Giving The Big Guns More Firepower

<B> Giving The Big Guns More Firepower</B>
<I>MIDT Improvements Arm Carriers With Better Client Data</I>

By Jay Campbell

Thanks to recent advances in the packaging of the origin and destination booking data that global distribution systems sell to airlines, the carriers now have more ammunition than ever for their negotiations with business travel buyers.

While the use of the data is expanding, particularly among foreign and smaller airlines, GDSs also are increasing the capabilities of bigger carriers that have been buying the reservations data for the past 10 years.

During the past year or so, the GDSs have developed the ability to customize their marketing information data tapes so that carriers can buy data on only the markets in which they are interested, rather than paying for data on the whole world.

Meanwhile, bigger airlines now are getting their information on a daily basis, with downloads beginning in the early morning for the previous day's bookings. Although that delay is far shorter than the 40-, 60- and even 90-day delays of old, it's not quite real-time data. "We call it near-time," said Continental Airlines vice president of distribution planning Steve Cossette.

Traditionally sold in the form of tapes, marketing information data tapes--which include airline codes, origin and destination cities, passenger counts, flight numbers, class of service, booking date, departure date, agency address, ARC/IATA number, pseudo-city code and cancellation indicators--now are being transferred through electronic links.

The information helps airlines in several areas, including scheduling, revenue management and corporate and agency account management. With corporate accounts, for example, the data might help a sales representative determine that one of his or her accounts isn't performing as expected on certain routes.

"We sit down together and the airline points out issues before they go long term," said Peter Buchheit, director of travel and meeting services for Black & Decker in Towson, Md. "It's an opportunity to communicate. For example, if the airline is wondering why there's a drop on certain routes, I can explain the reason--maybe we've suddenly set up some big meetings in other places. While they may have concern on certain routes, I can show them that I'm performing on the whole system. It's a much more business-oriented meeting."

Other common situations involve acquisitions and divestitures, or simply unforeseen changes in business needs that alter a company's travel patterns.

"A deal based on real information is a deal that can succeed," said Continental's senior director of sales programs Mike Gorman. "So if a corporate customer has market share goals, this ensures they're achieving them and helps foster long-term relationships."

Robert Magnus, manager of executive travel at Ford Motor Co. in Detroit, agreed that the airlines' increased sophistication will help them in monitoring his business.

"One of my complaints has always been when an airline that is not local comes in and sells you something, then they disappear and come back months later thinking that's all you've worked on," Magnus said. "Sometimes they give you a goal, then come and say you didn't meet it--when it's them who should have been on top of it."

As MIDT data becomes more readily--and more quickly--available, it gives the airlines that buy it a serious advantage. Some anecdotal stories have the carriers using the information in highly questionable ways.

One airline executive described the "frightening possibility" that daily data might enable carriers to steal each other's customers, particularly big-spending business travelers. One Texas travel agency, he said, was offered $1,000 for each passenger it moved from a competing airline, plus a $500 cash bonus to be paid to the passengers themselves. The agency would have to identify the passengers for the airline, since passenger name records are not included in the MIDT reports.

"It's a double-edged sword," said the source. "I could see an airline noticing that a corporate customer booked a bunch of first class tickets on a competitor, and the airline then saying, 'I see you have passengers on the other plane. Please be aware that your incentive will grow if they switch to us.' But offering the passengers money to switch? I don't know if that's appropriate."

Another interesting story involved two highly competitive foreign carriers, one of which recently began purchasing the data. The airline learned that a corporation whose business it had been trying to win--and whose explanation for not giving the business was that it was a government contractor and had to fly only U.S. airlines--had booked passengers on the carrier's arch rival.

"The sales reps were coached not to be confrontational, but to use the information as a resource," said the source. "I think that's the right thing to do."

Another angle on the potential repercussions of MIDT usage is that not all carriers can afford to buy it, although that's less true now than in the past with the development of customized reports. Frontier and Midway Airlines, for example, don't buy the tapes, calling them too expensive.

The U.S. Department of Transportation's inspector general included this line of thought in a paper on travel agency overrides released earlier this month. Since there are four primary CRSs, the report said, carriers must buy tapes from all of them to gather meaningful information.

Worldspan sells raw data for $19,000 per month for domestic and $16,500 for international, while Sabre charges about $33,000 for domestic data and $40,000 for international, with $10,000 to $20,000 levied for processing.

An Amadeus executive tabbed its product at about $40,000. For Sabre, processing services costs $10,000 to $20,000. Several smaller companies also offer processing, including Shepherd Systems, which recently was bought by Galileo International (<I>BTN,</I> Dec. 7, 1998), and DOB Systems, which has a marketing relationship with Worldspan.

