By David Frangeul, Director, Global Air and Rail Practices
As business travel resumes, agility will be essential to your travel program’s success. Moving quickly to adapt to ongoing changes allows you to create a leaner program that meets your goals, while also saving you time and money.
Focusing in on your air program, now is the time to adopt a dynamic approach to customize fares and routing within your contracts, and monitor ongoing performance to make changes in real-time.
Why now? Because every aspect of the travel experience is changing quickly and sometimes unpredictably. Airline supply and pricing have both been impacted by the emergence of new COVID-19 variants and geopolitical tensions. And evolving industry trends mean that sustainability and traveler well-being are now high on your agenda. Meanwhile, IATA’s new air retailing model is disrupting distribution, promising personalized packages and new pricing concepts to corporate clients.
You need to be agile and reactive to deal with ongoing changes in the airline environment, as well as within your own organization. So what you should do? Here are our three best practices to power up your air program.
1. Avoid air sourcing
We don’t recommend starting a full air RFP right now. Based on recent sourcing experiences, the return on investment of air sourcing has dropped to below 1%, compared to 3-4% in 2019. Why?
- Airlines are not willing to boost offers. Many airlines have borrowed a lot of money to stay afloat during the pandemic. Plus, fuel costs have greatly increased (+60% in the last 12 months). These additional costs will need to be recouped. Hence, a low sense of urgency to offer more discounts for corporate travel clients.
- Many companies have significantly lower travel budgets. Even though most corporate clients are back to travel, their spend has been reduced in comparison to pre-pandemic levels. This spend volume is one of the most critical elements airlines consider when segmenting their corporate accounts. Their willingness to propose fixed fares on specific high-volume routes is low. We see the same trend on back-end rebates. It’s definitely not the right time for sourcing.
2. Focus on dynamic program management
Air demand is ramping up at different paces across the globe. For example, there is strong demand in domestic sectors, and for transatlantic travel, but demand is still stagnant for travel to and from Asia. Airlines are constantly adapting their flight network. During this slow recovery period, you will find that some of your preferred suppliers no longer have the capacity to fully cover your travel needs in certain markets. For example, the recent closure of Russia’s airspace has significantly impacted major carrier networks. Additionally, airline pricing is increasingly volatile as airline competition evolves. When booking, you will likely start to see fuel surcharges increase significantly in line with the rise of jet fuel prices. Tracking these service and pricing changes is paramount to adapting your program and potentially seeking alternative suppliers. Your priority right now should be ensuring your negotiated rates on top routes are competitive. If needed, take this time to renegotiate the contract amendments for these top routes and extend your airline contract by one year.
3. Be agile to adapt to a changing world: sustainability, multimodality and NDC
- Sustainability: Travel managers are under pressure to contribute to corporate sustainability goals. You can begin by examining how your airline partners are working towards a more sustainable business. Look at factors like fleet, sustainable aviation fuel purchases, or onboard sustainability initiatives to determine if you need to reconsider your selection of preferred airlines. Advito’s methodology for calculating travel-related carbon emissions, GATE4, measures multiple components not included in standard carbon reporting, such as passenger to freight ratios, aircraft type, cabin class, and more.
- Multimodality: Integrating high speed rail content into your air program should be a priority. New travel policies aimed at reducing carbon footprints must encourage a shift from air to rail. This will create opportunities to negotiate better deals with railways, while simultaneously impacting your contracted airline performance goal. This is why it is so important to take a flexible approach to managing your travel program.
- New Distribution Capability (NDC): Airlines are implementing new retailing capabilities in order to propose richer content and more tailored offers to corporate travel clients. Distribution is heavily involved in the development of this new content. Depending on the airline agreements with the Global Distribution System (GDS) and your Travel Management Company (TMC), you might have to reconsider your selection of preferred airlines.
Successfully managing a multimodal program in today’s rapidly changing corporate travel ecosystem is challenging. However, using innovative strategies, like Dynamic Program Management, can make a big difference in saving money, reaching sustainability goals, and ensuring traveler satisfaction. Follow our three best practices to power up your program today.