American Airlines Takes Top Honors From Corp. Buyers

American Airlines for the fourth consecutive year took top honors in Business Travel News' Annual Airline Survey, driven by the widespread perception that the carrier's sophistication, preparedness and long-term thinking make the difference when dealing with preferred accounts.

Continental Airlines, marginally behind AA's lead, jumped in front of United Airlines for second place as all three carriers distanced themselves from the rest of the pack.

Overall, carrier scores generally were higher across the board, compared with last year's, which were noticeably lower than 1999 levels. Also reversed from last year were average scores given by agency respondents specifically, which actually came in higher than those given by corporate buyers.

Measured by responses from corporate travel buyers and agency respondents, the survey ranked Delta Air Lines fourth overall, followed by US Airways and Northwest Airlines. Southwest, America West and Alaska Airlines finished in descending order at the bottom of the list for the second straight year, while Midwest Express Airlines, also for the second year in a row, easily won among small carriers (see story, page 8).

Questionnaires were returned this summer before Sept. 11 and, therefore, did not measure perception of carrier performance in the aftermath.

Unlike last year, American received highest marks from both corporate decision makers (319 respondents) and agency subsets (94 respondents). United was second on the buyer side—just one-hundredth of a point in front of Continental—but third, behind Continental, on the agency side.

The survey asked respondents to rank carriers, on a scale of one to five, in various categories, ranging from flexibility in negotiating prices and amenities to the quality of sales rep visits and carrier communication. It also included overall price value, a category easily and unsurprisingly won by Southwest Airlines for the fourth consecutive year. As in years past, BTN excluded general inflight service questions and U.S. Department of Transportation operational data to focus on carriers' performance in maintaining preferred corporate and agency relationships. Meanwhile, in terms of international operations, American, Continental and United landed the top three spots in virtually all five categories.



Industry Trends

Overall scores for domestic performance were higher this year for every carrier included in the survey, a complete reversal from last year's findings. "All airlines realized this year would be difficult financially and that the market would be as competitive as ever," said Gabriel Eshaghian, PricewaterhouseCoopers manager of global airline and car rental programs. "They needed to be as proactive as possible in assuring corporate travel marketplace wins."

Though experiencing lean financial times now, carriers in the late 1990s and into mid-2000 had been well in the black. That, according to Scott Gillespie, CEO of Solon, Ohio-based Travel Analytics, "meant airlines were able to invest in more things important to corporate travel buyers, including good service, good complaint resolution, resources for VIP travelers and aggressive discounting." Another factor contributing to more positive buyer perception may have been fare hikes, or the lack thereof. Polling last year came in the midst of multiple, broad-based business fare hikes, while this year's came at a time of fare moderation, or even decline in many cases.

Plus, deals were better, according to many. "WorldTravel BTI did some renegotiations with top carriers in the latter part of 2000," said Kyle Perry, vice president of industry relations at the Atlanta-based mega agency. "Our experience was that the airlines did come through and were more flexible in the incentives they put in place compared with previous years."

In fact, the aggregate agency score rose 10 percent from last year and surpassed that of corporate buyers. Carrier execs pointed to dedicated agency sales reps that in the past few years have learned the nuances of the business, as well as agency consolidation, which brought greater attention to larger agency partners. And similar to buyers pacified by fare moderation, many agency respondents may have been encouraged that carriers did not change their commission structure in the 12 months leading to this summer's polling. Of course, American Airlines a few weeks later laid on the latest cap (BTN, Sept. 3).

The higher aggregate score for the entire industry rose from 2.85 last year, to 2.98, driven by higher scores in nine of 10 categories and particular improvement in flexibility in negotiating group pricing, availability of services to VIP travelers and availability of timely and accurate flown revenue data.

Brian Mogler, director of consulting services at American Express, said group and meeting travel products offered by carriers have matured both in terms of infrastructure and tracking. "Revenue retention and incremental revenue all tie in and there is more flexibility in terms of what are discussion points," he said.

Scores for availability of timely and accurate flown revenue data experienced the greatest increase, from 2.80 to 3.04, attributable to a much deeper understanding by airlines as to the importance of data sharing with corporate clients and the corresponding increase in technological investments for new and revamped systems.

