Get transparency into your preferred airlines’ strategy
By Jason Kramer, Managing Consultant
Tactical pricing in the corporate airline environment is defined in many ways. For the purposes of this blog, we define it as the industry practice of fare filing higher corporate discounts or lower fixed fares outside of contracted terms between an airline and a company.
Airlines apply this method because they benefit from the improved market position it lends to, such as increased market share and revenue. Companies can equally benefit with great savings from tactical pricing. But is it being done transparently? Do you know when airlines are doing this with your fares? Here’s why you should:
Tactical pricing done transparently between an airline and a company fosters a constructive partnership and can lead to a “win-win” for both parties. But, tactical pricing implemented by the airline without transparency to the company can lead to contract compliance challenges with other preferred partners. In addition, tactical pricing without transparency can be considered a breach of contract, since most airline contracts require a minimum of 30-days’ notice to amend and/or cancel the existing contract.
As interest in tactical pricing grows, more and more examples of tactical pricing without transparency are being cited by travel managers, and it warrants attention. The implementation of tactical pricing without notice or advisement to the company is a unilateral decision by the airline to benefit itself, and it is likely to have a trickle-down impact on the contract terms of your other preferred partners. Our advice: Ask your preferred airline partners if tactical pricing is a practice applied to your program, and audit regularly to ensure discounts and/or fixed fare are applied as contracted. If it is being applied, ask to be notified in advance with the right to decline.
All said, transparent tactical pricing can be valuable. The evolution of managed travel is all about pro-actively sourcing markets and contract terms to drive on-going incremental value to your program. Tactical pricing can be a vehicle to drive traveler behavior while benefiting multiple parties – and the bottom line. Moving forward, tactical pricing – or competitive pricing in general – should be a part of every meeting your company has with your airlines partners.
Consequently, tactical pricing will soon be a practical application of contracted corporate pricing. In markets where strong low-cost-carrier competition exists, traditional airlines are now becoming more nimble with its discounts to sustain competitiveness. In simple terms, corporate discounts will become a variable, and they will be implemented to match the competition of the market. Raise the topic of tactical pricing with your airline partners. Ask if it is being implemented, and if it’s not, ask how it can be to drive incremental value to your program.