As we explore in a recent Atlas article, airfares are rising across the globe for all travelers. In the business world, smaller companies are bearing more of the brunt of increasing costs, explains Jeremy Quek, air practice lead on our Global Business Consulting team.
For starters, small- to mid-sized enterprises (SMEs) are often at a price disadvantage, not qualifying for the same discounts their larger counterparts enjoy.
“They may have one or two contracts that they negotiate with airlines, but typically because they’re much smaller, the discounts are lower. They also don’t get the benefit of the waivers and favors, the soft-dollar perks large corporations receive,” said Jeremy.
Geographically, the SME segment also may be in an unfavorable position.
“SMEs tend to be more dispersed in terms of where they are located and are traveling from a wider range of cities,” said Jeremy.
In an analysis of our transactional data from August 2022, we found that 65% of all bookings for larger corporate clients is within the top 400 city pairs (i.e., the departure and arrival airport codes on a flight itinerary). For the SME segment, the figure is 53%, indicating that nearly half of all SME travel originates from smaller regional airports compared to only one-third for larger companies.
The more diverse travel pattern of SMEs is a significant finding when you consider what’s happening at smaller airports. With regional airports suffering the most from schedule cutbacks, business travelers in more remote areas face higher fares, fewer flight options, inconvenient routes, and in some cases, may be losing commercial service entirely.
There is one thing weighing in SMEs’ favor – they’re leading the corporate travel recovery. As we have posted in our earnings report, SME travel is recovering faster than any other customer segment. Consequently, smaller organizations are catching the attention of suppliers.
“From the airlines’ perspective, SMEs have been hard to manage because they are so dispersed, but now some carriers are pivoting and focusing more on this segment,” Jeremy said.
You should shop around to see which airline program best suits your needs. Jeremy says some carriers are concentrating on perks that enhance the traveler experience instead of discounts.
So, what can smaller organizations do to trim air costs – the biggest component of the travel budget? Here are a few ideas:
Set up a policy
If you do not have a travel policy because your organization has been evolving too quickly or focused on other priorities, it’s time to implement one. Some policy guidelines that can help drive down air costs include:
- Implementing rules around ancillaries (e.g., Wi-Fi, preferred seats, lounge passes, seat, or cabin upgrades) and even fare rules like “refundability.” (Airlines are increasingly looking to generate incremental revenue and margin through ancillary upsell and add-ons.)
- Establishing best practices for purchasing tickets (e.g., advance ticket purchase, booking with your chosen online booking tool, and booking with your chosen travel management company [TMC] for support and duty of care).
- Establishing a clear policy around “lowest logical airfare,” including a “price tolerance” that limits how much a traveler can spend above the lowest airfare available.
We also recommend encouraging travelers to be flexible about the day of the week and time they select for departing flights. Some days and times are particularly popular and the airlines priced these flights accordingly. For example, when traveling from the United States to Europe, travelers may consider leaving on a Saturday instead of on a Sunday even if it means an extra hotel night since the difference in a business class ticket between a Saturday and Sunday departure can run into the thousands of dollars.
Another advantage? Your travelers may prefer having an extra day in Europe to explore on their own.
Be prepared to negotiate
Companies with more mature travel programs may have contracts with airlines, providing their loyal business in exchange for a negotiated discount.
Jeremy says airlines are adopting a firmer position on contracting and offering less generous discounts than previously. Therefore, you will need to become more strategic in managing your supplier relationships to maintain program discounts. You can begin by doing an analysis of your carriers to identify which ones are essential to your air program and focusing your attention on these suppliers.
During negotiations, Jeremy recommends asking the airline to recognize your true total spend, which could typically include minimum ticket spend, fuel surcharges, and traveler spend on ancillaries such as Wi-Fi. Carriers may push to consider only the ticket value. It’s not straightforward to capture ancillary spend but, at the very least, you should insist the airline take your fuel surcharges into account since these costs can and do add up.
Lean on your travel management company
Not having a contract with an airline does not mean you have to pay full price. You likely can achieve substantial savings through your travel management company.
Because of our enduring relationships with suppliers, we’re able to extend discounts up to 25% on top air routes through our Preferred Extras™ program.1 According to our transactional data, we helped SMEs save nearly $33 million on air costs in the first half of 2022 through this program.
We also offer an airfare re-shopping solution that automatically monitors airfares and rebooks like-for-like tickets that cost less as they become available.
Benefit from a disruption management service
Flight delays and cancellations also can add to trip costs. On top of the additional expenditures for extra hotel nights, meals, taxis, and entertainment, there are intangible costs, too – like lost productivity and traveler frustration.
Check to see if your TMC has a disruption solution that can help travelers get itineraries rebooked quickly so they will not have to camp out at the airport all day or spend an extra night in a foreign city. We have a set of disruption solutions that provides immediate rebooking assistance, including offering new flight options from a range of suppliers directly to travelers’ phones. Best of all, the service is already included in your program.
For more savings tips – and a breakdown of our airfare predictions based on regions – download the Air Monitor 2023, a forecasting report on the top business travel routes prepared by our GBC team.
1 Based on American Express Global Business Travel contractual agreements and availability. Program content is subject to change without notice. All discounts depend on route and class. Air savings reflect the average gross fare difference expressed as a percentage from booking a Preferred Extras fare rather than the equivalent published fare for 2021. Equivalent refers to the same or better for fare terms and conditions.