Due to the increasing consolidations of airlines, negotiating corporate travel agreements has become even more difficult. This environment has created continuing challenges for corporate travel buyers, since current contracts with preferred vendors may not be suitable for a company. If a current preferred supplier was involved in a merger or acquisition, a company’s negotiating influence could decline.
Though airline consolidations have caused a decreasing group of possible contracts, the biggest U.S. airlines have stated they will assertively vie for profitable companies, especially accounts that produce greater profit and create solid traveler backing.
An important part of airline negotiations is identifying travel spend. For companies with smaller air volume, many carriers have small business programs, which can involve moderate discounts, loyalty mileage accumulation, and other advantages. Working with a Travel Management Company (TMC) is a crucial part of a successful corporate airline program. A TMC will assist with examining and interpreting spend and recognizing opportunities to enhance corporate travel programs. Contract negotiations are another important aspect of utilizing a TMC and having access to travel suppliers where there are already established partnerships.
During the initial phases of managing airline negotiations, there are crucial factors to consider. Acendas suggests the following guidelines for companies that are preparing to negotiate with airlines for the first time:
1. Gain insight into how senior executives view airline partnerships. Discuss the kinds of savings and additional amenities that are obtainable and the dedication needed to be successful. Measure the level of assistance from executive management for a preferred airline program. Attaining real buy-in from senior executives that includes requiring preferred airlines use may ease complications down the road.
2. Comprehend and discuss the company’s requirements. Create a cross-departmental team incorporating the CFO, Travel Manager, purchasing, meetings, managers of departments with the greatest air spend, your TMC’s Account Manager, and road warriors. Forecast corporate air volume for the upcoming year using the previous year’s data and key components of the upcoming year’s business plan. Furthermore, contemplate the volume for meetings and in-house travel for training, rather than for client trips.
3. Recognize traveler preferences. Discuss with road warriors about the airlines they frequent and reasons for favoring them, as well as comprehending the services that are significant for all travelers. Evaluate frequent flyer enrollment and ascertain traveler’s readiness to back a preferred program and the possibility of a mandated policy.
4. Attain a thorough comprehension of historic spend and patterns. Work with your TMC to obtain this data, which should include common city pairs by segment and total travelers, annual spend by airline and route, and the amount and cost of trips booked in many fare groups. If possible, obtain ancillary fee spend to include checked bags, onboard meals and Wi-Fi, and upgrades. In addition, your TMC should assist in compiling benchmarks to provide perspective of your program and support the negotiations.
5. Examine the airlines. Your TMC can provide airline details such as on-time statistics, delays, and information on your specific routes and competition to assist with negotiating.
The advantages of negotiating preferred agreements is continuous, as a company will attain savings based on existing spend and subsequently, the capability to raise volume can cause additional savings. The length of agreements varies based on the airline, which are increasingly being offered for three years instead of the standard two-year contracts.
Once agreements are in place, the Travel Manager or buyer will need to review current contracts before the negotiating process starts over. This process can expose possibilities such as further advantageous contracts with preferred airlines or a chance to switch to another vendor. As part of managing the airline program, Travel Managers should communicate with travelers about preferred partners and policy requirements.
Acendas has created a white paper to assist with the airline negotiations process. Click the link below to read our Best Practices in Corporate Airline Negotiations.
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