Never before have companies been so squeezed by changes announced by the airlines — changes designed to stem what the International Air Transport Association estimates to be a $9 billion loss for 2002.
“Airlines have responded to their financial crisis by putting it on the backs of their best customers,” says one critic, Kevin Mitchell, chairman of the Business Travel Coalition, a Radnor, Pa.-based advocacy organization, “rather than stepping up to the really tough cost and productivity problems they have ignored for decades.”
Here's a look at what you can expect in 2003:
You won't be able to reuse nonrefundable tickets if you fail to travel on your original travel date — The exceptions: You can rebook before your original travel date for a $100 fee, and you can travel standby on your original travel date for a $100 fee. (Northwest charges no standby fee, and United recently dropped its fee.)
If you rely on nonrefundable tickets to keep your budget in line, you face a decision: Continue to buy the cheaper nonrefundables and risk losing all of their value (or paying $100 to salvage them), or spend more at the outset and buy tickets in less-restrictive fare categories. For many companies that use nonrefundable tickets for 40 percent to 50 percent of their air bookings, it has made sense to continue to use them.
There will be no more lowest-fare options for corporate discount programs — Companies that book enough air travel will continue to negotiatewith the major airlines based on that volume. But while those contracts will get them discounts off published fares, they no longer include the lowest fares available.
Companies without the volume to negotiate corporate contracts will also continue to use group contracts based on the number of people traveling to the meeting destination. Group contracts can also provide discounts off published fares (the discount varies depending on fare class) or are drawn up using zone fares, which offer savings off full coach fares but have none of the restrictions of the cheaper nonrefundable fares. Companies with corporate contracts may still use group contracts with carriers that don't normally get the bulk of their volume, or they may use group contracts with zone fares for meetings that don't take place over a Saturday night.
When there is no Saturday-night stay, zone fares may emerge as the way to go, and they can represent 60 percent off full coach fares. American Airlines' group contracts using zone fares give companies an additional 5 percent off the zone fares when tickets are booked at least 30 days out.
Figuring out which fares are the lowest for any one meeting by taking into consideration the dates, all the restrictions, the corporate travel policies, andstipulations will only become more complicated. The situation is already so confusing that corporate travel agencies have computer programs to do the work for them.
“Waivers and favors” will continue to be outlawed — Remember the days when the airlines tried to smooth out fare fluctuations for their corporate customers? Say, for example, that your travel agent found a low fare in the morning for one of your attendees, and then went back to book the ticket after lunch and discovered that the fare had gone up. It used to be that the agent could put in a call to the local airline rep, get a waiver code, and pay the morning's lower fare.
Not any more, say the airlines — although there might be some wiggle room. A Northwest spokesman put it this way: “Since our fare restructuring in November 2001, we have been more closely adhering to our guidelines in this area [waivers and favors]. Beyond that, it is not something we discuss publicly.”
Many planners believe that while waivers will be less common and a travel agent might have to go “two or three layers up” to get one, they will still be available for key corporate clients.
More Turbulence Ahead?
Last fall, Hal Rosenbluth, chairman and CEO of corporate travel management company Rosenbluth International, submitted a white paper detailing a “Fair Fare Plan” as part of his testimony before the U.S. Senate Committee on Commerce, Science, and Transportation. “The corporate pricing structure of the airlines is broken,” he wrote. “Airlines won't publicly state that they are in a mess they can't get out of, yet privately, they are quick to agree that lemming pricing has ruled the day for the past two years.”
Rosenbluth called on the airlines to take a number of steps, including reducing walk-up fares while simultaneously reducing corporate discount programs. He noted that airlines often maintain corporate discount programs even when a corporation fails to meet its volume or market share goals, and called for closer monitoring of customers so that those who do perform aren't subsidizing those who don't. Although Rosenbluth recognized the hurdles to implementing these and other suggestions and acknowledged that no one knows what the perfect fix is, “What we know for sure is that right now all we see is a recipe for disaster,” he said.
While airline stocks continue to plunge, airlines teeter on the brink of bankruptcy, and predictions of huge financial losses become reality, Kevin Mitchell of the Business Travel Coalition offers an equally dire view. “There are no surprises here,” he says. “It's just that these new onerous policies will backfire. In my view, it's game over, lights out for the major network carriers.”
Three Things You Can Do
Educate your attendees — Emphasize the penalties for changing and cancelling at the time of ticket booking, and confirm reservations at the end of the call so that you can minimize the number of cancellations (and the number of unused nonrefundable tickets).
Fly where Southwest flies — It's become a recognized fact: When Southwest flies into a city, it brings all the fares down.
Think twice about accepting “1 for 40” comp tickets — Group contracts allow you Earned Free Tickets, usually one free ticket for every 40 you buy. But here's the problem: Just like frequent flyer seats, you may never find seats with those freebies because the airlines allow very few seats for ‘non-revenue’ passengers. Instead, negotiate any concessions up front.
Alison Hall is the former editor of Insurance Conference Planner magazine. She lives in Sudbury, Mass.