Exec-Level Seating Policies Becoming More Stringent

<B> Exec-Level Seating Policies Becoming More Stringent</B>

By Sarah Welt

Increasingly, companies are scrutinizing travel costs and realizing that a very easy way to see a quick return is by cutting first class travel both domestically and overseas. Ironically, those who have to approve such policies are among the few who have had access to the front of the plane for quite some time.

Despite the booming economy, many companies are changing their corporate policies to incorporate business class overseas instead of first, while others have eliminated first class travel altogether, even for the CEO. Still other companies have taken the approach to reward only their most frequent travelers with the ability to fly business or first.

According to Runzheimer International's 1998 Survey & Analysis of Business Travel Policies & Costs, 43 percent of companies queried allowed their travelers to fly business class for international trips--a double-digit drop from two years prior--and the corresponding 3 percent for first class international travel is the lowest in a decade.

While fewer companies are allowing traditional high-end travel, many companies still are working to get business and first class upgrades for their employees--as long as they don't have to pay for it. Now that upgrades often are tied to moving market share, many corporations have been able to negotiate those incentives into their preferred airline agreements, therefore keeping costs at the coach level but still making senior management happy.

"We are seeing less usage of full-fare first class travel," said Stratton Travel president and COO Terry McCabe. "People are using miles and other types of programs to get up there, certainly on short hauls. For long haul flights, people will pay for business class. The business traveler today is more than ever looking for value and a lot of carriers put together deals that include the front of the plane."

Tower Travel Management's vice president John Smith said he's seen "decidedly less" first class travel this year by clients "if they have to pay for it." He noted that there has been a "proliferation of upgrades for transatlantic travel," and those upgrades are "being negotiated into the corporate agreement."

While McCord Travel Management is seeing less usage of first class and negotiations to get upgrades with preferred suppliers, "that is not as aggressive as in years past because the demand for airline seats is so great they can't get upgrades. The gold and executive premier and platinum levels are oversaturated. Airlines are not as apt to give them away of late," said central region director of client consulting Mary Gould.

That hasn't stopped Dade Behring of Deerfield, Ill., from negotiating those upgrades. The corporation's policy actually has gotten more lenient in regards to first class travel as a result of being able to negotiate front of the plane upgrades with preferred suppliers. Dade Behring went though a policy revision in April 1998 to reevaluate its practices, including the use of first class. Before the changes, "I don't believe even the executives were allowed to fly first class," said corporate facilities manager Valerie Richards. Now, the company's executive team of seven can approve their own first class travel but everyone else has to get an okay from the CFO. The masses fly coach domestically and business class for anything over six hours. "We have provisions within our contract with preferred airline suppliers" that allow the company to "facilitate first class travel for our executives, however, there is not a cost impact to Dade Behring," she said.

At Taro Pharmaceuticals U.S.A. Inc. of Hawthorne, N.Y., the travel policy was revised about six months ago to restrict the use of first class travel because of escalating costs. Prior to that, employees could get the next class of service for flights of six hours or more, but now, "we have upper tier executive vice presidents and senior vice presidents who are being questioned," said corporate travel manager Robin Buzzeo. "We are trying to cut costs wherever we can." The company, which operates as its own full-service agency, is part of American Airlines' small business program that offers upgrades and elite club status based on volume. In addition, beginning about eight months ago, the company decided to reimburse travelers for the cost of the upgrade if they use their own frequent flyer points because it is "still saving us money on an upgraded ticket," Buzzeo said.

Meanwhile, at EMC Corp. of Hopkinton, Mass., the company hasn't changed its first class/business class policies this year because it has had a pretty restrictive policy for the past two years. It allows business class travel for more than 10 hours, from the time of departure to the time of arrival, including layovers and connections. Before travel manager Sheri Carlsen came on board in 1997, the policy actually was slightly less forgiving. At that time, employees had to travel more than 10 hours to upgrade, but they couldn't take into account layovers and connections--instead it was measured by segment.

In addition to the more than 10 hours policy, EMC also does not allow business class when flying from the East Coast to Western Europe. The only people exempt from the strict rules are those who Carlsen refers to as "road warriors"--employees who travel 100,000 miles or more a year. "They get to fly business over five hours from the time of departure to the time of arrival, and they don't fly first class except domestically when there is no business class," said Carlsen. "Policy really rewards the person who travels the most, not just because they have a title," she added.

Even the CEO can't travel first class at Lockheed Martin anymore, at least not as of Jan. 1. It was at that time that the company instituted an across-the board no first class rule. Before that, certain executives could fly first class, but "we made the decision they could fly business class just as well," said director of administrative services Pete Broadrick. It actually was the executives who flew first class who made that decision because they were interested in "returning optimum shareholder value" and taking the "cost out of producing our products to the greatest extent." Now executives are allowed to fly business class domestically where it exists, and if it doesn't, they fly coach. The majority of the company is expected to fly economy. There are a couple of exceptions to the policy, however. A medical need for a bigger seat or an urgent business need to get on a certain flight might get someone upgraded to first class. The policy allows for business class internationally, depending on the discretion of each individual business unit president.

The need to cut costs has even trickled down to companies long considered exempt from the traditional rules--professional service firms. That is because those travelers--lawyers and consultants and the like--charge back the cost of their travel to their clients and those clients have decided in most cases that they don't want to pay for high-end tickets anymore. These professional service firms, in fact, have to adopt the policy of their clients, which have become more and more restrictive. McCord has been working for the past 18 months with its professional service firm customers to provide reporting for them to give to their clients to show that they are obtaining the lowest airfare and staying in their clients' preferred hotels.

Another change in professional service firms is the elimination of tiered policies. "It used to be that a VP or above could do what they wanted to do. We are not seeing that anymore," Gould said. "It is more wholly across the company. Noone is being treated specially." She noted that this also holds true for CEOs, who believe that they have to set an example for the rest of the company.

At Manhattan-based World Travel Specialists Group, a niche travel agency for professional service firms, all travel is client-driven, which means that like McCord's customers, the clients of the professional service firms call the shots. "For the most part, the clients of our clients will no longer approve first class," said chairman and CEO Paul Metselaar. Clients are continuing to be very cost conscious, particularly when professional service firms are concerned. So it is up to us to be resourceful to persuade airlines that we deal with to upgrade them or get them gold or platinum cards to get them upgrades themselves to get them into first class." Metselaar said the company pays its agents incentives to get those upgrades at no cost to clients.

Even though a lot of companies will remain cost-conscious, some corporations have decided to make concessions if it comes down to a choice between higher productivity at the front of the plane versus saving a few bucks on coach tickets.

"Because airlines have made coach so uncomfortable, a trip in the back of the plane is wasted time from a productivity standpoint," said Runzheimer International senior consultant Rolfe Shellenberger.

Travel Incorporated's president Mike Brown said that while corporations are doing away with first class travel, they often are willing to pay for business. "The reason they are sticking with business class and paying for it is they really want their people ready to work when they hit an international city."

That logic applies at Dade Behring. "Our folks work a lot of long hours and traveling is a hardship and an inconvenience for them. We truly believe we get definite productivity gains by people traveling in business class or being upgraded to first," said Richards. "Folks generally travel on very limited time frames--flying late to make a meeting the next day--and obviously that impacts their ability to be productive if they are in coach in a lovely middle seat for six hours.