<B> Nets The Rage In Europe</B>
By Amon Cohen
Net fares are a hot property in Europe, as travel purchasers and agents alike report increased demand from corporate clients for up-front discounts and non-commissionable fares and also an increased willingness from airlines to give customers what they want.
Sometimes it has to be dragged out of the airline, such as by a customer boycott in Sweden (see story, page 4). Elsewhere, overcapacity, especially across the Atlantic, is creating a buyer's market and airlines are serving up deals any way the corporate client wants.
"Smaller airlines are looking to increase market share and will do almost anything to win business," said Dennis Bailey, senior buyer for British agricultural machinery manufacturer New Holland.
As in the United States, the key drivers for moving to net fares are the desire to bring forward the paying of rebates and simplify their reallocation, and to make pricing transparent for travelers.
One company enthusiastically embracing net deals in Europe as much as stateside is IBM. "We are globally reviewing all our air deals and in 2000 we want to move wherever possible to a net-net basis," said Huub Smeets, IBM's Amsterdam-based travel manager for Europe, the Middle East and Africa.
However, European agents also feel there are potential problems and are warning clients not to jump on the net fare bandwagon without understanding the disadvantages. At the BTI U.K. client conference in London earlier this month, both Business Travel International CEO David Radcliffe and COO Mike Platt urged caution. "I am not convinced that they are good for every client," Radcliffe said. "They are great for companies that can enforce policy; otherwise you might be best off going for the lowest fare." Platt said airlines are beginning to restrict availability to net fare users, using their yield management systems to shut out inventory in favor of full-fare tickets.
Other restrictions include the inability to interline and--in some cases--to change or cancel the departure.
Another British agency that has witnessed greater variation in net fare conditions is Seaforths Travel, which has few route deals with airlines. Instead it has net agreements with no fewer than 35 carriers and uses these with creative ticketing to control air costs for clients.
"What has changed is that net fares are almost mirroring the excursion fare market with different levels of flexibility for different prices," said Seaforths director Gary Hance.
As an example, Seaforths offers clients an economy return between numerous points in the United Kingdom and the United States with a continental European airline for around $395, including tax. That ticket cannot be canceled or changed, but the same airline is offering another net fare with the same carrier for $600 that can be amended for an additional fee of $120.
According to Hance, net fares are usually around 30 percent higher than the cheapest excursion fares, but not all deals are in economy--some are available in business class.
Platt said net fares increase processing time and cost, a message that is endorsed by American Express Europe vice president for supplier relations Alan Coles. "They are not the easiest things to manage in a process that is dominated by the Billing and Settlement Plan," Coles said. "Under a fee structure, we would agree on what process the client wanted and if it was more complex, we would charge more for it. Nevertheless, many clients feel the benefits outweigh the costs."
Processing has been made easier in the Nordic market by Amadeus--the dominant global distribution system in Northern Europe--introducing a negotiated airfare module. "Practically everything is done automatically within the system and is loaded by us or the airline. Net fares are not exploding in popularity but they are being adopted this year much more than ever before," said Jon Risfelt, American Express Nordic vice president for corporate travel.
Yet even if the reservation process is being made easier, some companies are finding their internal financial arrangements cannot digest net fares, according to BTI's Platt. He said, "We had one client ask us to put commission back into their deal so that it was self-financing.