Delta Exec Deals W/ Buyer Issues

By BTN / May 20, 2001

Delta Exec Deals W/ Buyer Issues

Just seven months on the job as Delta Air Lines' senior vice president of sales and distribution, Lee Macenczak was in Tampa last month to address the Association of Corporate Travel Executives annual conference. After telling attendees to be concerned about both industry consolidation and data privacy issues, Macenczak sat with BTN airline editor David Jonas to discuss slower corporate traffic, various new distribution methods and the importance of relationships.

BTN: The hot issue of the day is data privacy. In your comments this morning, you mentioned that if confidentiality of your deals with corporations were to be breached, you would take action. Does that mean canceling contracts?

Lee Macenczak: Possibly, yes. We are very serious about the confidentiality of our agreements. Our deals are very sacred to us, they are one-to-one relationships and all deals are different. There are a lot of changes around the technology, which will continue to evolve, and this whole picture is going to change. This is a broad reminder about confidentiality, and if we find out that has been breached, we'll take the appropriate action.

BTN: On the reverse side, how valuable is flown data to the corporation?

Macenczak: Very. We have been working with our corporations on an individual basis to disclose that flown data back to them. It is full disclosure on our part, but done one-to-one and not on a regular basis, such as if there is a question at a corporation regarding refunds or unused tickets.

BTN: When you were first named to your current post last fall, you told us you have quite a different personality than your predecessor, Vince Caminiti.

Macenczak: (laughing) I am the kinder, gentler Vince.

BTN: With personalities in mind, how important are relationships between buyers and senior airline sales reps, taken apart from the ability to shift share, and recognizing that not every account can speak frequently with people at your level within the organization.

Macenczak: Let's face it. For travel in general--whether it be the airlines, hotels, car rental companies, GDSs--there are aspects of relationships that go across all faces of this industry. That has certainly changed, but it's not going away. I will get involved in any account that I need to get involved with for the betterment of Delta's business relationship with the corporation. I have a tremendous amount of confidence in my staff, but I enjoy spending time with customers. If you are not out there with them, listening to the issues and concerns, then you truly are of an Ivory Tower mentality. It is not my day-to-day role, but I see it as part of my ongoing learning about where we need to take the distribution system. You can't force some things. There are certain things we have forced in the past, but other things have been done through cooperation and dialogue. Relationships are key for understanding what really is going on in the market.

BTN: There must be some accounts out there that you really do trust, even if they do not have the ability to move as much share as other accounts whom you may not know at all. Obviously, there needs to be a balance.

Macenczak: Absolutely. These guys give us terrific feedback on many aspects of our business. It is not just the deal they cut with us. It could be about our product, BusinessElite, our checkin process at airports, our reservations process or any of a number of things. We look at these people as true travel partners.

BTN: Maybe relationships are more important than ever in a sagging economy. With the softening in mind, what are the current trends you are seeing in corporate travel?

Macenczak: The economy is having an impact on bookings at this point. What we have seen is pressure from some of our accounts around their deals, obviously wanting to come back and talk about the level of commitments and level of discounts. We hope we have bottomed out and we'd like to think the second half of the year is going be an uptick for the economy, which obviously would impact us in a very positive way.

BTN: Are the current cutbacks you are seeing from corporate accounts primarily fewer trips taken or revenue cuts through other means?

Macenczak: I think it's a little of both. The mandates coming from corporate travel departments that we have heard are, obviously, slash your T&E. Only take the trips absolutely necessary for customer service or for sales. Meetings are somewhat being pulled back in scale and scope. Companies still make the trips, but take fewer people. The real difference in what we are seeing in terms of booking traffic is that the yields have held up fairly well, but traffic is off a little bit. Before, when you had a period of down demand, there was always plenty of other traffic to fill in behind it. But now, overall traffic is a little softer than we had hoped.

BTN: Regarding distribution, Delta obviously does not have a one-size-fits-all approach. Can you give us an update on MYOBTravel for small corporations?

