<B> Swissair, Sabena To Mesh</B>
By David Jonas
Corporate buyers soon will have an easier time negotiating contracts that include both Sabena and Swissair as the two carriers combine their sales and marketing efforts into a new separate entity. Generically dubbed Airline Management Company and the product of the ongoing Project Diamond integration plan, the single sales arm for the partner carriers promises to facilitate deals with not only corporate accounts, but travel agencies as well.
Though Swissair and Sabena already enjoy antitrust immunity, the further integration is designed to give customers the highest level of seamlessness yet for multicarrier agreements. While that sales unity also has been achieved by Northwest and KLM, another link of the fledgling Wings alliance, Continental and KLM, has encountered turbulence that could derail the emergence of truly global deals from that partnership.
"The advantage of combinability on top of antitrust immunity is the opportunity for unique fare structures," said Ulrich Wohn, Swissair's general manager of marketing in the Americas. Integration of net fares is a development that certainly would appeal to buyers, but any contract, regardless of fare structure, automatically will include both Swissair and Sabena, he added.
That means flights on both carriers automatically count toward volume thresholds. However, Wohn noted that for U.S. corporate accounts, only transatlantic flights and those in and out of Brussels, Geneva and Zurich would apply.
Swissair and Sabena had been offering joint deals for a while. In fact they already account for a majority of all U.S. corporate deals with the carriers. However, Wohn said a big step forward is on the agency side where contracts have been "as parallel as possible" but not necessarily integrated.
Only a few other carrier pairs--namely American, Canadian and Northwest-KLM--have established joint deals with the travel agency community. According to Michael Boult, Rosenbluth International's vice president of supplier relations, "Partners are attacking corporates first, while the next step for single airlines is multinational deals for the mega agencies."
Boult added that Swissair may take over all U.S. sales activities because of "better sales distribution here." In Europe, sales will be headquartered in Sabena's hub at Brussels.
Jack O'Neill, vice president of airline partnerships for Maritz Travel, agreed that NW-KLM has a headstart. "Everyone else is still in the formative stages of joint proposals to the agencies and exploring varying models," he said. Other agency sources expect Swissair-Sabena proposals on the table in the very near future.
Meanwhile, other benefits for buyers--in addition to access to both route networks--include transparent monitoring so consumers can see how they are building combined traffic, and transparent remuneration and payment.
Buyers will have access to both carriers through just one sales rep, a welcome development in the current environment of alliances and the pursuit of global deals (<I>BTN,</I> Aug. 2). "If the deal is as good with multiple carriers, a single point of contact is certainly very helpful to corporate travel managers," said John Heilner, of Management Alternatives in Princeton, N.J.
Swissair and Sabena still need to iron out a few details before AMC officially opens for business next spring. For example, the specifics of revenue sharing still need to be determined. One possibility is that the carrier that actually sells the ticket would earn the revenue. And from the buyer perspective, the two carriers will have to alter slightly their sales approach. "It means that each sales rep needs to be an expert on both carriers and networks to equally represent both," Wohn said, adding that it may take time to develop such universal expertise.
AMC's business activities will continue to operate out of Brussels, and Zurich to an extent, though it exists as a legal entity in London to take advantage of greater flexibility in U.K. law. AMC will be headed by Phillipe Bruggisser, CEO of Swissair parent SairGroup, which also holds a 49 percent stake in Sabena. The carriers forecast the "synergy potential" to amount to about euro 150 million per year.
Despite the new level of integration, both carriers said they will strive to maintain their independence and individuality. In a statement, Swissair said both airlines will maintain separate boards of directors, corporate headquarters and brand identities. Wohn added that distribution vehicles also will remain separate, but said there is the "possibility for joint distribution activities in the future."
In other airline integration news, the yet-to-be official Wings Alliance may have hit a snag as Continental and KLM reportedly disagree on certain areas of coordination. Though revenue sharing on transatlantic flights may be one sticking point, neither carrier would elaborate on which issues they differ on. KLM, however, stated that discussions with Continental will continue after a three-way operational merger with the alliance's other members, Northwest and Alitalia, is finalized.
The trio is targeting Nov. 1 to clear that hurdle, including the necessary grant of antitrust immunity. For its part, Continental said it "remains committed to the concept of the Wings Alliance.