<B>World Bank Mandates</B>
<I>Travelers Must Choose From Five Airlines For Long-Haul Flights</I>
By David Jonas
Looking to recoup costs associated with international commission caps, World Bank threw around its considerable air purchasing weight and this month implemented its first preferred airline program.
The international organization now mandates usage of certain carriers on a vast majority of $100 million-plus air spend. Quite different by nature than most travel management programs because of its frequent use of a variety of remote airports, Washington, D.C.-based World Bank's new requirement adds even more visibility to a growing movement toward mandating preferred carriers and travel policy (<I>BTN,</I> April 3).
As of April 2, World Bank's 4,000 frequent travelers are required to use one of five airlines for the long-haul leg of their trips, depending on the region. After three separate RFP processes, the organization awarded its transatlantic business to Air France, Lufthansa, Northwest and United; its transpacific travel to Northwest and United; and its Latin America portion to Continental and United. Travelers still have freedom of choice for domestic travel, which accounts for only 5 percent of total air spend.
Airlines that have a strong presence in more than one of the regions still were asked to submit separate proposals. "The fact that United will be used in all three areas is just how it worked out," noted Angie Attena, World Bank's travel chief. "These were three distinct bids."
While consolidating global air spend with a few preferred carriers and then mandating usage of those preferreds is nothing new for global organizations (<I>BTN,</I> April 3), one twist on World Bank's program is quite unique. Because many trips continue well beyond gateway cities to a multitude of smaller cities and towns all around the globe, the institution sought a nontraditional solution that would work best for its needs while making life easier for its travelers.
"Staff are required only to take a preferred airline over water to the international gateway and from there they are free to take any carrier they wish to their final destination," Attena explained. "But we still were looking for commission on the entire ticket." Therefore, because of its attractive overall volume, World Bank was able to negotiate with the preferred carriers a pre-determined commission award for each entire itinerary, even if some segments are on other carriers. "We don't have much volume on any certain city pairs, so we didn't want to go after negotiated rates where we would forfeit the strength of through-faring," Attena said.
While the preferred carriers are incurring some level of risk, Michael Boult, Rosenbluth International's vice president of supplier relations, said they do see benefits from such arrangements. "They are the validated carriers so the money is dispersed to them; they receive the loyalty of the travelers who are part of their frequent flyer programs; they control who they interline with; and they get revenue from the international segment, which likely is the longest and most lucrative part of the transaction," he said. "The potential profits from World Bank and others make it very attractive to do this sort of thing."
The entire process of choosing partner airlines and establishing a preferred usage policy was new for an organization that always had permitted its travelers to pick and choose. "Most of our travel is international and very dispersed, so it had worked well to give travelers a choice," Attena explained. "And we were pretty well buffered from early domestic commission reductions. But when the international caps hit at the end of 1998 (<I>BTN,</I> Nov. 16, 1998), suddenly we had to do something."
Because World Bank's rather unique travel needs require special attention--including the coordination of complex, multiple-segment trips and visa services for non-U.S. nationals, who account for 80 percent of all travelers--the organization elected to retain its agency services despite the additional costs. Those services currently are handled by American Express through a combination of an onsite program and a dedicated telephone reservations center. The World Bank also uses Sabre BTS, but reported only 1 percent of all bookings were routed through the online booking system. Travelers instead use BTS as an informative tool.
"We determined we had to keep using the agency, so the remaining question was how to pay for it. The only way to get revenue back from the airlines and use it to cover the increased costs of travel services was to leverage our buying power, which is something we never did," Attena said. "We had to react to the changing industry and remove that freedom of choice."
Understanding that travel can be quite personal, and expecting negative reaction, World Bank proactively communicated with various departments and travelers throughout the bidding and implementation. It ran an article in an internal newsletter describing the impact of industry change, met with users, gave presentations and explained each step of the RFP process. "Any time you change the culture of an institution, it will take a lot of time and effort," Attena said. "It hasn't been easy and initially there was a lot of venting." Even so, just a few weeks into the new program, she said travelers were adjusting to the changes and understanding the rationale. However, World Bank still felt it necessary to start the program April 2 rather than a day earlier. "Otherwise our travelers would have thought it was all just a big joke!" Attena quipped.
Attena was joined by a team of internal experts in devising and executing the new program, including Bud Childs, former BTN Travel Manager of the Year Koos van den Berg in procurement and travel specialist Debbie Hurrell. In addition, separate teams were assembled to analyze RFPs from the three regions.