Conf. Eyes Euro. Aviation
Paris - Penetration of corporate self-booking systems in Europe remains considerably behind deployment in the United States, according to Pascal Bordat, vice president and general manager of the global travel and distribution practice within Unisys Global Transportation, who told BTN here late last month at his firm's Travel and Transportation Conference. "It is more difficult and more complex, considering trains, differing languages and other barriers," he said, "but it is getting started." Bordat added that the infrastructure in Latin America still is insufficient to support widespread development of the newer corporate travel management practices. Asia also is lagging as the penetration of the Internet remains quite low. "China is getting started, but they first need to go through the B2C experience."
Bordat pointed to Australia as the exception and suggested the government could be the trendsetter, noting a recent request for proposal on a self-booking system put out to the market by the Australian Department of Defense. On the issue of payment, Bordat said the environment, particularly in Europe, now may be ready for more widespread direct settlement solutions and that experiments are underway. "We could leverage the bank settlement plans and expand it," he offered. "Instead of travel agents at the end of the chain, why not corporates?"
* * *
"It looks like we have seen the worst for the European flag carriers, but the next down cycle is bound to come," said Andrew Light, director of the transportation sector for Citigroup Smith Barney's European Equity Research. "Unless some fundamentally change, they won't survive the next downturn, which will be sooner than 10 years off." He pointed to positive trends, including an uptick in premium traffic predicted to be a driver of recovery throughout 2004. "But getting back to 2000 levels of premium traffic will take at least six years." Light also said European industry cost reduction, which has amounted to 5 percent per available seat kilometer since 2001, is expected to total another 10 percent by 2008. "Those flag carriers with the highest margins are the ones that face the most low-cost competition," he said, citing Aer Lingus, British Airways and Iberia. "So, the greater the pain now, the greater the hope."
Like several speakers, Light discussed the relentless growth of European low-cost carriers, which now control 20 percent of the market. He forecast 20 percent annual growth for such carriers during the next few years, driving market penetration beyond 35 percent by 2008.
Akin to the scenario in the United States, many startup airlines are destined for failure, perhaps as many as one-third of those that would be operating by the middle of this year. "Of those that do survive, a further group will disappear through consolidation as the dominant low-cost carriers seek to expand their market coverage and marketshare," said Mark Darby, a partner in the European Unisys transportation consulting practice. Despite difficulties related to the regulatory environment and the limited number of transatlantic routes that can handle fresh capacity, Darby said, there are several business plans in the works for transatlantic low-cost operations. "It is only a matter of time before they emerge." Such carriers could use Boeing 767 aircraft and offer either limited onboard meal service or a pay-per-meal model.
* * *
Despite its low-cost model, Australia's Virgin Blue has attracted "skyrocketing" corporate interest for its 20-city network. "Thirty-seven of the top 100 Australian companies have signed up for corporate agreements with Virgin Blue, and that is growing," said Timothy Jordan, Virgin Blue head of commercial. "The number of corporate clients who only deal with Qantas is reducing very rapidly." Jordan cited Virgin Blue's domestic Australian marketshare—which now stands at 32 percent—the carrier's high-frequency services between the business centers of Brisbane, Melbourne and Sydney, its market-leading ontime performance and the fact dominant rival Qantas next month will begin transitioning many of its services to its no-frills Jetstar subsidiary. Virgin Blue corporate deals provide small rebates based on revenue thresholds. Responding to corporate client requests, Virgin Blue now also offers airport lounges in Brisbane, Melbourne and Sydney.
BMI of the United Kingdom, meanwhile, has "gained some and lost some" corporate accounts as it transformed its business into three segments, according to CEO Austin Reid. The mainline segment of BMI is the only one on which corporate agreements apply. "Being in Star Alliance and participating in alliance contracts also has helped us get corporate interest," Reid said, noting that BMI corporate agreements include a mix of volume and marketshare targets. "Before the transformation, the corporate rate was the default rate. Now, the corporate rate is secondary to the low, one-way fares available through the Web because of lowest logical fare policies at many corporations."
* * *
Immediate past vice chairman of the U.S. National Transportation Safety Board Robert Francis said he is "pretty critical" of U.S. government policies that push U.S.-centric aviation security policies on other countries. "A lot of things required by the Transportation Security Administration of the countries are not necessary," he said. "We need to be more sensitive."
Seconding that thought, senior vice president of safety, security and compliance at Korean Air George Snyder said, "Uncoordinated security requirements don't add a layer of security, they in fact remove it." Snyder also criticized certain cargo screening procedures, including using security personnel to guard cargo aircraft following security threats. "We are applying 1970s solutions to 2004 problems," he said. "We apply high-cost, manual countermeasures to high-tech issues."
Francis, currently an executive vice president at consulting firm Farragut International, also blasted as "total idiocy" the measures passed by Congress to arm pilots. Citing fortified cockpit doors and passenger awareness, he said, "No one is going to get into a cockpit, much less take over an airplane in the United States and use it as a weapon. More people will be hurt or killed by pilots running around with guns than another aviation terrorist act."
Francis said another mistake was making airport screeners federal employees. "Are federally paid screeners now a whole lot better?" he asked. "The statistics show there has not been much improvement. You end up with huge diversions of resources that can be much better used." Francis added that some type of trusted traveler program "is coming," despite the difficulties of taking into account individual rights and freedoms. "In a very real sense, the person is the thing we should be focused on, not the things."