<B> E-Delta Opens Shop</B>
<I>Delta Unit To Share Savings Of E-Commerce W/ Corporate Buyers</I>
By Jay Campbell
Delta Air Lines has created a new unit, called E-Delta, devoted to helping the airline and its corporate customers exploit new distribution models, sharing savings based on a matrix of options.
The group, headed by senior vice president of sales and distribution Vince Caminiti, also will develop Delta's consumer-oriented distribution strategy and improve its interaction with smaller clients by bringing its Sky Privileges Plus small-business program to the Internet.
"It will operate like a small Internet company," Caminiti said. "We don't want to be bound by the traditional Delta. Sans bureaucracy, if you will."
Delta revealed the news last week during its second corporate advisory board meeting, attended by more than 50 national accounts that spend over $1.2 billion a year on Delta--8 percent of the airline's 1998 revenues. But contractual relationships with a number of those largest clients have reached a point of diminishing returns, Delta said.
"Sometimes the discount can't get any deeper, it's maxed out," said Steve Sheper, general manager of agency and corporate programs. "So, to provide increased savings, we have to look at what's left. Distribution costs are the last frontier to be mined, and we have to bring some rationality to the distribution model, control it and be prepared when new technologies emerge."
The matrix would offer increased savings, which will be discussed individually with clients "very soon," based on moving away from the traditional practice in five categories: booking method, CRS or alternative, form of payment, ticket type and deal structure.
Within the first of those, Delta will move to set up preferred relationships with booking system vendors that can circumvent the GDSs and link to Delta's internal reservations system, Deltamatic. The carrier would offer additional savings for companies that use these preferred systems.
"We're already talking with several online booking providers," said Sheper. "In a broad scope, anyone who is willing to do that would become preferred."
The E-Delta group also envisions a place on the carrier's SkyLinks Web site where corporate clients can book their negotiated rates and the airline would capture the data and report it back. That, Caminiti said, is the cheapest booking option.
"Our own site is four times less expensive than the traditional travel agent-CRS-paper ticket model," he said. "And 80 percent of the cost of the site is the credit card fee, so we'd be interested in linking a deal there with the form of payment menu, perhaps seeking direct payment or standby Air Travel Card. Of course, we can't do that Thursday--it's going to take some work."
Caminiti said the airline is working on an improved database to capture the data and shift it back to customers. Such a deal likely would apply to simple, but big, city pairs.
Delta also plans to offer bookings for other airlines on its Web site, but travel managers who participated in the meeting doubted they could take advantage of that since they would not be accessing their preferred rates on other carriers. "It would be great if you were an Atlanta company that only flies to Cincinnati," said one buyer, referring to Delta's two biggest hubs. "But most of us wouldn't be able to use it that way. To me, it seems logical to link with something like the Delta Shuttle."
He suggested that concepts such as bulk purchases could be made easier if Delta were able to place a secure inventory control mechanism on its site.
Another buyer said that if negotiated, flat Delta Shuttle fares were on the site, "We'd consider that." But she added that there was some concern among travel managers that there would be no way to guarantee that travelers booking on Delta's site would get the lowest fare.
In terms of ticket type, paper or electronic is the current choice, but that could be expanded to include emerging options such as "pay as you fly," which reduces exchange and reissue costs by allowing corporations to pay for travel only when travelers actually board the plane (<I>BTN,</I> June 15, 1998). Delta, which is moving 43 percent of its tickets electronically, joined Continental in acknowledging it will associate discounts with e-ticket usage (<I>BTN,</I> Oct. 27, 1997). But, like its Houston-based competitor, Delta will not treat e-tickets as a "magic bullet," said Caminiti, but rather consider them an option in the matrix.
In terms of the menu item addressing deal structure, Caminiti said point-of-sale or back-end discounts would be options, but he also is open to ideas such as total dollar guarantees.
Delta created the matrix framework for negotiations because buyers have been "knocking down our doors," Sheper said. Until now, account managers in client meetings found themselves "talking around" distribution issues. Also, new technologies have brought the industry to a point where negotiations need to be structured differently.
Buyers also were given details of the airline's customer relationship management initiatives (<I>BTN,</I> April 26). By Q1 2000, Delta's top 26 airports will have entirely new gate and boarding platforms, enabling the airline to collect information using the same technology that tracks its telephone and Web site reservations. One travel manager called the CRM effort "really slick."
Last week's two-day session was framed within an overall effort to build closer ties with corporate clients and better account for their needs, and buyers praised Delta for it. At the airline's first advisory board meeting, held in the spring of 1998, it was Delta that did most of the talking.
"We are asking these customers to tell us how they want to interact with us, and the response was better than I had expected," Caminiti said. One attendee said, "I think we've helped Delta prioritize what they should be working on."
That mood is in stark contrast with the customer response to Delta's short-lived surcharge for bookings made outside its Web site (<I>BTN,</I> Feb. 22). Caminiti assured buyers that moving to lower-cost channels would not result in punitive treatment for those who do not. He emphasized that companies that stick to more traditional distribution models would not be excluded from dealing with Delta.
Part of the impetus for the development of E-Delta, Caminiti said, is that with the Year 2000 bug behind it, the carrier has made significant strides in its technology systems over the past year. Additionally, the relatively new management team under Leo Mullin, much of which consists of talent from outside the airline business, is asking questions and pursuing ideas with a bit less tunnel vision than longtime aviation professionals.