Profiles In Travel Management: Globalizing Agency Aids Air Deals

Company: Merrill Lynch

Headquarters: New York

2002 U.S. booked air volume: $76 million



After consolidating its worldwide agency with WorldTravel BTI in February, the Merrill Lynch travel team brought in the procurement department to secure the company's first global airline deal, saving the New York-based firm millions of dollars. Joining forces with procurement marks a new strategy that Merrill Lynch vice president of travel services Kevin Brady intends to develop further to purchase other travel goods and services.

The Merrill Lynch travel and procurement teams first tackled a global contract with British Airways, which accounts for more of the firm's spend than any other carrier. "It worked out very well, and we had a rigorous procurement process through all of this," Brady said. "It's in the multimillions that we're saving compared with the last program."

Additional global airline contracts are expected in the near future, with Brady and his team now preparing a request for proposals for Merrill's U.S.-based carriers. "That's more of our target for next year," he said. "We're focusing on the big win first, which is the United States and United Kingdom, and the deal on the New York-London route was the biggest deal for potential savings. The United States and United Kingdom account for about 80 percent of our spend."

The impetus for Merrill's new airline contracting strategy began earlier this year when the travel team replaced its former consolidated domestic agency, Carlson Wagonlit Travel, with WorldTravel BTI as its global travel management company. "That was paramount to doing a successful global program," Brady said. While there are still some small pieces to put into place, WorldTravel has been rolled out to the major regions within Merrill Lynch's program. "The last piece will be South America, probably in 2004, but that's only a couple percentage points of our total spend," he said.

Brady said the worldwide travel agency consolidation paved the way for negotiating better airline contracts. "The airlines are more willing to offer you deeper discounts when you have one agency and can control policy," he said, noting that a more global view of spend also is vital to securing contracts.

Prior to going global, Merrill Lynch operated under various regional deals with its carriers. For example, the company had two separate contracts with British Airways. "We primarily had been doing airline deals by country and with coordination in the U.S.," Brady said. "It was a lot more regional and even though we gave them advice from the U.S., it was more independent from the different regions. We really felt we were losing leverage, and what we're trying to do now is to get that merged altogether and leverage it."

Cooperation with the procurement department has been essential to Merrill Lynch's recent wins in travel contracting. Now, both departments work together on nearly every travel contracting initiative, including a recent worldwide global distribution system RFP. "All around the globe, cost containment has just been a driver," Brady said.

Beyond travel agency consolidation and global contracting initiatives, Brady is digging deeper to secure a globally harmonious program through consolidating vendors. Saying there are "definitely opportunities" to drive more consistency, he is implementing an American Express card program worldwide and will roll out the firm's Ariba expense reporting platform to more regions.

In an era of cost containment and waning corporate travel, Merrill Lynch has witnessed declining travel spending since 2000, echoing a major trend in Corporate America. While much can be attributed to the general decline in corporate travel, better airline contracts and more consistent policy will lead to a further decline in spending. In 2000, Merrill Lynch had a worldwide air volume tipping $200 million. Last year, that number slimmed down to $140 million. Next year, the firm tentatively is predicting that corporate travel will pick up between 10 percent and 15 percent, as prices are not expected to increase at that level.