Atlanta - Mired in a business slump likely to drag on throughout 2003, Delta Air Lines is the latest major carrier to reorganize its sales structure. The cost-cutting shuffle, a several-month effort to be completed by April, eliminates the district sales manager layer and refocuses field sales on regional accounts. The new structure also consolidates management of all internal and external distribution channels.
Mirroring financial and traffic trends, smaller low-fare airlines AirTran Airways and JetBlue Airways are expanding salesforces as the majors retrench.
A slimmer salesforce at a major carrier can have both positive and negative effects on corporate and agency programs, depending on the size of the account. On the one hand, smaller clients, particularly agencies, either could see their account reps less often or be funneled into airline telesales and branded small business programs. On the other hand, "maybe there is a bright side in that things will get more streamlined for corporate accounts," said John Heilner, Princeton, N.J.-based vice president of Management Alternatives. For better or for worse, he said, "pricing departments and revenue management will be a little more formulaic."
As such, some accounts may experience a shorter negotiating cycle and there may be less ambiguity as carriers employ efficient technology tools to set goals and monitor performance.
"We are seeing salesforces adapting to the times, responding to the market and being agile," said Fay Beauchine, Northwest Airlines vice president of sales and customer relations. "Sales resources are very precious within airlines and they have to be targeted the right way."
As would be expected, larger companies that bring more to a given airline will receive more attention. "We have experienced some changes in airline personnel that are servicing DaimlerChrysler but not any significant reduction in the degree of service being provided," said David Weiner, DaimlerChrysler director of travel management and business services.
Nevertheless, many accounts have and will continue to feel the pinch, oftentimes to the detriment of both parties. "When I have a supplier's face in front of me, I pay much more attention to that supplier," said a corporate travel manager at a midsize northeastern company. "When it is only a voice on the phone, I do whatever the hell I please."
It is an ironic sign of the times that carriers are reducing sales headcount even as they, in an effort to boost traffic, proclaim to Corporate America the business necessity of face-to-face interaction.
"Obviously, reducing headcount is a painful process, but it is the nature of where we are as a company and as an industry," said Lee Macenczak, Delta senior vice president of sales and distribution. "It is a new world with zero commissions and our needs and our clients' needs are changing. We need to reallocate resources so we can react quickly."
Delta's corporate sales team, under managing director of corporate sales Steve Smith, now includes global account director Bob Somers and several regional general managers, each with an average of eight to 10 sales account executives reporting to them. Dan Cupertino, meanwhile, now holds the title managing director of agency and segmented sales, focusing on leisure, group, military, government and other targeted market sales.
Applying a strategic perspective rather than a geographic one, Delta centralized some personnel in Atlanta to handle contract analysis and corporate requests for proposals—aided by the Prism-enabled Corporate Data Solutions
(BTN, Dec. 9, 2002)—while fielding a smaller external salesforce.
"There will be fewer of them," Macenczak said of Delta's reps, "but they will be more productive now, because instead of being generalists, everyone will be an expert in a particular area, be it corporate, agency, online, etc., and can focus on the relationship."
Said an exec at a competing carrier: "Delta never took a bite out of their DSMs all these years, and they had a lot of them. It is a move they should have made a long time ago."
Management Alternatives' Heilner added that the biggest impact for airline corporate accounts likely would be on "special things," such as waivers, favors and general degree of flexibility that will become more difficult to come by. "The special things are where the relationship really pays off."
As Delta cuts, cross-town rival AirTran Airways has been adding personnel. In the past few months, AirTran has added a sales manager in the Baltimore/Washington area, a new account manager in Atlanta and another inside sales rep, all three of which have been calling on corporate accounts. The carrier simply has more services to sell now, as it, unlike major competitors, increased yearly traffic in 2002 by 24 percent. Much of that growth recently has come by way of new point-to-point service rather than hub flying, though the carrier recently announced new services between Atlanta and Denver, Las Vegas and Los Angeles.
Meanwhile, JetBlue Airways recently hired a sales and marketing manager for the West Coast and soon plans to add another sales rep to relieve what has been a very thinly spread salesforce. Of course, JetBlue, like Southwest Airlines, does not craft traditional corporate discount programs, but its growth and high level of interest has enabled it to add resources.
"For all the smaller carriers, it is the old chicken and egg question," said Terry Trippler, airfare expert at Cheapseats.com. "Are they adding personnel because they have gotten bigger or have they gotten bigger because they added personnel?"
JetBlue on May 8 plans to launch three daily flights from rival Delta Air Lines' Atlanta hub to Long Beach, Calif., and continues to add frequencies on other transcon routes.
Among the majors, Northwest has made changes similar to its peers, but began the process well before Sept. 11, 2001. After two waves of reductions earlier in 2001 and one more recently, the carrier had reorganized sales into five regions, down from nine, and correspondingly cut the number of district sales managers to about a dozen. "The changes were commensurate with cost reduction initiatives and how the business is changing in the marketplace," Beauchine said, adding that sales resources still are focused on global selling and alliance marketing.
Many smaller accounts now are offered Northwest's Biz Perks and Ebiz Perks small business programs through travel agencies. Smaller agency account coverage was moved into telesales, freeing up salespeople to focus on corporate accounts. Analytical work already had been centered at headquarters.
A similar strategy is in place at Northwest partner Continental Airlines, where vice president of sales June Bennett discovered that specialty sales resources located at headquarters can outperform field sales for certain customers. "They can respond more quickly. Based on that, we realigned the sales organization," Bennett said.
Continental maintained the sales structure, but by November had consolidated positions. The organization now is split into specialty sales, a Houston division that handles most of the western United States, and a Newark division for the eastern United States. "Letting people go was painful, but they helped us transition, especially by identifying many midmarket accounts that now can be handled by telesales," Bennett said. For larger corporate accounts, Continental actually doubled the size of its national corporate sales team to "provide more one-on-one interaction."
American Airlines also has reduced passenger sales resources while maintaining a focus on well-performing corporate customers. "A lot of guys are trying to morph into what has become a successful formula here at American," said Frank Morogiello, AA vice president of global accounts. "Maybe we are doing a few things to magnify what we have, maintain our competitive advantage, undertake a few process improvements and tweak at the customer's request. Yet, in the field, accounts rarely are more than one step away from a senior executive. We cleaned out the extra layers years ago."
United Airlines has maintained its sales structure, albeit with a smaller number of personnel. The bankrupt carrier kept account reps in the field while reducing the number of district sales managers, cutting the number of managing directors from five to three and combining three sales vice president positions into one. Overall, sales headcount was cut 17 percent since Sept. 11, 2001. "Remaining managers have broadened lines of control and authority," a United official said. "We have centralized sales, worldwide planning and decision support."
Meanwhile, Delta's Macenczak said the realigned distribution organization would allow for "a cohesive distribution strategy. We still think there are opportunities and that the models will change dramatically in the next 18 months."