On the flip side, quantity of sales rep visits received the lowest overall score, followed by sales rep empowerment. Both categories are traditional points of frustration for many buyers. A range of sources said larger, more lucrative accounts receive better service than smaller accounts dealt with at the local field sales level. Airlines should be cognizant of all clients, avoid a one-size-fits-all approach in the small and midmarket and strive to appropriately match reps with accounts, they said.

"It is remarkable how much ill-will can be created against an airline based on a poor salesperson," Gillespie said. "The best thing airline sales management can do is to make changes if they are getting bad feedback." Regardless of proper matching, buyers must face the reality that sales reps often are not authorized to make deals due to necessary interaction with revenue management, pricing and network planning departments.

Meanwhile, the survey found higher usage of all carriers listed, possibly a result of more comprehensive corporate airline programs targeting expanded discount coverage.



Individual Carrier Performance

American has owned the top spot in BTN's survey since the survey's inception in 1998. This year was a tour-de-force for the world's largest carrier, securing the top rank from both corporate decision makers and corporate travel agency reps, and placing first overall in four categories. Echoing years past, numerous sources credited the airline for its well-trained and disciplined salesforce, as well as for being easy to work with. "American has the most proactive and customer-friendly sales team, with a focus on long-term objectives to ensure constant win-win scenarios in their corporate partnerships," Eshaghian said. "They have the best industry training in relation to corporate sales, they listen to and understand the needs of corporate partners and are willing to take risks in developing new ideas."

Areas of particular improvement included availability of special services for VIP travelers. In fact, the 4.11 it earned from agencies in that category was easily the highest single score in the survey. "Our great secret weapon that comes out in the RFP process, and that everyone now knows about, is our Executive Connection desk and special services people," said Frank Morogiello, AA vice president of global accounts. "That all reports through passenger sales and gives us an immediate imprint on how we should handle our best customers."

AA also performed well in providing preferred accounts with timely and accurate flown revenue data, beating Continental by a nose. Morogiello cited "a collective effort" throughout the industry, including ACTE and NBTA, but also noted the carrier's centralized analytical department, which has streamlined data processes to allow for flexibility at all levels. However, AA's scores from corporate buyers declined in a few areas, including flexibility in negotiating transient pricing and overall price value.

American's control of the top spot, although four-years running, is as tenuous as ever. Continental pushed ahead of United for second place, finishing a mere .02 points behind American. The Houston-based carrier finished in the top three in all but one category and improved every one of its scores from last year.

Though it placed second among agency respondents, it still received a significant score improvement among that subset. Indeed, according to BTN's Annual Airline Surveys since 1998, Continental traditionally has been considered an agent-friendly carrier. "We made a conscious decision to continue focusing on both entities, agencies and corporate clients," said June Bennett, Continental vice president of sales. "We did that as the competition was pulling back on the agency side."

Continental received the highest overall score for flexibility in negotiating group pricing, an achievement it attributed to both one-stop shopping capabilities with partner Northwest Airlines and new technology linking available inventory with group travel demand. "We have a dedicated group desk, and being very lean works to our advantage in that we work directly with pricing and revenue management," Bennett said.

Continental in the past year also opened a corporate executive desk for its top customers and expanded its specialized airport checkin for select clients. Those developments evidently paid off, as the carrier substantially improved its score in availability of special services to VIP travelers.

Meanwhile, Continental's Corporate Insight data sharing program helped the carrier obtain top marks among travel buyers specifically, despite early controversy (BTN, Feb. 26). Sources hailed Continental's sales management and analytical teams as well as its solid pricing model. "They also approach the corporate market from more of a relationship standpoint," said Dee Runyan, WorldTravel BTI executive vice president. "They know where they are going to fit into a preferred program."

Unlike Continental, but similar to chief rival American, United takes a more business-like approach to the corporate market. And despite difficulties that have dogged the airline for the past 12 months, it finished third overall—just .05 points behind American—and second on the buyer side.

"They have put more effort into constructing economic models and trying to understand the corporate market," said Jack O'Neill, president of corporate travel at TQ3 Maritz Travel Solutions. "They have worked on rationalizing corporate discounting and having proper program parameters."

United has been viewed as the most aggressive discounter in the market, a tag that certainly stuck this time around as the carrier was deemed most flexible in negotiating transient pricing. Some of that can be attributed to its fierce head-to-head competition against American. "There is overlap there and corporations oftentimes are the winners," Perry said.

