Some Buyers Softening Business Class Air Policies

Citing a stronger economy and the desire for more productive employees on the road, many corporations have permitted buyers to loosen the reins on business class, and in some cases first class, travel policies. Such policies, however, are not quite as liberal as those prior to the economic fallout of Sept. 11 and the accounting scandals of Enron and MCI, which prompted the financial-reporting requirements of the Sarbanes-Oxley Act of 2002. Instead, many buyers simply have reinstated premium travel privileges to senior management, with a few opening up services to travelers below the C-level.

Though some buyers certainly are cutting back on premium class travel, many who report that business is good are not under pressure to cut cost, therefore affording for less restrictive class-of-service polices. "For us, the idea is more to control and manage the cost," said Rick Wakida, global travel manager at Gilead Sciences. "We want to look at it, manage it and administer it smarter and more efficiently. We want people who travel business class to be more efficient."

With many carriers unveiling bigger seats and cabins with more privacy in business class, some buyers are able to justify the upgrade for travelers who need to be refreshed for a meeting overseas or are working on an important deal. "That would be a perfect example of when we would allow a traveler to go first class," said Kevin Brady, vice president of global travel services for Merrill Lynch. "It was primarily instituted as more of a comfort, the idea being not so much about entitlement, but that we want someone who's flying a long way to be pretty sharp and refreshed when they get to the destination. You couldn't really do that in business class seats of old and you certainly can today."

Brady said changes to business class seats prompted his program to put less emphasis on first class travel. "We've had a liberal premium policy, particularly on international travel, for a while," he said. "This past summer we made a pretty strong recommendation to cut that back, just because the business classes are getting so much better on the longer-haul flights. There's not as much of a need to pay the extra thousands of dollars for the premium seat, since most of your business seats now lie flat or close to that and have all the power ports and pretty much everything else a business traveler would need."

There wasn't a lot of pushback to that suggestion, Brady said, as Merrill Lynch's different business units have different travel needs. "We have an overall umbrella policy that's pretty liberal and allow each business unit to not be any more liberal than that, but restrict it to their business needs," he said. "I've been consulting with them on the fact that business class seating is so much better today, so there isn't the need that there used to be." Meanwhile, travelers at the vice presidential level and above are allowed to fly first class on any international flight over nine hours, as well as travel to Hawaii, which the company defines as international.

Wakida this year joined Foster City, Calif.-based Gilead and is helping to construct its first managed travel program. At the request of senior management, Wakida is examining Gilead's existing policy to ensure it is competitive and still a right fit for the company, using benchmarks from other companies within the industry and of similar size. "I found the policy is in line with industry benchmarks. We're about in the middle of the bio-tech and pharmaceutical companies that I talked to, and the policy was actually more liberal than the regional companies of similar size, where very little of their travelers can go business class," Wakida said.

He recommended retaining the class-of-service policy to senior management, not just because it was in line with the industry, but also because the company needs to remain competitive.

"We weren't looking to cut travel, so it was an area still feasible," Wakida noted. "Also, it's important for retention and recruiting talent in this industry, because that could be a deciding factor for candidates who have choices between companies. We're competing for researchers and scientists in specialized fields."

Though some buyers declined to discuss the specifics of their travel policies, Dale Eastlund, air solutions practice leader for Carlson Wagonlit Travel's North American Solutions Group, said two CWT corporate clients early this year began allowing top executives to fly first class for all travel, while another now allows all employees on flights exceeding five hours to fly either business or first class, depending on the services offered by the airline.

Eastlund said the trend is for companies to establish an hourly minimum for long-haul travel. "The most common we're seeing now is eight hours for long-haul travel," he said. "Historically, we've seen a lot of companies be fairly liberal on allowing travelers to fly business class within Europe, and that's the one area we're seeing tightened in terms of getting travelers to fly more economy or back-of-the-airplane type seats in the short haul."

Eastlund noted that some companies are looking at policies based on mileage alone, "where if you fly 3,500 miles or more, for example, you're allowed to fly business class—less than that, it's economy."