American Airlines for the fifth consecutive year was deemed the best domestic carrier with which to work within the context of a managed corporate travel program, according to results from the latest Business Travel News Annual Airline Survey. Since the survey's inception, buyers have awarded American Airlines the top honors each year, driven by what travel managers perceive to be a prepared salesforce, precise and realistic contracting goals and a powerful network.
AA increased its lead over Continental Airlines, which finished second among major carriers. US Airways continued its improvement, jumping from fifth last year to third, marginally behind Continental. Prior to 2001, US Airways failed to place higher than sixth overall. These three carriers scored significantly above the rest of the pack.
Measured by responses from 172 U.S. corporate travel buyers, the survey ranked Delta Air Lines fourth among the nine majors for the third consecutive year, followed by Southwest and Northwest airlines. United Airlines, which last year finished second among corporate travel managers, dropped to seventh.
Overall, the industrywide score from corporate travel managers of 2.98 (out of five) matched exactly the score from last year, though certain categories saw vast improvement while others degraded substantially.
The year measured by this survey began last fall, right around the time of the Sept. 11 attacks. At that time, and during the following few months, corporate travel managers praised their major network carriers for their cooperation, both in the immediate-term efforts to locate travelers and bring them home and in understanding the ramifications on corporate travel programs. As such, overall scores for complaint/problem resolution and quality of communication substantially were higher. Record flight completion rates at some carriers also meant passengers have had fewer operational complaints.
As the year progressed, buyers again became frustrated and an air of antagonism returned. New policies further restricting many fare types and the elimination of discounts on lower-bucket fares, among other policy tweaks, alienated many corporate travel managers. Indeed, with their very survival at stake, carriers were forced to make decisions oftentimes painful to their corporate customers. The results are reflected in lower scores in the eight other categories.
"After Sept. 11, there was a lot more cooperation from the travel manager perspective. They understood what we were facing and tried to work with us," said Paul Leyh, US Airways global director of corporate programs. "As time went on, they went back to issues within their own companies and have been trying to balance our pressures versus their own internal pressures."
Summing up a common buyer sentiment, one travel manager commented, "We understand they are fighting for their lives, but eliminating discounts on lower buckets and making those changes to the nonrefundables has left a bad taste in my mouth."
Indeed, new airline policies meant to fend off financial collapse added to the burden of buyers already bogged down by their own cost-cutting mandates. "There has been a lot of anxiety around moves the airlines have made in the course of the past nine months," said Ron DiLeo, COO of Rosenbluth International strategic travel solutions division. "If you are a buyer, no matter which way you turn, all these moves equate to price increases and that builds resentment."
Mark Walton, principal at Consulting Strategies in Lincolnshire, Ill., said the airlines' inability to develop long-term relationships with corporate clients, and the clients' corresponding tendencies to switch allegiances, is detrimental to both parties. "You have all these one-year contracts, and carriers do not step up to the plate to renew," he said. "Instead of building a structure to work in the good and the bad, they snubbed their noses and created a revolving door situation that speaks to the commodization of the industry."
Kevin Iwamoto, global air and car supplier manager at Hewlett-Packard, agreed that carriers have not focused enough on creating long-term partnerships, lambasting the majors in particular for pricing inflexibility, a category in which all 14 carriers received lower scores than last year. "It is not right when they broad-base everyone and place no value on accounts that have been performing," Iwamoto said.
Meanwhile, Midwest Express for the third straight year scored highest among smaller carriers, closely followed by JetBlue Airways, a newcomer to the survey
(see story).In terms of international operations, Lufthansa German Airlines finished first of the seven foreign and domestic carriers with more than 20 percent usage among survey respondents.
The survey asked travel buyers to rank carriers, on a scale of one to five, in various categories, ranging from flexibility in negotiating prices and amenities to the quality of sales rep visits and carrier communication. It also included overall price value, a category secured for the fifth consecutive year by Southwest.