Macenczak: We have been launching it in stages because we really wanted to make sure it is a proven concept and that we worked out all the bugs--in terms of software, fulfillment, our own marketing and how it's positioned--before we went out and marketed it in general. So you have seen a soft launch over the past few months. In the next half of the year, you'll see more advertising and a bigger push behind the product.

BTN: And you have an ARC number and earn commissions for bookings made on other carriers, correct?

Macenczak: It is set up as more of a traditional agency, yes. We know that for many small and medium-size businesses, they will have a large portion of their travel on Delta, but we also know we can't satisfy everybody's needs all the time. We are giving them a product that they can use as they see fit, whether it's to book on Delta, other carriers or their hotel and car. It is more of a full-service product across all carriers, which allows us to receive commissions.

BTN: Some travel managers have brought up concerns about service: the ease of refunds and exchanges and the ability to make changes from the road.

Macenczak: When corporations are dealing with us through delta.com, they can call any of our res offices and have any change made to that record. If a travel agency were to book through our online agency service center--net fares are available to them through our new service center--they could call Delta and have access to that PNR. So changes from the road aren't really an issue.

BTN: Switching gears, how have you been integrating sales within the SkyTeam alliance?

Macenczak: In terms of sales performance, Delta and Air France are still considered to be competitors. We do not have antitrust immunity and cannot collaborate on sales efforts or incentive programs. Our network teams have the ability to work together in terms of flight synchronization, codesharing and beyond destinations, but the sales and pricing activities are totally separate.

BTN: Then, what exactly are these bridge agreements in place?

Macenczak: We do have bridge agreements, but those are based on the proprietary Delta agreements and the proprietary Air France agreements--we don't know each other's details. If somebody were to meet both of the base programs, then an overall program could kick in, but we are not allowed to go in and jointly negotiate those deals.

BTN: Independent of partners, how do you define and manage global deals?

Macenczak: It depends on the structure of the company. Agencies, as well as corporations, are looking for global deals. If one of our national accounts that Dan Cupertino's team is dealing with comes in and asks for a global agreement, a national accounts manager would work with each of the various countries to pull together a global program. Companies are looking to leverage all their power. If I am a global corporation, I may not want to negotiate a U.S. deal because I am missing the power of what I have out of Europe or Asia or Latin America. We do the same thing. Everybody is looking at what the total value of one company is to another and trying to leverage that all together for the best deal possible.

BTN: Is the North Atlantic as highly competitive as it has been?

Macenczak: It still is, but we have seen capacity that was shifted from Asia actually go back to Asia, as some of the Asian economies have picked back up. The North Atlantic always will be an extremely competitive market and we are there to stay. Atlanta, Cincinnati, JFK--we will continue to grow those hubs and make sure we are feeding them from the interior. We also are expanding into Latin America, as Atlanta has become a very successful gateway to the region.

BTN: Back stateside, are there geographic regions that you are focusing on as growth areas, aside from your main hubs?

Macenczak: We are going to be extremely focused on the Northeast over the next few years. We have recently committed to large expansions of our airport facilities at New York JFK, as well as in Boston. Our shuttle markets continue to be very important, our international presence out of New York is very important and we have been adding transcon frequencies. We will continue to support all that with an additional sales focus, including new, innovative programs.

BTN: Meanwhile, AirTran seems to have been securing more accounts lately in your home market of Atlanta. Are they taking some corporate clients away from you or simply finding new clients that you haven't had?

Macenczak: AirTran is much more focused now. They are doing a better job with their marketing and sales efforts in going out and targeting accounts. So, yes, there probably are a few different factors driving their increase in accounts. They are becoming a more mature organization and have some new talent in there that has changed their focus, as well as new planes and new service. Of course, in this economy, their fare structure offers opportunities. But we feel we have been very competitive on the fares and we have a very competitive frequent flyer program, which opens the world to most of these corporations. For the most part, these corporations look for size and breadth for all their needs and we can satisfy that out of Atlanta better than anybody.

More