Oracle Takes Air Policy Step

<B> Oracle Takes Air Policy Step</B>
<I>Mandating Nonrefundable Tickets</I>

By Jay Campbell

<I>Redwood Shores, Calif.</I> - In its first major air travel policy change in eight years, Oracle Corp. on March 26 took the rare step of mandating the use of nonrefundable tickets on the estimated 15- 25 percent of itineraries for which they are available.

The change came as the result of a financial analysis indicating that travelers were wasting about $6 million of Oracle's $120 million domestic air budget by choosing higher priced, less restricted tickets when non-refundables were available.

About 11 percent of all companies require travelers to use nonrefundable tickets when available, according to a fourth-quarter fare audit done by Topaz International of Portland, Ore. Fares for nonrefundables can be more than 60 percent cheaper than full coach.

Under Oracle's new policy, if a traveler refuses to take an available nonrefundable fare, Oracle travel manager Val Cordell informs the traveler that he or she must either cancel and book the nonrefundable, pay the difference or get approval from one of Oracle's three senior directors of finance. The company is not requiring connecting flights over nonstops just to get the non-refundable fare, however.

As the policy rolls out, Cordell is giving travelers a little time to get used to the change. "Right now, I'm only dealing with travelers who refused to book nonrefundables that are available on the exact same flights they took," she said. But if the program proves a success, Oracle might expand it to include all available nonrefundables within a two-hour window. The company's previous air policy required travelers to book the "lowest unrestricted fare available within a two-hour window."

Accompanying the policy change, Oracle set up a formalized "ticket bank," into which employees who have purchased non-refundable tickets and subsequently had to change their plans can deposit their tickets. The system is handled manually by Oracle's travel management company, Rosenbluth International, but Cordell hopes to automate it soon.

She is considering the services of Fremont, Calif.-based third-party technology vendor Airlink Systems, which has software that would allow Oracle to: track the number of tickets used and the total of the $75 change fees; automatically document the profile of travelers who have tickets pending re-use; notify travelers of e-tickets that were neither deposited in the bank nor used; pull up a listof tickets about to expire and notify travelers by e-mail; and periodically update travelers on what they have in the bank, among other features.

But "we still have to do the cost/benefit analysis on that system," she said. Being a database company itself--not to mention the world's second-largest software vendor--Oracle could develop a tracking system of its own.

The new policy came after Cordell's department tracked two quarters of bookings to determine how often nonrefundables were offered and how often they were declined. They found that while 16 percent of tickets were nonrefundable, nonrefundables were available on another 7 percent of itineraries.

Asked why they declined the cheaper fare, travelers most often said they didn't want to risk having to carry the balance of canceled tickets on their individually billed corporate cards. Responding to that issue, Cordell set up a central bill account to be used only for nonrefundable tickets.

"By having the travelers responsible for the float, we had been actually de-incentivizing them from buying nonrefundable tickets," Cordell said. "A lot of people were pleased that we made the central-bill option available, even if it was only for those tickets."

The Oracle travel department contacts travelers who used the central bill, but fail either to expense the ticket or deposit it. They are given a 45-day warning, and if no ticket or expense report comes in, they are charged for the cost. Further, their CRS profile is adjusted to prompt travel agents to remind them that they have outstanding tickets and should attempt to use them as credits on future flights.

But Cordell suspected many travelers had been booking the less restricted fares in order to be closer to the front of the upgrade line. Airlines are offering more perks to frequent flyers who book higher fares, ostensibly to improve the product for such passengers. But travel managers fear such perks contradict their own efforts to control air costs (<I>BTN</I>, April 13). Adjusting to that trend, Cordell said travelers may book the occasional higher-priced nonrefundables within a certain dollar range without requiring an exception approval.

Indeed, Cordell said, "After we put in this new policy, the frequent flyer issue quickly reared its ugly head. In traveler feedback, no one admitted that was the reason, but our agents were really good about reporting to us what was really going on."

In its research, Cordell's department also found employees were confused about what exactly a nonrefundable is, and needed simple education. "Some people thought these types of tickets were absolutely unusable once they are changed. The perception was that they're so restricted, they're not worth the pain," Cordell said.

The travel department sent out several e-mails, including a Frequently Asked Questions file, on the subject of nonrefundables, and posted the file on the travel homepage.

Also helpful was the fact that the name of Oracle's CFO, Jeffery Henley, appeared on all the communications. In fact, the new policy is a top-down move. "We have a mature travel program from the perspective of consolidation and travel management, so over time you're constantly looking at where you can find incremental savings. One area that's been considered each year is nonrefundables," Cordell said.

Following the policy's implementation, Cordell's department was inundated by traveler comments and questions. The most legitimate issue, she said, was brought forward by Oracle's consultants, who buy 40 percent of Oracle's travel. "What do we do," they asked, "when the client we're rebilling for travel doesn't follow the same policies and doesn't want to have to float non-refundables?" Cordell told the consultants to ask clients if they would be willing to share the risk given the potential cost savings. Most were willing to go along.

Other issues arose when some travelers complained they would not get their credit card points for tickets booked on the central card. For those folks, who just can't pass up 300 or 400 miles, Cordell said travelers still are allowed to book non refundables on their own credit cards.

She said one early and unexpected benefit of the policy change was that it heightened everyone's sensitivity to travel policy. Some employees, she said, were not very familiar with the policy since it hadn't been changed in eight years.

Since the program is so new, Cordell isn't positive it will pay in the end. "This requires a lot of internal administrative work, so the jury's still out," she said, noting that Rosenbluth already has two full-time people devoted to tracking nonrefundable tickets. The changes in accounting also required the reprogramming of Oracle's expense reporting system. "But I'm pretty confident in it," she added. "For $6 million, even if you have to hire ten people, it's worth it."

Meanwhile, Oracle is negotiating contracts with airlines. Asked whether she expected the new policy to reduce her negotiating leverage, Cordell said, "I've emphasized that this is only 20 percent of our tickets, so they seem okay with it as long as it stays at that level.