As in years past, Business Travel News excluded general inflight service questions and U.S. Department of Transportation operational data to focus specifically on carriers' performance in maintaining preferred corporate relationships.
Individual Carrier PerformanceAmerican Airlines placed first in seven of the 10 categories and well above the industry average in the others, improving marginally its overall score from last year and distancing itself from competitors. Its margin of victory—a 3.29 overall score compared with number-two Continental's 3.16—was the widest in three years.
The carrier attributed its ongoing success in the survey to a superior product—additional coach leg room and a global network—and a well-trained salesforce. "We have had for 10 years a consistent formula on how we go after corporate business," said Frank Morogiello, AA vice president of global accounts. "We have a training program that becomes the way we work. From the top down, we instill that into all our salespeople."
That consistent formula evidently paid off specifically in value of sales rep visits, a category in which AA improved upon from last year and easily took top marks again this year. It also managed to maintain its winning score in sales rep empowerment, a traditional area of poor performance for all carriers.
"AA spent time trying to figure out what we needed and did not assume it was the same as last year," said a travel manager at a large international company. "Nothing is last-minute. They brought a team in six months ahead of time."
"Others have tried to emulate what we do, but copying programs just is not enough," Morogiello added. "If you stay close when good or bad news comes, it is not a surprise. At worst, it is a family feud rather than a divorce."
Though AA's score for availability of special services for VIP travelers declined from last year, it still blew away the rest of the field. "We have trimmed in that area and are using it more as a specialty rather than giving it to everyone, so that may be why we came down a bit," Morogiello explained. "But we still have a special services team that always undercommits and overdelivers."
Continental Airlines, which buyers last year ranked third, moved into second place this year. Respondents particularly were pleased with the carrier's performance in complaint/problem resolution, quality of airline communication and value of sales rep visits. In fact, Continental's score in the communication category was tops of all carriers.
Though scores were lower year over year in the other seven categories, each mark easily exceeded the industry average. "Continental does a great job in inside sales support," said a Bay Area travel manager. "Their turnaround for problem resolution is very strong, and they are more aligned in terms of knowing the strategic objectives of their corporate clients. That is what long-term partnerships are all about."
Monisa Cline, Continental managing director of national corporate sales, attributed the carrier's success to sales support teams, open communication and the Prism-enabled Corporate Insight system.
"In terms of field and national corporate sales, Corporate Insight has helped us by providing real-time data back to the customer and better communication on how corporate accounts are performing," she said. Continental placed second in availability of flown revenue data.
Among the major carriers, US Airways showed the most noticeable improvement, jumping from fifth a year ago to third this year and generating a higher overall score. The survey had an East Coast bias—about 30 percent of all respondents were from the Midatlantic region—which partially could explain US Airways' success. Buyers and other industry observers were satisfied with the carrier's forthright communication efforts during its most challenging of years, scoring US Airways much higher than last year in complaint/problem resolution and quality of communication.
"They have run local focus groups to find out what the issues are," said one travel manager. "They obviously realized they did not do so well last year and now they have really gotten into it. They have sat down and listened."
US Airways also garnered the highest score of all carriers in providing accurate flown revenue data. "Discounts are predicated on performance and you don't know the performance until you are provided that data," said Steve Tracas, the carrier's vice president of sales. "We work diligently to extract that data, which is not easy to do, and equip our salespeople so they know, on the spot, what is going on."
US Airways' scores declined from last year in several categories, but none was lower than fourth among major carriers. The carrier finished below the industry average only in overall price value.
Nevertheless, some buyers were unhappy with US Airways this year, particularly some in hub cities that claimed to have outperformed contractual goals but were not offered improved terms. Others still were stinging from US Airways' industry-leading move to further restrict nonrefundable fares.
Similar complaints were lodged against US Airways' East Coast rival Delta Air Lines, which improved on last year's performance in just one category: complaint/problem resolution. Among major carriers, its 2.89 score for overall price value beat only Alaska Airlines and United.
