TWA's Compton To Court Corps.

By BTN / December 05, 1999

TWA's Compton To Court Corps.

Trans World Airlines president and CEO William F. Compton discussed the airline's strategy for the future with Business Travel News' airline editor David Jonas. BTN later caught up with TWA's vice president of sales Scott Bush to discuss opportunities available for corporate clients.

BTN: Please outline your Vision 2000 plan.

William Compton: There are five major elements, the five Ps. The first four--people, places, product and position--lead to the result: profit. Below each of the four, we've defined specific goals and objectives--a total of 60 handled by a particular department that together will lead us to profitability. For example, one goal is to reduce the turn time for aircraft on the ground at St. Louis by five minutes, which is very complicated. The value would be making the final two flight banks--which are too late in the day to appeal to business travelers and therefore less profitable--an hour earlier by moving up each preceding bank. Another example is to utilize each aircraft more than 10 hours a day. That is a goal and objective jointly owned by the scheduling people and the maintenance department to make sure the planes are prepared to fly those 10 hours plus.

BTN: How many corporate accounts do you have at this time, and what are some of the efforts to forge new ones?

Scott Bush: We have about 5,000 corporate accounts now. But we have determined that we cannot be all things to all people. We are a niche player with a major brand name, so we will get rid of those accounts that are not performing and concentrate on those where we can really ask for people's business. Our focus will be on markets where we have a unique competitive advantage or at least a strong competitive position.

BTN: Can you say a few words about your highest level of loyal corporations, perhaps those based in St. Louis, and what their loyalty means to you during these turbulent financial times?

Compton: Loyalty is very important. If you look at what it costs to get a new customer versus losing an existing customer, the value of an existing customer is much more significant. To maintain that loyalty, we are continually upgrading and improving the product. And we really have, in terms of on-time performance, schedule completion and refreshing Trans World One, our business class product across the Atlantic.

BTN: In light of last month's bulk buy with Travel Impressions, have you been offering some of your top corporate accounts the bulk buying option?

Bush: We have used a bulk buying model previously to add particular services to key accounts. We are continuing to look at ways of refining the models we use with select accounts. We are willing to offer more of a discount to those with a strong commitment to us.

BTN: Do you have direct links with buyers?

Bush: We are looking at direct links options, but we have not been an industry leader. We will position ourselves as a follower in that area as well as with commission adjustments. To lead in the cutting of agency commissions would be inconsistent with our strong commitment to the agency community.

BTN: Speaking of commissions, now that TWA, along with the rest of the industry, has matched United's latest cut, how much do you think it will save TWA and how will that money be spent?

Compton: It means between $30 million and $40 million a year to TWA. That money will be reinvested right back into the airline to improve the product.

BTN: With some of the corporations moving more toward direct relationships, will the role of agencies become purely consultative or will they still play a substantial role in distribution?

Compton: They will have a substantial place in the distribution system. A vast majority of customers will need the expertise they provide with price, itinerary, etc. I don't think that ever goes away.

BTN: What is the availability of net fares for corporations?

Bush: We are using net fares on a select basis in current contracts. We also have used net-nets, but it really depends on the unique needs of each client. The whole industry is going through a major transformation as major corporate accounts are finding new ways of paying for service that travel suppliers provide. You'll see a revolution in the industry.

BTN: Have you been forced to back off some market share demands to retain some of your high-yield accounts?

Bush: In some cases we are holding a firmer stance, and in others we are loosening demands. It is all dependent on our power in that particular market. We are small enough that they can still have a relationship with a major, while having a healthy one with TWA.

BTN: Is there any strategy moving forward regarding the inclusion in a global or regional alliance?

Compton: We are working hard on regional alliances. We signed a new labor contract this summer, which removed the restriction precluding us from having agreements with affiliates that operate regional jets. We hope in the next week or so to announce an alliance with a provider of regional jets. (Note: TWA and Chautauqua Airlines have since announced a partnership that will provide TWA will RJ service.)

BTN: Anything new on the revenue management side of the house?

Compton: Quite a bit of work is being done there, including upgrading our software and hardware, and bringing on new analysts with improved skill sets. We have a goal of getting to 95 percent of the industry revenue per available seat mile. Right now, we are at 90 percent.

BTN: JFK has been identified as an operation that's been losing money. What are your plans for that facility?

