In Conversation: Airline Partnerships in 2021
Nov 5, 2020
Where are the opportunities and how will travel managers need to work with their airline partners moving into 2021? One thing is sure, historical data isn’t the answer. In addition, airlines have changed key policies and will be flexible with buyers who can offer volume. Here’s what the industry is saying about recovery and how corporate agreements are shaping up for 2021.
LOOK WHO’S TALKING…
Louise Miller, Areka Consulting Americas Managing Partner
On Pragmatic Negotiations: We had relied on such robust growth and schedules for so many years. Services were expanding and becoming better every day. Now, a lot of the conversations have shifted from “What’s my percent discount?” to “What are the services going to be like for my travelers when they return?” and we’re really working hard to preserve important partnerships and make sure travelers don’t have false expectations. There’s a good chance you can set yourself up for failure if you negotiate too much on the wrong things and make assumptions about services that will take a while to come back.
On Pricing: Volatility is extreme. If you book pretty far in advance, you can still get pretty good deals. As it gets closer, the prices are a lot higher. I fly on certain routes across country very frequently, and I can pay $99 one way on any of the top carriers. If I wanted to go this weekend, it might $800 round trip. That span always existed, but it’s more extreme now, because you don’t have as much lift to balance it.
On the Impact on Booking Patterns & Corporate Deals: There were a lot of companies that planned even long-haul international with three- to five-day notice. Now, the companies that used to get really good deals because they could plan three or four weeks in advance? Oh, no. Everyone’s going to plan three or four weeks in advance, so they’re going to have to plan six or eight weeks in advance to get the good deals, and the front of the aircraft is going to be booked solid really far in advance.
On Eliminated Change Fees: That premium has been built into changes at the last minute anyway. For changes without much lead time, I don’t see an actual net benefit or cost savings. When you can make changes with advance notice, of course it’s a great benefit.
LOOK WHO’S TALKING…
Mauro Ruggiero, Finastra Director of Global Travel Management
On More Agile Airline Agreements: Even pre-Covid, your business changes. The traditional approach [to contracting] prohibits the ability to pivot. Continuous sourcing is a win-win, because you are able to proactively take advantage of new routes and new offerings and see how they match up with your business. Internally, you can work with your stakeholders and pick up new volume based on projects that are coming and going. What the pandemic shows us is that we need to be more agile as an industry. Dynamic is a better way to approach this.
On How He Did It: We started with a solid foundation using our anchor city pairs where we knew the business wasn’t going to change because it’s between our headquarters and key locations. From there, everything else is a living document. A lot of the conversations with the carriers were driven by input with functional business leads, as they talked about new projects and consultancy work.
On Covid Accelerating His Strategy: There’s one difference post-Covid: We’re trying to expect what the baseline will be in the future. If I’m using the last 12 months of regular business as the baseline, I’m going to go out based on where I think we’ll see decrease in travel. There will be a permanent reduction in travel spend. We already were trending down prior to Covid, as we were trying to move more people to virtual collaboration… Covid has accelerated the end game of our program, which was to look at about a 25 [percent] to 30 percent travel reduction.
LOOK WHO’S TALKING…
Bob Somers, Delta SVP of Global Sales
Kristen Shovlin, Delta VP of Sales Operations & Development
On Green Shoots: [Corporate travel] has grown exponentially over the last several weeks and months. We measured our last 14 days, and week over week, it’s up over 90 percent. At one point, it was very small numbers, but there are more companies traveling with relatively significant numbers, albeit on a different baseline. Transportation, manufacturing, automotive, those are the industries trending considerably up week over week. We’re watching all the different verticals. Entertainment and production is starting to see an uptick. Roughly 90 percent of our corporate customers have travelers flying.
On Boosting Corporate Confidence to Travel: Confidence is the No. 1 thing we are trying to instill in our customers and employees. We are following CDC guidelines and protocols, and we’re spending a tremendous amount of time talking to corporations about everything we’re doing to keep their travelers safe.
On Contract Flexibility: Right now, a lot of [corporate customers] are looking to extend agreements. Those [looking for] RFPs are looking at forward growth for their companies as well. Our goal is to [enable them to] book, change and cancel plans with peace of mind. We’ve refunded over 4 million tickets to the tune of about $6 billion. Not only did we permanently eliminate change fees but also extended waivers on fees for newly purchased tickets. We were one of the first carriers to extend SkyMiles status and extended the expiration of travel credits. We were the first airline to offer flexibility for those tickets through Dec. 31, 2022. We announced the ability to have multiple changes to tickets covered by the travel exception policy. We even put a travel exception policy binder in for agencies to help their corporations manage those unused tickets. We have offered UATP as an alternative, so we’ve come up with some alternative solutions to companies based on changing needs they have.
On What Gives Them Hope for the Future: We’re really proud of our corporate customers that have donated unused tickets for medical flights. Several corporations we’re working with have [done so], and we’ve used those towards the hundreds of medical flights we’ve provided for personnel dealing with the pandemic.
LOOK WHO’S TALKING…
Jo Lloyd, Nina & Pinta Partner
On Recovery Trajectory: When we look at the disruption and impact of Covid-19 on the travel industry and aviation, it’s been absolutely devastating. When we look at how things are likely to recover, the general consensus is that it’s going to take four years to get back to 2019 levels.
On How That Impacts Contract Strategy: That does lend itself to transitioning to a much more dynamic approach when it comes to contract management. One thing I’d suggest buyers do now is engage with internal stakeholders and see what this means in relation to their return to travel scenario, what will be coming back—at least their best guess. Traditionally, airlines have used historical data to project what spend is likely to be, and some of them are still doing that now. The problem is we’re basing it on a market that doesn’t exist anymore. It might be time to be taking a more fluid approach and looking at projected spend rather than historical data.
On Observing the Market Before Jumping In: Most customers aren’t traveling internationally right now, so that gives us a minute to see what happens with the schedules and network coverage. This is a supply and demand business, so the pricing will fit in relation to that. The best thing to do is to look at an active, ongoing dynamic program that lets you ride the wave of the market and the curve of the pricing.
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