The new watchword from United Airlines on corporate contracts is "compliance." That is, corporate accounts not delivering on negotiated commitments might not stick around.
Presentation slides accompanying remarks delivered Monday by United chief revenue officer Jim Compton at the J.P. Morgan Aviation, Transportation & Industrials Conference in New York noted that the airline during the last three months of 2013 "reduced [the] number of noncompliant corporate contracts by 25 percent" from the preceding quarter.
"One of the indicators that is firming is this concept of compliance," Compton told investors. "You can get corporate contracts really, really easy," he said, but added, "What's really important is: Is the deal working for you? Is it working for them?"
Meanwhile, Compton noted that revenue management adjustments made in the fourth quarter have helped the airline capture fewer far-out bookings in favor of close-in bookings. The latter are more likely to be booked by business travelers at a higher fare.
United previously attributed its industry-lagging third-quarter 2013 revenue performance to flawed demand forecasts baked into its revenue management systems. That appears to be on the mend.
"Tickets issued 21-plus days out for travel in January and February were down 3 percent" year over year, Compton said Monday. "Tickets issued within 20 days were up 11 percent in the first two months of the year."
While Compton did not detail corporate revenue trends for the first two months of 2014, he disclosed that full-year 2013 corporate revenue was up 5 percent from the prior year. The growth rate accelerated throughout the year, he said, and was up 7 percent in the fourth quarter from the prior-year period.
'First-Mover Advantage' Key To Delta's Corporate Success
Delta Air Lines, meanwhile, continues to post solid gains in corporate revenue.
According to presentation materials from the conference, ticketed corporate revenues this year are tracking 6 percent ahead of the prior-year period.
Delta reported the largest year-over-year revenue gains among clients in financial services (15 percent increase), automotive (11 percent), media (10 percent), business services (10 percent), banking (7 percent), technology (6 percent) and health care (6 percent). Ticketed corporate revenues from accounts in the defense and manufacturing industries, however, are down from the prior year by 1 percent and 4 percent, respectively.
J.P. Morgan airline analyst Jamie Baker during the conference said Delta's corporate share gains have "proven to be impressive," but questioned whether the recently merged American Airlines and US Airways could disrupt the success. In an exchange with Bastian, Baker highlighted "corporate share that American has ceded to you and others," but stands to win back as the merged entity "gets its network act back together."
Delta president Ed Bastian responded: "Well, you know, American never left the market. We've always been competing with American Airlines and US Airways. I have no doubt that once they get their act together, as you mentioned, they will be a much stronger competitor, and that is certainly our expectation."
Bastian spotlighted what he called Delta's "first-mover advantage in this space," citing the airline's work to restructure under bankruptcy protection, merge with Northwest Airlines and move "quickly to improve the quality of the products and offerings" ahead of the competition.
"We are not impacted by the distractions," Bastian said. "We all know, those are tough mergers and tough integrations to accomplish. That's not impacting our performance. What we're able to do is spend all of our time with our corporate customers and invest in the products, the services and the technologies that they prefer."
When United and Continental sealed their merger, Delta faced similar questions as Baker's. Yet, even after United eclipsed the Continental brand, "You've seen that we've continued to make progress," said Bastian, "and I think you're going to see some of that same performance. It's a big market out there, and the corporate markets are robust. We're looking for not trying to steal share going forward, but certainly at least to be able to maintain our share, and that should provide us some nice improvement opportunities for the future."