Lawsuit: Accounting Firms Overcharged For TravelErnst & Young LLP, KPMG LLP and PricewaterhouseCoopers—three of the largest accounting firms in the nation—are the target of a lawsuit that claims they have over-billed thousands of clients "hundreds of millions of dollars" for travel, The Wall Street Journal reported last week. Filed in October 2001 in Arkansas by Warmack-Muskogee Limited Partnership, the suit contends the firms billed clients full-value charges for discounted and rebated travel expenses during a 10-year span starting in 1991. The Journal reported that such practices, while legal when fully disclosed to clients, raise liability issues when they are not. "There are certain firms that add to their fees—15 percent or so—for administrative charges pertaining to travel, but that's part of the deal, that is part of the engagement document," said Neil Abrams, president of Purchase, N.Y.-based Abrams Consulting Group. "There's nothing wrong with it in a legal sense, but it comes down to the disclosure." Denying the allegations while maintaining the legitimacy of their practices, the defendants are seeking an injunction to prohibit class action.
Analysts Brighten Airline OutlookSeveral airline industry analysts recently upped quarterly earnings forecasts for many major U.S. carriers, primarily a result of improving revenue trends. JPMorgan Securities analyst Jamie Baker, for example, now expects that the current quarter will represent "the first emergence of quarterly operating profitability since 2001," following a "pretty respectable summer" for network carriers. UBS analyst Sam Buttrick estimated that industry revenue per available seat mile in August increased 7 percent year over year, following an 8 percent jump in July. Buttrick's September forecasts for the industry included an estimated RASM growth of 5 percent to 6 percent. Passenger yields also are moving in a positive direction
(see story).IBM Takes P&G's T&EA $400 million, 10-year global agreement between Procter & Gamble and IBM Business Consulting Services for Human Resources Business Transformation Outsourcing, announced earlier this month, includes the provision of travel and expense management services to nearly 98,000 P&G employees. As part of the deal, about 800 P&G employees will be offered employment with the IBM HR BTO team which, beginning Jan. 1, will run the three shared service delivery centers in San Jose, Costa Rica, Newcastle, England, and Manila, Philippines, that process about 750,000 P&G expense reports annually for 45 countries in 18 languages
(BTN, Dec. 9, 2002). A P&G spokesman said the company would retain "overall strategic direction" of travel management, with IBM focusing on processing and best practices, and that all travel management employees either would be retained or transitioned to IBM.
General Motors Goes With AmexGeneral Motors has selected American Express as its travel management company, ending a selection process that took most of a year and a longtime relationship with Total Travel Management in Troy, Mich. GM officials declined to comment. They were seeking a single-sourced, global travel management contract to handle its $350 million in worldwide T&E. "We feel we are a global player, and we weren't the only one they didn't take," said TTM's new strategic account advisor, former Chrysler travel buyer Charles Braswell. TTM just landed the DaimlerChrysler business in North America. "Naturally we would have liked to keep GM, but getting the Chrysler business is close to an offset," Braswell said. In 2002, General Motors bought $90 million in U.S.-based air travel; DaimlerChrysler's figure was $66 million.
Continental Tempts Higher-Fare PassengersContinental Airlines began rolling out a suite of customer service enhancements aimed at improving the airport experience for business travelers and securing more higher-yielding customers. EliteAccess—available to top-tier frequent flyers and travelers holding first class, BusinessFirst or full Y economy tickets—will provide expedited security screening at some airports, a separate boarding entrance and new EliteAccess baggage tags that already replaced all existing priority bag tags. Passengers on full Y fares either receive a space-available upgrade, guarantee of a window or aisle seat or 1,000 bonus frequent flyer miles. Continental said that 1,300 to 1,500 passengers per day fly on full Y fares, well under one per its 2,300 daily flights. The airline also said that its business mix—the percentage of revenues attributed to travelers flying on traditional business fares—is down to 36 percent, from 45 percent two years ago.