Lufthansa Expands Pay As You Fly Program

<B> Lufthansa Expands Pay As You Fly Program</B>

By David Meyer

<I>Torremolinos, Spain</I> - Lufthansa has expanded its Pay As You Fly program to include more than a dozen additional corporate clients within Germany. Last month it also added eight destinations outside of Germany for use by Siemens Corp., the original pilot and user of the program since 1997.

Lufthansa's general manager of key corporate account management Christoph Wilhelm told corporate travel managers gathered for the Association of Corporate Travel Executives' Global Conference here last month that there probably will be 20 German corporations using the ticketless travel program by the end of this year. Next year, he said, the airline will offer Pay As You Fly to those other companies on the routes it currently serves outside of Germany--including Amsterdam, Brussels, London, Paris, Strasbourg and Vienna--as well as add more of the 53 international destinations to which it offers electronic ticketing to the program in the coming year.

Meanwhile, informed sources said Siemens is the unnamed client that Continental Airlines intends to work with in piloting its version of the program in the United States in the coming year (<I>BTN</I>, Sept 6), and that the test will begin in the first quarter of next year.

Wilhelm said Lufthansa intends to share its Pay As You Fly experience with its Star Alliance partners starting sometime next year, but the airline is concentrating first on helping them develop electronic ticketing, the platform on which Pay As You Fly is built.

Wilhelm said he also expected to offer the international routes to other companies in the program next year. Lufthansa also plans to work out the technical details so that those companies would be able to use the Pay As You Fly program inbound from those destinations by the end of next year.

Wilhelm acknowledged that Pay As You Fly creates some exposure to the airline regarding no shows, but said that the number of no shows so far was relatively small. He also conceded that the program, through which travelers are charged for tickets only when they pick up their boarding passes, eliminates the float that corporations traditionally have paid between booking and billing reconciliation following the flight. He said these disadvantages were outweighed not only by a reduction in processing costs--including the bypass of the bank settlement plan by posting charges directly to the Siemens corporate card or the airline's lodge card--but even more importantly by developing a direct sales relationship that virtually locked in customer loyalty.

Wilhelm estimated that Lufthansa has invested more than $1 million and reaped a return of more than half a million from the program so far.

Klaus-Peter Schoelz, Munich-based director of travel management for Siemens corporate procurement and logistics, said the program also has saved his company more than half a million dollars to date. He said other airlines in Germany had sought to compete with Lufthansa by matching the fixed net fare rates that Siemens had negotiated with the airline, and the company had established a similar, though nowhere near as extensive, pay-at-lift scheme with low-cost carrier Eurowings for cities Lufthansa does not serve. Schoelz said Siemens travelers use Pay As You Fly for practically every flight in Germany.

Wilhelm noted that Lufthansa's other German corporate Pay As You Fly customers, including Anderson Consulting, BASF, BMW, Bosch and Deutsche Babcock, do not have the fixed, net fare arrangement that Siemens enjoys. Instead, what they pay as they fly are rates discounted off their regular corporate rates.

Schoelz said savings came from sharing in the airline's streamlining of administrative processes, such as printing and distributing tickets and refunding unused tickets, eliminating the need to pay for tickets or other services in advance of a flight and reducing the workload of the travel agency. He also said there is "additional streamlining of the travel process and cost savings by combining Pay As You Fly with an intranet booking engine," including automating corporate travel policy, speeding the preparation of business trips by giving travelers "immediate information about flights and hotels to plan a business trip," optimizing the booking process and further reducing travel agency workload.

Schoelz said that in order to implement Pay As You Fly, a company needs to have a simple travel authorization process, a corporate card program in place and a travel agency on a fee basis. He also stressed the importance of a strong MIS system and acknowledged the key role that Siemens' data warehouse played in supporting the implementation.

Wilhelm said the air volume threshold for corporations was generally about $2.5 million "to yield cost savings that are significant." Schoelz, who is responsible for a worldwide travel volume of $1.25 billion, agreed: "After all, letting the client participate in the reduction of the individual ticket price by the airline can result in major savings for companies with any significant travel volume.