One of Delta's steeper declines came in flexibility in negotiating transient pricing, down more than 12 percent to 2.77. A common complaint, repeated from years past, was that Delta's corporate contracts are overly complex yet still antiquated. "They are in the 1970s," lamented one New York-area travel manager whose company is a Delta client. "They are not flexible and not cooperative. There is no gray area with them, which in this industry you need."
Nevertheless, Delta finished fourth overall among majors and at or above the industry average in six of 10 categories. The carrier for the third consecutive year refused to comment.
Southwest Airlines performed uncharacteristically well in this year's survey, a result of other carriers suffering from lower scores while it generally maintained an even keel. Aggregate buyer responses brought the carrier from sixth place last year to fifth this year, ahead of Northwest and United.
Southwest placed below the industry average in the various negotiating and special services categories, a product of its simplistic, straightforward philosophy that does not permit corporate deals. However, Southwest's performance in providing accurate flown revenue data, with a 3.09 score, beat the industry average and was fourth overall. A likely explanation is the carrier's Swabiz online booking portal, which has grown rapidly in popularity—corresponding with surging Southwest usage among U.S. corporations—and provides travel managers with detailed reporting.
Southwest's industry-leading score for overall price value was unsurprising. In fact, the 3.75 it achieved this year was the single highest mark for any carrier in any category, though it actually slid a bit from last year.
Like many of its peers, Northwest Airlines improved over last year only in complaint/problem resolution, while scores in other categories fell. Yet, declines in flexibility in negotiating both transient and meeting pricing, as well as in overall price value, were not as severe as those experienced by competitors. Still, the carrier finished sixth among major carriers, barely ahead of United. However, Northwest was spitting distance—a mere .04 points—from fourth place Delta. The survey's East Coast bias, which may have boosted US Airways, conversely may have hurt Northwest.
"They are very insulated and have such a high share in all their fortress hubs that they are used to being complacent," said one travel manager. "They do not have to fight as hard for corporate travel dollars."
Nevertheless, Northwest in the past year became proactive in servicing corporate travelers, according to Fay Beauchine, vice president of sales and customer relations. "More has been done on the spot at the airport, there has been more of a focus on premium travelers and our corporate services desk always receives positive feedback," she said.
Beauchine suggested Northwest's relatively stable performance was reflective of stronger financial footing. "It all rolls up into a level of confidence," she said.
United Airlines is at the opposite end of that spectrum. The airline's well-publicized woes were mirrored in its survey results this year. The carrier plummeted from second place last year to seventh among majors and its overall score from buyers fell 12 percent to just 2.88, well below the industry average. Scores in individual categories fell sharply, often and uncharacteristically under the three-point barrier.
The only increase came in complaint/problem resolution. While most competitors improved scores for quality of communication, United did not. "In terms of schedule changes, some of which impact our program, we have to chase them around to get the information," said one travel manager.
Meanwhile, anecdotal reports suggested United has or will cancel many corporate agreements for a variety of reasons, though the carrier denied such reports. "United realizes they have a multitude of sins to make up for and they are cleaning house," said another travel buyer, suggesting the carrier's corporate client roster became too bloated to be beneficial in the current environment, considering United's business model.
Improvements in contract development and management were promised when United signed on with Prism and introduced Corporate Solutions in March. Buyers, however, gave the airline a 2.82 score for flexibility in negotiating transient pricing—ahead of only Delta, among the Big Six—and a 2.93 in availability of accurate flown revenue data. United expects those scores to improve as the Corporate Solutions program takes hold.
Meanwhile, United's scores for value of sales rep visits (2.87) and empowerment of sales reps (2.46) each were near the bottom of the list. "The empowerment issue has been a problem at United during the past year or so," said Consulting Strategies' Walton. "If a travel manager finds it really difficult to work with someone, they will have a really negative viewpoint."
