Following is the story of George Young, director of travel management at Raygon Corp., and how he handled the egregious airfare increase from States Air, Raygon's primary airline supplier. Raygon has participated in the Business Travel Traffickers Co., a corporate buying and advocacy group. This story (which, like all parodies, is fiction only and does not involve any real person or company, living or dead) was crafted from meetings between Young and States Air and unfolds through multiple discussions.
Young: How can States Air raise airfares 10 percent without notice or justification and drive my company's costs up overnight by $2 million? Is this customer focus? A business partnership is based upon win-win outcomes. Do we have one?
My largest internal customer, the industrial solutions division president, is livid. Contracts with her customers stipulate that Raygon cannot increase prices without providing 120 days written notice. To make plan, her division will now have to sell 2,300,000 extra units of cleaning solution.
What do you recommend I tell her? Do I tell her that after she supported my business rationale for centralizing travel purchasing, consolidating to one travel agency, implementing strict travel policies and awarding business to States Air that Raygon really has little true control over its air travel purchasing process? Should I say that while Raygon, with $20 million in air volume, is constantly frustrated by States Air's pricing actions, at least we are not paying as much as companies with $20,000 in air volume?
Perhaps she will ask if I have read the recent Stone Wall Journal article which pointed out that smaller companies pay less for air travel compared with companies of Raygon's size because larger companies tend to play by the rules, while smaller companies tend to use back-to-back, point-beyond and other airline-discouraged ticketing schemes.
Airline Rep: First of all, George, I understand your concerns and want to be clear that I value our relationship. But you caught me off guard. I was not informed of this increase. I will look into this, and I assure you, we will find a solution.
(One week later) Airline Rep: George, I met with pricing department staff and they confirmed airfares did increase 10 percent. However, they contend Northeast Air led the pricing action and that States Air had little choice but to follow. My management and I support your position, but our hands are tied.
While I was unable to acquire pricing relief, I was able to secure for you first-class upgrade coupons and free drink tickets. I am afraid that's the best I can do.
Young: Last week you assured me a solution to this problem would be found. Now you insult me with drink tickets.
I have met with Raygon division presidents and my CFO. There is a simple solution that will enable States Air to respond to our concerns without requiring a change in the airline's overall pricing structure. The solution is to amend the Raygon-States Air contract replacing the 10 percent discount with 20 percent. Raygon will remain within its travel budget and continue to give States Air its business.
Moreover, senior management has directed me to negotiate future contracts with only those airlines that agree to offer guaranteed pricing during the term of a contract. Finally, without a mutually acceptable solution, I have been instructed to cancel our contract.
(Two weeks later) Airline Rep: George, I was unable to secure approval for a 20 percent discount, but I was able to obtain 17 percent. I am also authorized to investigate a more rational approach to pricing that would include predictable airfares. I hope this is acceptable to you and that neither of us is ever surprised like this again.
Young: I can support your counterproposal with my management especially since you are open to exploring more established approaches to purchasing. I appreciate your responsiveness. You also might want to let your management know that most other BTTC participants have worked out similar contract renegotiations with their airline partners.
(Four weeks later) Buyers' Travel News BTN reported an unprecedented surge in airline contract renegotiations in the aftermath of its recent feature story profiling purchasing strategies employed by BTTC participants to address unjustified airline pricing actions.
Raygon's CFO was quoted as saying, "it is abundantly clear that proactive travel management experts can create value for their corporations even against insurmountable odds." And Mark Levens, marketing chief at Northeast Air, which led the pricing action, asserted, "not to acknowledge our best customers' concerns would be to betray the moral compact we have with them."
<I>Kevin Mitchell is president of the Business Travel Contractors Corp., a strategic buying and advocacy group formed in 1994. He can be reached at 610-834-8550 or by e-mail at
[email protected].