U.K. Travel Mgrs. Upset Over Frequent Flyer Promos

<H1> U.K. Travel Mgrs. Upset Over Frequent Flyer Promos</H1>By Amon Cohen

London - When does an incentive become a bribe? That is the question being asked by U.K. travel managers as the latest row over free gifts to travelers erupts.

As in the United States, there is a constant antagonism in Europe between airlines that use frequent flyer programs and other tactics to woo travelers, and travel managers who denounce such programs for encouraging their employees to flout corporate policy. Right now, though, the stakes are rising as carriers compete to win market share across the Atlantic and promote their expensive new premium classes. Among the offers in the U.K. marketplace singled out as excessive are:

1. American Airlines, promising 40,000 bonus AAdvantage miles (the equivalent of two free economy round-trip tickets) for purchasing either one first-class or two full-fare, business-class round-trip tickets from the United Kingdom to the States.

2. British Airways, offering two free economy round-trip tickets to Europe in exchange for buying one first-class or two business-class round-trip tickets.

3. Continental Airlines, giving 140 pounds (about $200) in travelers checks to passengers flying in BusinessFirst and 70 pounds (about $100) in travelers checks to passengers flying in economy. The deal, which applies to every trans-Atlantic flight, is available until March 31. This offer in particular has angered travel managers.

The offers are unusual: Although U.S. airlines give away bonus miles, they don't give cash awards to customers. And they don't offer free tickets as incentives, other than the tickets that customers redeem with their frequent flyer miles.

"The practice of giving travelers cash is an unethical bribe," alleged Andrew Solum, travel manager for global telecommunications company Inmarsat and vice chairman of the London region of the Institute of Travel Management. "It is an enticement to pull travelers to that particular airline, which may deviate from travel policy."

His view was supported by Norman Ryan, manager of corporate travel Europe, Africa and the Middle East for oil exploration company Halliburton Holdings.

Ryan was particularly incensed by the Continental offer because he sends a great number of travelers from London to Houston, a route on which the airline offers one of the strongest services. He wrote to Continental, saying he was "totally horrified" at what he regarded as a "totally unethical" promotion. "As soon as an incentive goes from being non-cash to cash, it crosses the line of the individual being remunerated by a supplier for using that supplier, and therefore it becomes bribery," he said. Ryan also said it was "questionable" whether travelers could avoid declaring the traveler's checks as taxable benefits.

There are a host of additional objections that Solum raised, one of which is an often-heard complaint about frequent flyer plans: "This is a cash benefit which goes to the traveler and not to the company which paid for the ticket," he said.

Solum said he also was worried that travelers might use company time to travel to the United States via Continental's Newark gateway rather than via a more direct route with a rival carrier.

There also is the question of company morale. "We could have people who travel with Continental say they got 140 pounds and rub it in the faces of everyone else they work with," said Solum.

The Continental affair is an embarrassment for American Express, which supplies the traveler's checks-and, as chance would have it, is Halliburton's travel management company, responsible for helping Halliburton travelers conform to travel policy.

Amex Europe senior vice president for business travel operations Eric Brannan has written to Ryan, saying that he had not known about the offer. "No linkage was made to the travel management side of our business," he said. "We certainly would not knowingly do something like this, which was no doubt agreed to in all innocence by someone in the travelers-checks division."

Continental has responded to the situation by agreeing to a request from Ryan to help track Halliburton employees to whom it has given travelers checks. Ryan will ask those travelers to hand the money over to the company.

"There have been a couple of incidents where corporates have suggested this was the wrong thing to do, and we have taken note of that," said Continental marketing manager Keith Woodward. "With hindsight, perhaps it should have been considered that this smacked of cash incentives."

Woodward accepted criticism that this was a cash benefit to the traveler and not the company, and that it could affect internal morale. But he argued that the deal was not intended to influence travelers to deviate from corporate policy because the promotion had mainly been sent to passengers' homes and therefore was targeting them as individuals.

Woodward added that the whole question of incentives was an ethical gray area. "When is it not a bribe?" he asked. "Are Air Miles not considered to be the same thing? Perhaps they are more palatable than a direct cash offer."

But both Solum and Ryan are unhappy with all types of incentives, whether cash or not. Solum finds that the influence of the frequent flyer program of BA, the dominant frequent flyer carrier in the United Kingdom, is particularly insidious. "I have travelers saying to me that they must fly BA," he said. "And I know why."

A common response from airlines is that they are rewarding travelers for flying in their own free time and that it is therefore fitting that they, rather than their employers, should receive the benefit.

This theory does not wash with Ryan. "If employees really feel aggrieved about the amount of time they are spending traveling, then that should be handled by their company through a human resources program or by giving them time off rather than by addressing the problem through a supplier," he said.

Andrew Waller, marketing manager for BA's U.K. and Ireland sales department, said it was an exaggeration to suggest that all travel managers were unhappy with airline incentives. "In many cases, we are targeting individuals in companies with no travel policy," he said. "We also have corporate executive club programs and often also have incentives with the company as well. There are many companies that are comfortable with the concept."

However, Waller acknowledged that loyalty programs and other incentives did potentially conflict with travel policies of large corporates, and this could ultimately lead to the death of frequent flyer clubs.

"Increasingly, as corporates become more sophisticated, they are able to enforce a travel policy that has potential for conflicting with frequent flyer schemes," said Waller. "A time could come when frequent flyer programs become more difficult to control as companies gain more control over their policy."

American Airlines European managing director of sales Mike Smith agreed that, ultimately, a powerful travel manager could nullify even the most powerful of incentives. "If travelers are going to be reimbursed by their company, they will have to fly with the airline mandated by the company," he said.

It is therefore up to the travel manager to be a strong policeman. As Waller put it, "At the end of the day, if policy is enforced, there is nothing we can do.