By David Frangeul, Director – Air Global Practice
In the wake of the COVID-19 pandemic, worldwide airline capacity has decreased by 80% year-over-year, and almost 90% for international flights. The return to air travel is expected to be gradual and slow – starting with domestic markets and followed by international markets. In this challenging environment, airlines are fighting to survive.
The majority of airlines will resume operations, but their network might significantly shrink. We expect to see a consolidation of the industry, especially in Europe and Asia. As we’ve learned from the past, consolidation reduces the market competition by increasing the number of monopolistic routes in a corporate managed program.
What does this mean for your air program? How are your preferred air suppliers navigating through the crisis? Are some of them at risk of bankruptcy? If so, what should you do? How will this decline in competition level impact your program coverage, average ticket price, and leverage with air suppliers?
Here are the three things for travel managers to consider to be prepared for the new future of business travel:
Assess your level of risk with preferred carriers
It is important to monitor the financial situation for each of your suppliers to understand the risk of grounding, taking into account their cash availability, government support, and network impact due to border closures and safety regulations. The scope of your risk assessment should extend to non-preferred airlines as well, since they may have a direct impact on the competition level of your flown markets.
Track current and future network changes for key airlines
Most airlines will not fully recover for 2 or 3 years, which means carriers will restart operations with a reduced network of flights and destinations. During this period of slow recovery, some of your preferred suppliers may no longer have the capacity to fully cover your travel needs in certain markets. Tracking these changes in service will be paramount in adapting your program and potentially seeking alternative suppliers.
Using a tool like Advito’s Air Fare Predictor will enable you to monitor the evolution of bookable flights, seat capacity changes, and future pricing points on a daily basis.
Gradually ramp-up your program
Once your business travel is ramping up, align your global travel footprint with the changed industry landscape to secure optimal coverage and competitive pricing as you gradually rebuild your program.
This will require ongoing negotiation with your suppliers to protect your top routes from volatile or uncompetitive pricing.
Beyond savings, ask your airline partners how they can contribute to your mutual success being easy to do business with. If necessary, add additional negotiation points around refunds, credits and vouchers – and advocate for fuel surcharge and distribution surcharge termination. Review health and safety measures to help your travelers gain trust in air travel, and most importantly, do not use the traditional air RFP process. A key factor to success for travel programs in a post-COVID-19 world will be agility.