BTN Europe presents an overview of business travel and MICE predictions for this year
ExCeL London - 22-23 June 2021
Nearly eight months on from companies across Europe switching off their business travel taps, many corporate airline agreements have expired or reached their review deadlines. But with little data for most of 2020, and no idea what 2021 looks like, where do you even start with a negotiation?The answer, it would appear, is you don’t. Status quo is emerging by consensus as the best of a bad bunch of options. “Almost all airlines are accepting extending agreements negotiated before the crisis started for another 12 months,” says Jörg Martin, principal of CTC Corporate Travel Consulting in Germany. “Volumes from corporate clients have decreased but airlines can’t offer the service and flexibility that was part of their original offer.”In any case, Martin points out, airlines have little bandwidth to renegotiate because their sales staff are furloughed, on short-time working or have been made redundant.From the buyer’s perspective, says a European travel manager, speaking on condition of anonymity, “many organisations are taking the view this is not the time to take advantage of other companies’ misfortune. No one I know is saying ‘you need my business and I want a better deal’.”
More important than price at this point, the travel manager believes, is agreeing more flexibility with airlines about terms and conditions – allowing name changes on vouchers, for example.A potential alternative buying strategy could be to avoid corporate fares from preferred suppliers for the time being and instead book best on the day from any airline. This tactic could be backed up by using an automated fare assurance tool that rebooks at a lower fare if one becomes available.
A travel manager for a global professional services firm, also speaking anonymously, rejects this approach, both in principle and practice. First, he says, “I believe in supporting your preferred airlines. You need each other.”
Second, he doesn’t consider this the ideal moment for air rebooking tools. “People travelling for business really care about their seat assignments right now, so they can be first off the plane, for example,” he says. “If that gets lost in the rebooking, it adds to their stress. With such low volumes as most companies have at the moment, price isn’t the major factor here.”Even so, there are some price risks which merit attention by travel buyers. During a recent BTN Europe Week in Review podcast, EY global head of travel, meetings and events Karen Hutchings said domestic fares are down but international fares up owing to reduced capacity.
Consequently, “there has to be consideration of do you negotiate more fixed fares so you’ve got a ceiling with your airlines?” Hutchings said. “You need some protection around the increase in fares.”Martin believes basic economics dictate buyers will have to accept higher fares as travel resumes “because volumes are lower. Airlines’ non-flexible costs have to be divided among fewer tickets.”
Another factor likely to drive fare inflation is reduced competition. “I expect bankruptcies,” Martin says. “I can’t imagine all airlines will survive the next 12-18 months and those still around will shrink their networks to focus on fewer routes. It will affect the purchasing power of corporate clients.”Changes to internal demand could also drive up average ticket price paid. The many uncertainties around travel in the Covid age, such as whether a quarantine might be required, are reducing the number of days travellers book flights before departure. Tickets bought at short notice are generally dearer. “If your agreement is heavily focused on advance purchase fares, maybe you should look at short-notice fare classes too,” said the professional services firm's travel manager.Buyers need to consider other risk factors. One is medical: are preferred carriers taking adequate steps to protect passengers from infection? An issue troubling the travel manager is inconsistency in hygiene protocols between different partners in airline joint ventures. He cites it as a particular worry because reduced route networks mean travellers will be more likely in future to fly indirectly, using two or more joint venture partners to reach their destination.Although the connection may not seem obvious at first, the same travel manager also points to duty of care challenges with some airlines removing fares from global distribution systems and making them available only through New Distribution Capablity channels.
His view is that keeping all bookings coordinated through GDSs is essential for keeping tabs on which employees are supposed to be where. “What I don’t want are NDC-only fares. Don’t do it right now please,” he says. “Stop undermining the corporate channel.”While buyers certainly have to address employee health, they have to consider supplier health too. The International Air Transport Association projects airlines will burn $77 billion of cash in the second half of 2020 and possibly another $5 billion to $6 billion per month in 2021. How can buyers figure out which suppliers will survive this unprecedented ordeal? “Most industry followers know which airlines are under pressure,” says the professional services organisation's travel manager. “If you’re not sure, talk to your TMC’s consulting business. Don’t get caught up in what the general media say.”More than other suppliers, potential failure of airlines is a particularly onerous financial risk for buyers because many tickets are paid for at the time of booking, not when they are actually used. Jörg Martin considers this a practice which needs to end. “It’s old-fashioned and almost unique to the travel industry,” he says. “The risk of airlines failing between when you buy and fly is huge.” Martin believes now is the ideal moment for a reset because few passengers are flying and many airlines are receiving state aid. Consequently, temporarily switching off cashflow from booked but unflown reservations would be insignificant.
He chairs the aviation committee of the German travel managers’ association VDR, which is lobbying the German government for change. “The government is really keen on the idea and asking lots of questions,” he says. It’s a rare example of how the present crisis may generate some positive outcomes for travel managers.