Avaya Applies Old School Sourcing Strategy To Airline Pricing And Attains Savings

Company: Avaya
Headquarters: Basking Ridge, N.J.
2006 U.S. Booked Air: $37.5 million

Applying procurement methodology to air sourcing earned Avaya $2.6 million in savings from reduced average ticket pricing in the first six months of its new preferred air program. Senior manager of Avaya's global sourcing organization Janine Battaglia used such practices as identifying top citypairs by volume and number of segments, benchmarking current contracts with similar travel programs and analyzing internal data to secure optimal carrier contracts.

When Battaglia came to business communications supplier Avaya's travel program in April 2006, she brought an "old school" procurement approach. "I looked at it not from a historical perspective in who we flew in the past, but from a pure, traditional procurement perspective, which entailed throwing all the balls up in the air, letting everyone bid on the business and seeing who came out the strongest versus relying on long-term relationships and favoritism of specific airlines."

Faced with expiring contracts with top carriers, Battaglia armed herself and Avaya's sourcing team for the upcoming negotiations and communicated to all suppliers that the business was open territory, as Avaya was willing to shift marketshare to new suppliers if the pricing and scheduling fit the travel program. "A lot of the contracts were coming up for renewal. Previously, they were each done independent of one another instead of looking at the big picture and how the different carriers overlapped with the marketpairs," she said.

Battaglia positioned Avaya to drive negotiations by obtaining accurate benchmarking data of travel programs with similar traffic, spending patterns and volume from American Express card services and establishing senior management support before soliciting requests for proposals in late fall of 2006.

Battaglia said that data acted as a leveraging tool in negotiations. "It was very successful in getting closer to more competitive rates in some areas where we didn't have any or where we were a little behind," Battaglia said. "We were very close, though. I was impressed that in a lot of cases, we weren't getting a real bad deal, we just weren't getting the best deal."

Senior-level buy-in also was instrumental in empowering Battaglia, especially when negotiating with Avaya's previous two main carriers. "The first thing I did was go to the top and get senior buy-in to do that if it made sense," Battaglia said. "When I came to the carriers, I delivered the message. I said, Let me tell you who I am and what I'm all about, which is old school procurement. I'm not a travel person. I'm coming in with a procurement discipline. Here is where we have senior leadership support and this is how we are going to manage compliance."

Battaglia said the major airline alliances were not so receptive to Avaya negotiating a global alliance contract. Ensuing negotiations yielded formal contracts with individual airlines and relationships with Oneworld and Star Alliance. "It was a holistic view to start, but then to impact and drive negotiations we were not successful at an alliance level based on our volume of air spend," Battaglia said. "We needed to do it on a carrier-by-carrier basis."

Basking Ridge, N.J.-based Avaya has since communicated to employees the introduction of new carriers into the program and has driven compliance via incentives for travelers, such as passes to airline lounges and designating carriers in the company's online booking tool as primary, secondary or tertiary.

Although Battaglia used some consulting services for the sourcing initiative, she said buyers should lead face-to-face negotiations. "Even if you hire a third party to help you provide benchmarking or support in doing the contracts, RFPs or negotiations, the buyer needs to be at the table and lead the negotiating," she said. "Even though I had Amex with me at a majority of the negotiation sessions, I led the conversation. It carried a lot of weight with the airlines because they believed it when I explained our current state and where we were going with the program. It wasn't just all talk."

The current contracts have addressed 80 percent of the telecommunications company's $37.5 million U.S. booked air volume, but Battaglia always is searching for more savings and optimization of Avaya's air contracts—most of which are two-year agreements—via quarterly meetings with carriers. "We meet with them to identify areas of opportunity or gaps in areas where we might have had specific commitments and put together action plans," Battaglia said. "Part of that action plan may be shifting marketshare somewhere else where we then have to renegotiate or do an amendment to an existing contract."

Battaglia now is working to harness air transactions booked outside of Avaya's travel management company American Express Business Travel. In reviewing card data, Battaglia found that a majority of volume booked outside the agency is on low-cost carriers with limited or non-GDS content. Battaglia also is working to secure a contract with Southwest Airlines and plans to bring Canada's WestJet and Brazil's TAM into the air program in the coming months.