Continental Airlines repeated this year as the winner of the BTN Annual Airline Survey, achieving top marks in five of the 10 categories. American Airlines improved its overall score and cut into Continental's lead, finishing at the head of the pack in four categories. In the seven years Business Travel News has measured corporate and travel agency buyer perceptions regarding preferred airline relationships, only American and Continental have won.
America West Airlines emerged from its traditional placement near the basement to secure a third-place finish, driven by strong scores in pricing and overall value categories. With very different value propositions for the corporate market, Northwest and Southwest airlines tied for fourth place. Rounding out the major carriers, United, Delta, Alaska and US Airways each dropped at least one rank from last year.
Measuring responses from 534 North American corporate and travel agency buyers, the survey scored carriers in categories ranging from flexibility in negotiating prices and amenities to the quality of sales representative visits and carrier communication. It also included overall price value, a category in which the industry at large again showed improvement.
A major theme in this year's findings was higher overall scores at virtually every airline, among both low-cost operators
(see story) and the nine major carriers. "This industry obviously has been really tough, so we have been focusing on core elements like the corporate market," said Fay Beauchine, Northwest vice president of sales and customer relations.
Travel buyers increasingly recognize the enormous difficulties faced by their preferred suppliers. The airlines "have been given a pass this year," in the words of one travel agency executive.
Drilling down to specific areas, improved industrywide scores in both transient and meeting pricing categories likely were the result of lower average ticket prices throughout corporate America. Many respondents in particular said they appreciated lower group and meetings rates, the option of fixed fares on key city pairs and simpler, more flexible contracts. "Preferred carriers lowered expectations and share requirements in difficult markets where goal achievement was unrealistic," said one respondent.
"The majors clearly are focused on who is in their rearview mirror," said Dee Runyan, executive vice president at WorldTravel BTI, referring to low-cost competition. "They are mighty and powerful with their global networks, but if they cannot get it right at home, it just won't work. There has been some flexibility injected into the mindset of majors."
Buyers also rated the airlines favorably for keeping open the lines of communication to solve problems. "Responsiveness is something you can do, and do well, without spending lots of money," said America West vice president of sales Joette Schmidt.
Many praised the airlines' VIP programs, especially those that offer preferred status upgrades. "Our preferred airline made it much easier for my clients, who are salespeople and whose territories have changed, to get preferred status," said one respondent. "This means that my clients are not at the back of the line and the airline gets a new loyal flyer."
"Our primary carrier offers complimentary frequent flyer status upgrades each year and has provided us more if needed," added another. "This has actually caused a shift in marketshare from our secondary to the primary."
Overall, the industry posted scores above 3 on the five-point scale for both premium/special VIP services and services/amenities, rising noticeably from last year. Several buyers specifically pointed to automated checkin options that provide travelers a time-saving choice at the airport.
Despite airlines focusing such efforts toward corporate clients and business travelers, usage among the survey base decreased at all 14 carriers for the second consecutive year. Though all major carriers in the survey had relationships with at least 10 percent of survey respondents, and some airlines claimed client growth in the past year, buyers are being more selective about how and where to commit marketshare.
"With $3 million in air volume, we can't carry five agreements anymore," said Yasuo Sonoda, travel manager for Macromedia in San Francisco. "We can only carry two."
There also are questions related to financial stability, service levels, new fees and the increasing relevance of low-cost operators. "It is challenging to justify to senior executives why we have contracts with legacy carriers," said one travel manager.
"We question the value of contracting and are considering buying on the open market," added another.
Meanwhile, airlines also are being more selective in offering discounts and are more likely to cancel underperforming agreements. The same systems they employ to push contract performance data to clients in a timely fashion—another area in which the industry improved noticeably from last year—also help them to be more discerning.
At the same time, buyers have many complaints about airline efforts to serve travelers and maintain preferred relationships. Despite higher survey scores, more understanding about the inhospitable operating environment and a degree of compassion, survey respondents noted various shortcomings.
For starters, despite marginal improvement, both scores measuring sales rep performance averaged less than 3 points on the five-point scale. "There are too many stepping stones," said one buyer at a midmarket account. "It is a frustration to be unable to speak directly with decision makers. It is very apparent that the reps in the field have no authority."
In addition to more empowerment, respondents asked for more analytical data, more communication and regular meetings. Some airlines have reorganized and downsized their field salesforces. Many accounts either are losing reps, especially from secondary or tertiary suppliers, or being directed to small business programs often handled from headquarters.
Meanwhile, more than twice as many respondents commented negatively on industry pricing as commented positively. "Our spend has been flat, year over year, and comparatively speaking ours is definitely not a large program, but these realities seemed to be non-issues in the past, and not subject to the scrutiny to which they're currently being subjected," said a travel manager at a midmarket financial firm. "To the extent it prevents the subsidization of discounts for non-performing accounts, I'm all in favor of this move on the airlines' part. The quandary for me is the cutback in everything else, such as routes, number of flights, soft waivers/favors, upgrade availability. The combination of increased price for decreased service is a tough pill to swallow, often leaving me in the hot seat."
