With Air Canada's Corporate Pass program requiring corporations to buy bulk prepaid flight segments in order to obtain a negotiated discount, the Royal Bank of Canada last year signed corporate contracts with smaller Canadian carriers Porter Airlines and WestJet. In doing so, RBC shifted some of its domestic volume, provided travelers with a more convenient airport alternative and enabled competition for its business, which historically has been dominated by the national carrier.
RBC's contracts with Porter and WestJet have overall minimum volume requirements. While less than 10 percent of RBC's volume goes to Porter and WestJet, RBC head of procurement infrastructure Ken Scott said it's important to drive share to ensure a level of competition that keeps the pricing somewhat "honest."
Scott said the company is saving about $100 per roundtrip in ground transportation fees by flying from Porter's Toronto City Centre Airport hub, minutes from RBC's downtown Toronto headquarters, instead of Toronto Pearson International Airport.
RBC spends $35 million annually in North American booked air volume for 35,000 travelers, including about 15,000 "hardcore" travelers. The RBC travel program, managed by two travel managers in Canada, one in Minneapolis and one in the United Kingdom, has tweaked its policy, implemented an e-mail communications program and leveraged its online booking tool to promote the relationships with Porter and WestJet to travelers.
A key factor in administering and facilitating the diversification of RBC's Canadian air program has been the corporation's recent transition to Concur's Cliqbook online booking tool, which directly links to Air Canada and highlights Porter and WestJet as preferred vendors.
Porter's and WestJet's global distribution system participation has enabled visual comparisons of fares and schedules at a single point of sale. "They had a bit of a struggle getting from the retail environment to the corporate one with having the discounts up front, versus the back-end rebates of the past," he said. "It was harder to compare apples to apples with Air Canada, which had discounts in the global distribution system."
Despite limited route service, Scott said many RBC travelers on top citypairs, including Toronto-Montreal, are opting for Porter, which launched service in 2006. He expects RBC's volume to increase when Porter launches service this year to Newark Liberty International Airport. New York is RBC's top cross-border destination and home to about 1,000 employees.
While there are several variations of Air Canada's Corporate Pass program
(BTNonline, Oct. 23, 2006), RBC purchases bulk sets, in which passenger names can be changed, and sets of segments for individuals. Once a flight is booked, RBC receives a bill for the flight without any charges, which is applied to its segment "bucket." Passes usually carry a 12-month expiration date. For employees to be included, they have to be registered on Air Canada's Aeroplan loyalty program, which can prove costly for corporations.
"Suddenly, I need an admin or travel agency to take care of log-in, registration and other administration for all these travelers," Scott said.
Scott said Corporate Pass discounts seem like a deal up front, but the negative impact is on the back end. Air Canada evaluates a corporation's volume on a citypair and average-airfare basis and sets negotiated rates with marketshare commitments for the upcoming year, even if travel patterns change. "Plus, I've already built this large infrastructure in terms of a prepaid expense, account tracking and reconciling. This way, I can't walk away easily."