Bayer Takes Flight With Low-Cost Startup

Bayer Takes Flight With Low-Cost Startup

Company: Bayer AG

Headquarters: Leverkusen, Germany

Worldwide 2002 air spend: $136.2 million

No. of travelers: 70,000



No-frills airlines continue to change the European corporate travel landscape, with one recent startup, Germanwings, aggressively and successfully forging a unique, mutually beneficial relationship with Bayer AG travel manager Anna Wrossok.

Bayer has annual sales in excess of US$35.6 billion, 350 subsidiaries worldwide and 120,000 employees. The size of its business travel budget—one of Germany's 10 largest—and its location a few miles north of Cologne, Germany, attracted the interest of Cologne-based, low-cost carrier Germanwings.

Set up in late 2002 as a subsidiary of Eurowings, Germanwings formed from a merger of Germany's two largest private airlines early in 1993 and now part-owned by Lufthansa. The airline operates five Airbus A319s from a dedicated terminal at Cologne-Bonn airport and serves 20 destinations from the city, including London, Zurich, Milan and Paris.

Fares on the airline start at e19 (US$22.50) one way, including taxes. As a comparison, a one-day trip between Cologne and London in mid-June costs nearly e600 (US$709) on Lufthansa and e179 (US$212) on Germanwings.

"It is good for the competition to have a low-cost carrier in the German market," Wrossok said. "What we had to face before was prices going up at the same time services were being canceled as airlines took aircraft out of the market."

Traditionally, Frankfurt and Munich airports were the hubs through which German business travelers flew. "Having a low-cost carrier in Cologne means there are now more frequencies, and it has acted to lower fares," she added.

Still, Germanwings did not take Bayer's use of the airline as a given. Other European no-frills airlines have failed to attract corporate business, so Germanwings contacted Wrossok before launch to find out what would be the company's policy toward the airline.

"The difference between Germanwings and the other low-cost airlines is that in the beginning they had talks with our company because we are quite near to Cologne," Wrossok said. "They asked us in advance what are our demands would be to give our travelers to Germanwings. It was quite fruitful. Germanwings said, 'We are highly interested in business travel and that means we have to adjust certain things for the needs of the business. For instance, we needed to be able to negotiate fares.' "

The provision of management information also was key. Bayer uses the AirPlus corporate travel payment system to gather management information from such airlines as Lufthansa. "That was one of our demands for Germanwings," Wrossok said. "We said we did not want our travelers to use their private credit cards to make bookings. The company credit has to be behind the booking so we received the data."

Although Bayer did not get involved in the planning of the original route network, Wrossok said the airline is open to discussion about destinations.

"When they started, they had already set up where they wanted to go," she said. "As our cooperation developed, they asked us, 'What are your destinations, where would you like to have in our network?' "

Lufthansa has a minority shareholding in Germanwings, but Wrossok said this does not appear to affect their negotiations.

"When we deal with Germanwings, we never have the feeling that Lufthansa is involved. Germanwings is an independent airline, and there is very strong competition between them and Lufthansa."

Bayer has a lowest logical fare policy, and this has seen Germanwings take a share of Bayer's air spend on key routes from Cologne.

"We have a lot of traffic within Europe," she said, "and we use a lot of airlines, but there are routings, like Cologne to London, Paris and Milan, where we can use Germanwings. Now, more than 50 percent of our business on those routes is with them."

The firm uses no-frills airlines in other countries, although none of them yet is integrated into Bayer's self-booking tool, Amadeus' E-travel.

"With Germanwings, we were able to establish a real procedure for business travelers," Wrossok said. "That is not what happened in the United Kingdom, where there is quite a lot of business with Ryanair."

Globally, Bayer subsidiary TravelBoard—a 38-strong team headed by Wrossok—manages the company's business travel. Bayer's travel managers in other territories all report to Wrossok, who has been with the company for seven years and has previous experience in both airlines and travel agencies. In Germany, TravelBoard also acts as travel agent and Wrossok plans for this agency role to be extended to the rest of Europe in due course.