Many called on major airlines to remove restrictions from business fares. Others asked for discounts on more classes of service and simpler contracts. Some simply asked for forthrightness. "Be upfront with clients in advance of negotiations as to what the economic situation is and how it will affect the relationship in the short- and long-term," said one respondent. "Explain why or why not prior benefits are available."
Tina Itschner, corporate travel and purchasing manager at HNTB Corp. in Kansas City, Mo., criticized carriers for their slow understanding of such travel management issues as corporate online booking tools. "They do not understand the systems well enough to integrate things like fare matching, waivers, favors and other things that can be accomplished over the phone," she said. "Some airlines are starting to put together committees to understand all this, but they have missed the boat."
Survey respondents also asked for more flexible loyalty and rewards programs for their travelers—notably more easily attained upgrades—as well as an improved inflight product and widespread Internet access in airport clubs and gate areas. "They need to upgrade all their planes," said one respondent. "It is all right for them to charge a little more for a business service, where business travelers can work on the plane and be comfortable, even in coach."
Some concerns were market-specific, such as carrier decisions to reduce or eliminate service in certain city pairs. Others were endemic to the entire aviation system, with sagging on-time performance and mounting flight cancellations at the top of list.
Then there was the bevy of little things that add up to frustrate travelers and their managers, like cramped seating, inflight pay-per-meal programs and a whole series of new fees tacked on to tickets purchased at airports and through airline reservations centers.
"They say we have to pay an extra $5 to spend our money with them?" asked Sam Barber, director of business travel for Dawn Food Products in Jackson, Mich. "There has to be a better way for the airlines to get the extra margins they want because this is a slap in the face."
Individual Carrier PerformanceContinental's overall victory was punctuated by first-place scores in half of all categories. Its performance was noticeably higher in both pricing categories, contract performance data, complaint/problem resolution and quality of communications.
"We are doing a better job in showing the transient marketplace that we compete with the low-cost carriers," said Monisa Cline, Continental managing director of North America sales.
Continental also fields a dedicated meetings and incentive travel salesforce and this year launched an online meetings program.
Cline also pointed to Continental's communications efforts. "Good news or bad, we are always upfront and our executives always are visible," she said. "Communication will be a big distinguishing factor. Considering all the challenges carriers face, the tendency is to be internally focused. We continue to be externally focused."
Meanwhile, survey respondents were pleased with Continental's frequent flyer program, which added more perks for elite level members, including automatic space-available upgrades. The carrier did slip in a few categories, generating lower scores for sales rep empowerment and services/amenities.
American, after relinquishing first place last year to Continental, narrowed the gap and again finished a close second. It beat the industry average in eight of the 10 categories.
"Though we are a small account, American has gone out of its way to recognize share shift and generally higher-margin fares, through access to preferred/elite traveler amenities and benefits," said one respondent.
Others praised the airline for its flexibility in contracting, communication from sales reps and VIP programs. "We are managing resources better so corporate travelers get that type of premium service," said Frank Morogiello, American vice president of global accounts. "On the contracting side, we don't do cookie-cutter stuff. It is a framework that other airlines have tried to mimic over the years."
HNTB's Itschner also commended American for its decision not to follow Northwest in imposing extra per-ticket charges on bookings made through travel agents connected to a global distribution system. "They stuck their neck out for the travel agency community by saying they would not match the Northwest GDS fee," she said. "We feel gratitude for that."
America West vaulted into third place, its highest ranking in seven years. It received markedly improved scores in all 10 categories and beat the industry average in seven. "We know we cannot be all things to all people, so we are trying to provide a valued option in terms of pricing, our operation and customer service," Schmidt said. "We will negotiate occasionally, but we try to keep relationships in place whether we have negotiated discounts or not. There are other things that can be done, such as offering flexibility, matching elite frequent flyer status, etc."
The carrier in the past 12 months reorganized its salesforce, streamlined its complaint resolution system to empower front-line employees and restructured internal communications.
"We are an airline, so we know things won't be right 100 percent of the time," Schmidt said, "but when you arm your employees, customers get better information." AWA rose half a point for complaint/problem resolution and quality of communication.
AWA plans to add sales resources, enhance its corporate booking portal and explore a meetings program.
Southwest's overall score rose slightly to 3.16, but its ranking dropped from third to fourth. Its performance in value of sales rep visits and sales rep empowerment dropped marginally, as did the low-cost carrier's score for meeting pricing.
That decline may be attributable to the airline's decision last autumn to terminate its meetings program. "We heard from meeting planners that they enjoyed the program and hoped it would stay in place," said corporate sales director Rob Brown, citing the 10 percent discount afforded by the program. "But [the Swabiz booking portal] is a better option for tracking travelers and pulling reports. The meetings program, as it was, could not provide them that."
Southwest continued to outperform the industry in quality of communication, complaint/problem resolution and its traditional survey strength, overall price value, a category it again easily won among major carriers.
Its reservations agents now also are trained to handle Swabiz questions. "Southwest Airlines introduced Swabiz and made reporting so much easier," said one survey respondent. "It is the easiest airline to work with. They don't offer any perks, but you don't have to put up with any b.s. either."