An executive at another mega agency agreed that United is the most aggressive discounter and said, "they have a list of clients that they will not let anyone else get close to."

"Especially after last summer, we have really focused on reestablishing partnerships with key customers," said Frank Kent, United vice president of sales. "We are not interested in being just another commodity with a pricing vehicle we can take into the marketplace."

He added that the carrier's philosophy of empowering sales reps is "180 degrees off" what it was a few years back, when much of the sales organization was heavily centralized. "Our account executives, district sales managers and everyone on up are truly empowered and do not have to check and balance with corporate headquarters," he said. Respondents appreciated that approach, giving United easy wins for both quantity of sales rep visits and sales rep empowerment. However, scores for complaint/problem resolution and overall price value were down slightly.

Mirroring last year's results, Delta finished fourth overall. However, its ranking among agents slid to fifth, driven by below-industry average agency scores for complaint/problem resolution and overall price value. Scores for flexibility in negotiating transient pricing, from both buyers and agents, were just about at the industry average and a shade above last year's performance. But a common complaint was that its contracts are too rigid and too complicated.

"The contracts are more complex because they put in performance requirements at three separate levels—revenue, market share and specific city pairs—whereas others may just have one or two," said WorldTravel BTI's Perry.

"Corporations, especially in Atlanta, have never felt glowing about being beholden to Delta," said an executive at another mega agency. "They need to simplify, which would benefit everyone."

Buyers, too, ranked Delta well below the industry average for overall price value, at ninth. "They don't feel they need to be competitive in the market place," said one buyer, speaking on the condition of anonymity. "They feel they have the network and the product that commands a premium over airlines' pricing."

Even so, scores from buyers showed improvement from last year, particularly for sales rep empowerment, flexibility in negotiating service and amenities and availability of special services for VIP travelers.

Delta, for the second year in a row, declined to comment.

US Airways improved its overall standing, moving from sixth to fifth. Agencies particularly were satisfied with the carrier's efforts in the past year, ranking it fourth.

Paul Leyh, the carrier's global director of corporate programs, attributed some of the improvement to enhanced educational efforts regarding US Airways' Comparative Corporate Performance Factor program. "Initially there was some confusion out there, so we spent a lot of time over the past year walking corporations through CCPF," he said.

US Airways also took a close look at its data processing and greatly improved its score for availability of timely and accurate flown revenue data—2.64 a year ago to 3.22 this year. "About a year and a half ago, we looked at the whole data process from top to bottom—from the agency, to our internal processing to sales staff knowledge—and found a number of things to improve upon, including better timing and training," Leyh said. "As a result, our output probably is in the 90 percent range in terms of delivering data ontime and meeting client expectations."

Other areas of noticeable improvement included flexibility in negotiating service and amenities, availability of special services for VIP travelers and flexibility in group pricing.

However, issues exist, including complaint/problem resolution, for which it earned a ninth place score from buyers, and a below-industry average score for overall price value. Some clients based in US Airways hubs still feel trapped, forced to deal with US Airways or use connections and are not offered any deeper discounts as time passes. Nevertheless, US Airways' has shown continued improvement in the survey, inching up in the standings each year since 1998, when it finished seventh overall among major airlines.

Northwest's ranking among travel agents jumped from ninth last year to sixth, due, in part, to reinvesting in partnerships, according to Fay Beauchine, vice president of sales and customer relations. "We have worked hard on our relationships and put forth a large effort with travel agents," she said. "Our agency revenue is strong and our share position is moving in the right direction."

Still, some agents said Northwest does not do the simple things. "The sales support desk has very little power. They don't even unblock preferred seats, which is a big deal for business travelers looking for last-minute seat assignments," said a travel agent source.

Among buyers, Northwest slid from fifth to sixth, a product of many factors, including a very old fleet affecting perceived overall price value, perceived monopolistic pricing in the hubs it dominates, inflexible contracts and an inability to shake off a bad reputation from a devastating pilots strike and a botched job at handling a Detroit snowstorm a few years back.

Nevertheless, buyer scores were higher, year over year. The carrier attributed the improvement to bringing its top executives closer to corporate clients and advancing its domestic partnership with Continental.

Particularly solid improvement came in flexibility in negotiating group pricing. "We have done some deals on an ad hoc basis and given them great meeting fares," Beauchine said, noting that a more formalized meetings program will be unveiled once certain data issues are resolved.

