New airline distribution strategies have brought a rapid rate of change to the airline industry. Some airlines have chosen to entice travelers to book directly from their website while others are implementing dynamic pricing which means fares can change. If you manage a travel program, you may be wondering how to keep pace with all the changes while maintaining value in your program. A successful travel program helps you fulfill your duty of care and drive savings – two big considerations.
Duty of care. Having travelers book trips within the guidelines of your travel program rather than directly from an airline’s website gives you better oversight of their location. That way you can take precautions to minimize travel risk and meet your duty of care – a company’s moral and legal obligation.
Driving savings. A well-managed travel program has pre-negotiated rates. And with air travel taking up a significant portion of the travel budget, it helps getting discounts from airline partners. Yet higher jet fuel prices wage bills and increased debt have created cost pressures on airlines, creating conditions where airfare discounts may be harder to get.
So, how can you drive value within this travel landscape? To answer that question, we sat down with Amy Rayca, the global air practice line lead for Amex GBT Consulting who gave some helpful tips.
Apply smart strategies in your sourcing negotiations with airlines
You can start by doing an audit of air travel spend and identifying your most frequently used airlines. Focus on building relationships with those few that you’ve identified as most important to you and negotiate ways you can maximize the return on investment from your airline spend with them.
Look for creative ways to drive value
If you find that an airline is reducing upfront discounts on airfares, consider a back-end credit like cash on a Universal Air Travel Plan (UATP) card or a flex dollar fund which you can use like a credit card for flights with the airline. For example, an airline may be willing to apply unused tickets to a UATP card that can be used later on for an upcoming flight. While other airlines allow you to use the UATP card toward change fees, seats, upgrades, and non-refundable tickets. Determine what’s important to your travelers. Amy finds that every company measures savings differently. If added fees on baggage, meals and lounge access are big considerations then make the request to apply their value to a fund or UATP in your contract negotiations. Some airlines can show you how much is saved from those ancillaries, according to Amy.
Also keep in mind that every airline has its own terms and conditions (T&Cs) for a UATP card. Some allow you to apply a portion of ticket spend onto the card, while other airlines have different stipulations. It’s important to manage the UATP closely so you can be sure you’re meeting the airline’s T&Cs.
Maximize group travel
In cases where you have large teams flying to a tournament, sporting event or concert, see if the airline is agreeable to a discount on future airfare when you meet a certain spend-per-ticket criteria. By taking advantage of our group supplier relationships, you can get some of the most competitive flight rates around including help with all the complex, in-transit logistics involved in group travel.
See if the airline meets your sustainability standards
With sustainability increasingly becoming a corporate priority, it’s a good idea to find out about the airline’s emission standards and sustainability initiatives. There may be an opportunity to contribute to their initiative using your UATP card and claim the environmental benefits in your corporate reporting, according to Amy.
Consider alternatives to an advanced purchase policy
Traditionally, the going rate for a flight was cheapest if you booked within 21 days. Amy is finding instances where that’s no longer the case due to the cost pressures that airlines are faced with. To compensate, she suggests a rate variance threshold. For example, if the airfare variance between one flight and another is $100 then give travelers the option to choose either one. When applicable, you may also want to consider a combination of advance purchase policy and threshold. Whatever strategy you go with, include it in your travel policy so everyone’s aware and compliant. And if you need advice on strategy, Amex GBT Consulting is on hand to help.
Look at airline dependability
If you’re committing 60% or 70% of your airline spend to a specific airline, you want to be confident that their performance record exceeds that percentage. Has there been lost savings due to frequent cancellations? How has their on-time performance affected your travelers? Those are the types of questions to get answered before you commit to spend requirements.
Ask for transparency on surcharges
Given the high price of jet fuel, carrier-imposed surcharges – referred to as YQ – went into effect over 20 years ago on international tickets to help airlines meet fuel costs. Not only are they assessed differently by airline carriers, they’re subject to change which makes it hard to budget. Amy suggests asking for more transparency. See if the airline can include those surcharges as part of your spend commitment.
Time your negotiations right
Stay in touch with your airline partners and your travelers on a continuous basis so you can be sure you’re meeting travel needs. Amy recommends managing contracts carefully by doing regular contract reviews. Is there a general rule on timing? If you’re a large global company with a large airline spend, consider reviewing contracts on a quarterly basis. Annual reviews are typical for companies with smaller air spend volume. Does your company fall somewhere in the middle? Semi-annual contract reviews may be the right cadence for you.
With all these considerations in our rapidly evolving airline industry, you may have more questions than we’ve answered. If so, breeze through our Air Monitor for added insights. And if you need further support and guidance, get in touch with Amex GBT Consulting .
Amy Rayca is a travel industry veteran with extensive knowledge and skills in client relationship management and strategic planning. Before joining Amex GBT as the global practice line lead for air consulting, Amy led an account management team, specialized in corporate relationships at American Airlines. To learn more about Amy and her success executing business strategies, click here.
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