Northwest jumped from seventh last year into a fourth-place tie among major carriers, with an overall average score slightly above the industry baseline. It gained in every category, including a third-place tie in flexibility in transient pricing, a third-place score for providing contract performance data and second in sales rep visits.
Beauchine in part credited year-long training of the carrier's salesforce. "We have empowered our salespeople and stressed that they must interpret data for corporations," she said. "We also have ramped up the quantity and quality of communications sent from headquarters to the customer base."
For example, on request from clients, Northwest informs corporate accounts of personnel changes within the sales structure. It also continues to be the only major carrier to provide account-specific customer performance metrics. The program currently covers on-time performance but by year-end will be expanded to include baggage handling and complaint information.
"It lets the accounts really know what is going on during the corporate travel experience," Beauchine said. "The corporate traveler does not care about all these distractions they read about in the paper. They care about what goes on when they are on the road and in the air."
The airline, however, achieved lower than average scores for meeting pricing, services/amenities, complaint/problem resolution and overall price value. It also continues to take heat from its failed attempt to impose a GDS fee on travel agents. That initiative, however, occurred after most respondents filled out the survey and likely did not factor in the results. Northwest said it experienced no negative consequences, in terms of bookings, from that decision.
At bankrupt United, the overall score edged higher, but the carrier's rank slid from fourth to sixth. It finished below the industry average for both transient and meetings pricing flexibility, sales rep empowerment and complaint/problem resolution.
"Their reps now have to ask the home office at headquarters to approve everything. Now, even if a mistake is made, United won't give you a waiver," said Macromedia's Sonoda. "Every year, we give what we promise in terms of volume and segments. If we do that, we need flexibility on their part, but we don't get it and it is kind of disturbing."
On the flip side, United easily beat the industry average for services/amenities and special VIP services. "I believe they heard some of our complaints," said a corporate travel manager at a company based in the Los Angeles area, referring to United's newly branded PS premium service. "Theirs had become an inferior product to low-cost carriers on the transcon route."
Moreover, United's focus has been on its bankruptcy reorganization and some respondents gave the carrier's sales department credit for providing updates and communicating changes.
Respondents this year pushed Delta's score above the 3-point line, giving the carrier marginally better rankings in all 10 categories. Some respondents were satisfied with Delta's corporate pricing, while others commended it for flexibility in allowing clients to ticket on international codeshare partners.
"If anything, Delta has been more aggressive in developing relationships with hometown companies," said Ron Sharer, head of corporate support services for Ciba Vision in Duluth, Ga. "They have been open to talking deals and extremely communicative, much more so than in the past."
Yet, despite securing improved scores across the board, Delta beat the industry average in only three areas—VIP services, contract performance data and value of sales rep visits—and slid from sixth to seventh overall.
Alaska Airlines, along with US Airways, picked up just a tenth of a point in overall score, the smallest gain for all airlines in the survey, and dropped to eighth place. The carrier received lower scores than last year in both sales rep categories and also for services and amenities, despite its decision to maintain a first class product.
The airline achieved improved scores in several other categories, notably complaint/problem resolution, for which it attained a third-place ranking.
US Airways' score in that category remained flat, well below the industry average. It also had lower marks in both sales rep categories, VIP services and contract performance data, and failed to match or exceed any aggregate industrywide scores.
The carrier's performance undoubtedly was negatively influenced by press reports and industry speculation regarding its viability. Such US Airways decisions as downsizing its Pittsburgh hub and reorganizing and reducing its corporate salesforce affected buyers' perceptions. Also, many of the carrier's executives, including top salespeople, left the company.
US Airways scored well in on-time performance, however. In the latest Department of Transportation figures, the airline ranked behind only low-cost carriers JetBlue and Southwest during the 12-month period through Aug. 2004. JetBlue finished first (83.8) among carriers included in this report, while all-time champion Southwest was a close second. American and America West each finished below 78 percent.
In August, Delta had the highest mishandled baggage ratio per 1,000 passengers, 5.08. American (5.06) also performed poorly. AirTran, Continental and Southwest reported the least mishandled baggage.
DOT also measures consumer complaints and denied boardings, but respondents said on-time performance is the key customer-service metric. Whereas baggage was mentioned only once, dozens of respondents listed on-time performance as the area preferred carriers needed to most improve.
Of carriers rated on overall international corporate contracting, Japan's All Nippon Airways and Singapore Airlines finished first and second, respectively, though fewer than 10 percent of respondents said they had used those carriers in the past 12 months.
Among the carriers with higher usage numbers, British Airways ranked highest with a 3.78 overall score on the five-point scale. Continental was tops again among U.S. carriers with a 3.69.
American, which had international contracts with 28 percent of survey respondents, garnered a 3.58 overall score. United had international contracts with a full quarter of the survey base and finished with a 3.23 overall score.
Those respondents who contracted for international airline services either praised their U.S. carrier for including alliance partners and points of sale outside the United States or they requested the U.S. carrier do so to improve coverage of their agreements.