Compton: Another of our goals is to eliminate unneeded facilities systemwide. At New York JFK, we will be pulling down unprofitable flying, including some feeder flights from Chicago, Detroit, Cleveland and Washington National. In those markets, TWA only operated one flight a day to feed the international flights and had very low yields. Those planes will be redirected toward the Caribbean where we'll be adding flying from JFK that can produce much higher yields and greater profitability.

Bush: The North Atlantic has been frustrating for us, as it has been for British Airways, Continental and others. We have decided to move capacity to other markets and we have made some radical changes in our schedule for this year, including pulling down flights to Barcelona, Madrid and Rome. If the marketplace is telling us we're not making money in Rome and Madrid, we'll move somewhere else. But we are still flying to Italy over Milan, which we found to be much more of a business market.

BTN: You have a slew of new Boeing 717s coming in. What is the appeal of that plane for the business traveler and where will they be deployed?

Compton: They have asymmetrical overhead bins that can fit three rollaboards each. In the old overhead bins, you were lucky to get one or one and half per bin. It also will be the quietest airplane in the air, which helps not only the passengers onboard, but the communities they will be serving as well. The 3-2 seating is appealing for those in coach, because only one in five have the possibility of being in a middle seat. Also, there will be an expanded first class--16 seats of the 111 total, which is a high percentage. Early on, they will be replacing older airplanes, such as DC-9s and 727s at O'Hare, Washington National, LaGuardia, Philadelphia and in the Midwest in and around St. Louis.

BTN: Is e-ticketing a priority?

Compton: It is. We have a new distribution department challenged this year to meet our internal goal of selling $150 million worth of tickets--roughly 5 percent of our gross--via the Internet. The objective is $300 million next year, and $450 million the year after. Beyond that, they are challenged with finding ways to make the entire experience paperless. I want the customer to get out of his or her car at the curb and walk straight onto the airplane, without having to wait on any lines. It will take time, but that's the vision for two or three years down the line.

BTN: Third-quarter earnings were weak. Is there a short-term strategy to turn those earnings around and return to profitability in the next few quarters?

Compton: TWA has encountered 30 years of disinvestment and it's not something that can be turned around on a dime. There is not one magic bullet that will fix it. It requires an attack of all 60 items in the Vision 2000 plan simultaneously. Third quarter was weak, but it looks a lot better today than it did three years ago. And getting the new airplanes in the long term will save TWA a lot of money. In the short term, it actually costs more money because it's the worst of both worlds: new ownership costs of the airplanes, but still flying old planes with high maintenance costs. As the old airplanes leave the fleet, which they are doing in dramatic fashion, then you will start getting the efficiencies associated with lower fuel and maintenance costs, plus the positive customer perception. It won't happen immediately, but a year from now, TWA will look a lot different and a lot better than it does today.

BTN: What is your growth strategy for the Caribbean, and while there is a frequent flyer element there, do you expect a good deal of business traffic to the region?

Compton: Our goal is to become a strong number-two in the Caribbean by the end of next year. We are tackling that by establishing the new focus city of San Juan. There will be 15 departures a day out of San Juan and we will open a new Ambassador's Club there in a few weeks. A lot of people don't recognize the amount of business presence in Puerto Rico. The pharmaceutical industry is very big there and there are also a lot of technology firms. Meetings also are growing in Puerto Rico.

BTN: Beyond the Caribbean, we have seen a convergence of transient and group travel. Are meetings an area that you will focus on going forward?

Bush: We have pricing for corporate meetings in most of our contracts. If the corporation is a heavy user of group travel, we will take that into account and apply a deeper discount to daily business travel. We are looking at total revenue and yield.

BTN: Overall, would you characterize 1999 as having been a buyer's market, and what do you expect for 2000?

Bush: This year has absolutely been a buyer's market. Moving forward, I expect the buyer to look for more efficient and intelligent ways of buying. Also, I see the market looking for enhanced services to make the traveler's experience easier. In our research, we found that 80 percent of the decision regarding which airline to fly was based on the opportunity of sitting in the front cabin. As a result, we have expanded our first class cabin by 60 percent, which has allowed us to market the First Up program. When you buy a Y ticket for travel through one of our hubs--even with a corporate discount--you can book in first class. In that way, we need not demand a high elite status for the elite product.

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