Yet, some buyers have been pleased with United's recent efforts in explaining new policies, which have included a series of forums and conference calls with its largest accounts. "I think they actually have done a better job in keeping us informed," one travel manager commented, echoing sentiments from others. "From what I have seen, it surprises me that so many still have such a negative viewpoint."
United vice president of sales Frank Kent said the survey results "are not unexpected," considering the multitude of changes the carrier has gone through during the past year. "Earlier this year, United unveiled a new process and corresponding suite of products designed to, in fact, change the way we do business within the corporate marketplace," he said. "We recognized that our agreements had to be smarter and more beneficial to both United and its corporate customers. This required change, and change is never easy—for our customers and us. Despite this period of change, we remain committed to providing a mutually beneficial value proposition to the corporate marketplace."
America West Airlines' business traveler-friendly fare restructure undertaken earlier this year apparently did not propel the airline to a better survey performance as it finished near the bottom, again in front of only Alaska Airlines. Most categorical scores were down from last year.
"Dealing with AWA has been challenging in the way they have centralized the salesforce," said one of the carrier's corporate travel manager clients. "They have nobody on the local or regional level. It is all out of Phoenix."
Similar to its larger competitors, AWA managed to improve performance in complaint/problem resolution and quality of airline communication. Respondents also graded the carrier slightly higher in value of sales rep visits.
Despite the generally low scores this year, some buyers said AWA gave itself a competitive advantage moving forward by not matching the other majors in imposing new ticketing restrictions. Moreover, travel managers all year have applauded AWA's fare restructure, even if they do not have formalized deals with the carrier.
Alaska Airlines again placed last among the nine majors, finishing with an overall score of 2.59, marginally below its 2.66 from last year. Buyers this year gave the carrier lower scores in seven of 10 categories, notably in flexibility in negotiating transient pricing, availability of special services to VIP travelers and overall price value. However, Alaska showed marked improvement in complaint/problem resolution, value of sales rep visits and empowerment of sales reps.
To be fair, Alaska's usage among survey respondents was just 19.8 percent, the lowest of any major carrier. Though the carrier in the medium term is not likely to grow larger than the other majors, its usage may increase as it expands transcontinental flying and sustains overall capacity growth while the others retrench. Alaska, for example, this year added nonstop Seattle-Boston service and this week will launch nonstop Seattle-Miami and Seattle-Newark flights.
International Operations
German carrier Lufthansa took top honors in the international portion of BTN's survey with an overall score of 3.65. It was followed by British Airways (3.58), Continental (3.55) and American (3.32). Rounding out the list were Northwest (3.26), United (3.25) and Delta (3.20). All other carriers had a usage rate among respondents below 20 percent and therefore were excluded from comparisons.
Lufthansa did not finish lower than third in any of the four international categories and placed first in flexibility in multinational deals, a likely result of close affiliations with Star Alliance members, especially in Europe.
Like last year, BA faltered in the negotiating categories. "They frustrated me to the point that I had to drop them from my program," said one travel manager at a multinational company. Yet, BA made up for such shortfalls with top scores in quality of premium class service—the 4.28 score easily was the highest mark in the entire international portion of the survey—and in availability of special services to VIP travelers.
Continental scored highest among U.S. carriers, pulling in a top score for flexibility in negotiating pricing.
Northwest's scores showed a dichotomy between well-received negotiating efforts—it scored second in pricing flexibility and third in multinational deals—and dead-last scores in quality of premium class service and VIP traveler services.
"As we opened contracts to redefine the domestic corporate fare structure, some opportunities availed themselves in the international arena," Northwest's Beauchine said. "Also, we believe we have a very productive, working relationship on global deals with KLM." She added that lie-flat premium class seats, slated for deployment next year on the carrier's international Airbus 330 fleet, should help to improve Northwest's scores in the service categories.
Meanwhile, United and Delta airlines each placed no higher than fourth in any one category.