"DOT rules specify that each CRS shall make available to all U.S. participating carriers all marketing, booking and sales data," the IG report said. "However, cost considerations may restrict data acquisition to the largest airlines. Whereas marketing strategies of most businesses are based on their own proprietary data plus estimates and assumptions concerning their competition, air carriers can obtain specific data about their competitors and distributors and can alter their strategies to maximize their results."

Those cost barriers are coming down as the GDSs offer customized, market-specific data. Where the raw data prices are essentially based on the number of locations that use the CRS, "there's a fixed charge for customization because it does cost us more to package," said Jim Poage, senior vice president of customer marketing for the Sabre Travel Information Network. "But there's a lower per-terminal cost, so the net price is cheaper."

Sabre, which began providing market-specific data in 1997, said it typically has as many as five airlines buying its customized reports. Amadeus' Hans Joregensen, vice president of partner strategy, said his company has five carriers currently testing customized MIDT. He said the full product, which the company is calling "regional MIDT" will be ready for purchase by April.

Virgin Atlantic is one carrier that, over the past 12 months, has benefited from the availability of customized reports. "Before, you had to buy the whole world," said Bill King, vice president of sales for North America. "But now with customized reports, we have changed our selling approach and are better aware of what share we're getting. We're able to target accounts whose business we're not getting."

For the first time, Virgin has been able to equip its sales team with monthly historical reports loaded onto their laptops. "In the beginning, it wasn't very well accepted by corporate accounts and agencies," King said," but they've seen that it helps them if the account manager has a good idea of how the business is going and can help ensure compliance with the agreement."

Air Canada began acquiring MIDT last year. Director of corporate sales Jack Wallis said that getting the right platforms together and training the sales staff is a lot of work, but MIDT is "extremely valuable in identifying trends, even in the future, about a corporate account that the travel manager may not even be aware of."

Lufthansa's North American headquarters earlier this month installed a direct link to the source of its MIDT info in Frankfurt. Disks with account information are sent to sales reps monthly.

Most other carriers have yet to make anything more than monthly data available to sales reps, but a handful of major domestic and foreign airlines are using daily information in their headquarters. The GDSs have had the capability to feed such data daily for a while (Worldspan and DOB were the first to do it, in 1996), but only recently are the airlines' internal systems coming up to par.

"We started getting daily data over a year ago and our revenue management department was the first to use it, because it gives you advance information," said Nancy Cheberenchick, director of North American sales planning for United Airlines. "The sales force still gets it monthly, so they'll get March towards the end of April. We are going to update the sales reps' software so they can take daily data also."

Continental (<I>BTN,</I> Feb. 22) and Delta (<I>BTN,</I> March 8) both have recently upgraded their sales information systems, complementing their MIDT capabilities. Continental was scheduled to begin feeding its reps daily information last week, and Delta's Larry Beck, portfolio director of distribution, said the airline is "looking at daily MIDT so we can improve discussions with our accounts." Though the appropriate sources at American Airlines could not be reached before press time, most observers agreed that AA, Sabre's sister company at AMR, probably is at the forefront of this trend and likely already is providing its sales staff with daily information.

In the case of Continental, Gorman said, sales reps in the field will log onto a private Web site and download MIDT data to their laptops. "Most competitors' systems get disks or dial in," he said.

Clearly, the spread of MIDT is at hand. "We expect a whole new range of airlines will see the opportunity, especially for regional MIDT," said Amadeus' Joregensen. "I expect it to happen rapidly."

Amadeus has 32 airline customers getting the raw data, Sabre has 36 and Galileo said in December it had 30. Worldspan would not reveal how many airline customers it has, but the company did say its customer base grew by 24 percent in 1997 and by 38 percent in 1998. Even Abacus, which had long stayed on the sidelines of the MIDT business, in January began offering data.

Sabre's Don Brei, project manager for MIDT, said Sabre is looking for ways to expand the data by offering additional elements.

But even as powerful and important as MIDT information has turned out to be, Continental's Cossette said that it's only as useful as the GDSs are. "As more business drops from the CRS and takes on direct connections with suppliers, MIDT becomes less reliable," he said. "And that's potentially a good thing."

Another issue whittling away at the MIDT systems is the growth of reservation centers. "If the number of onsites goes down, and corporations are booking their business in huge res centers along with 55 other companies, it's almost impossible to sort that out by company," said Alexander Rahe, national key accounts manager for Lufthansa.