Meanwhile, similar to but separate from Continental, Northwest in the past year set up a corporate services desk that, in part, pushed its score for availability of special services to VIP travelers from 2.91 overall to 3.20 overall.

Trans World Airlines was a unique case, as it was acquired by American parent AMR Corp. earlier in the year. American this summer began integrating TWA's salesforce, meaning this is TWA's last survey appearance. The carrier, like last year, finished seventh overall, but the average score from agents pushed it from fifth in that subset to eighth.

Known for favorable discounting, TWA improved its overall score for flexibility in negotiating transient pricing, finishing third in the category. It also improved its scores for group pricing and availability of services for VIP travelers.

Nevertheless, aggregate scores from both corporate buyers and travel agencies were below the industry average, possibly compounded by the carrier's preoccupation with the immense integration task in past years.

Southwest finished far down in the ranks with an aggregate score well below the industry average. The carrier does not negotiate corporate pricing and offers little, if any, special services for frequent business travelers. Agencies in particular were not fond of Southwest's performance in most categories—the carrier generally ignores those areas—and gave it a 2.77 overall and a last place finish among major carriers. But its low fares, ingenious network growth decisions and consistent service has made it the healthiest airline in the nation. And its low-fare calling card was accepted enthusiastically by corporate buyers and agencies alike, who gave Southwest top marks for overall price value.

Furthermore, Southwest has made life easier for corporations that want their travelers to take advantage of the carrier's low fares. Its SWABIZ online corporate booking portal has been extremely popular both for its ease of use and travel management reporting capabilities.

It also earned top marks for its efforts in complaint/problem resolution, a development that bodes well for Southwest's future dealings with corporate clients as it expands more quickly than any other U.S. carrier.

Due to its relatively small size and network constraints, America West Airlines' applicability in corporate programs has been limited primarily to corporations in its three main hubs: Columbus, Ohio, Las Vegas and Phoenix. As a result, buyers generally did not view America West as a viable player and it finished ninth overall for the second consecutive year. It landed in last place for availability of timely and accurate flown revenue data and for complaint/problem resolution. In fact, the score in the latter category in the agency subset was one of the few scores in the entire survey below last year's result. But it nevertheless placed third in overall price value, reflective of low fare availability in many markets. It also tapped into the small corporate market with its Corporate AWArds program.

Alaska Airlines took its familiar spot in the basement. Its 2.71 aggregate score was nearly 10 percent below the industry average and its performance ranked dead last among majors in six of the 10 categories. Even so, its overall score jumped from 2.33 to 2.71, driven by fourth place finishes in complaint/problem resolution and overall price value.



International Operations

Similar to the domestic side, American, Continental and United dominated the top three spots in most international performance categories. However, to limit analysis to carriers used by a relevant percentage of respondents, Delta and Northwest were the only other domestic carriers included in the following comparisons.

British Airways also was well utilized by the survey base, but it finished behind all five U.S. carriers in flexibility in negotiating pricing and multinational deals, as well as availability of integrated contracts with alliance and codeshare partners. "They threaten, more than anyone, to yank override deals if agencies miss market share goals," said one New York-based travel agent, "and waivers and upgrades are just impossible to get." BA, however, garnered top scores in the two customer service categories: quality of premium class service and availability of special services for VIP travelers. Lufthansa was just the opposite, receiving higher scores than all five U.S. carriers in the negotiating and contracting categories with lower, but respectable scores in the customer service categories. All other foreign carriers did not have a high enough usage rate to produce any meaningful score comparisons.

Continental's 3.72 score for flexibility in negotiating international pricing easily outpaced American's 3.53. United was third, followed by Northwest and Delta. American took top honors for flexibility of multinational deals, followed closely by Continental and then United. Northwest and Delta again finished fourth and fifth, respectively. However, the strength of United's Star Alliance affiliations propelled it to a first place finish in availability of integrated contracts with alliance/codeshare partners. American was second, followed by Northwest and Continental. Delta, again, finished fifth.

The results were somewhat different in categories affecting passengers. Continental and its BusinessFirst cabin, among the five U.S. carriers, easily won the premium class category with a 4.12. American trailed with a 3.99. The two airlines swapped positions in availability of special service for VIP travelers as American's 4.02 score inched ahead of Continental's 3.97. In both categories, United finished third, followed by Delta and then Northwest.