The Los Angeles Times this week reported that United Airlines is defining what constitutes an acceptable standard of reliability and if these targets are not met, the carrier will compensate its corporate clients with credits which can be used for upgrades or to apply against on-board fees (eg for WiFi connectivity or refreshments).
The move follows a similar initiative earlier this year which saw Delta Air Lines promising credits which could be applied against fares if reliability targets were not met.
Both carriers are effectively making their fares conditional upon a certain service level. This is also about giving teeth to corporate agreements.
In an earlier expert contribution to Business Travel iQ Carol Randall argued the potential value to both client and TMC from their agreeing specified and measurable service levels and then conducting regular reviews which could result in penalties being payable if the specifics agreed in the contract had not been delivered. This is a new world from that in which most SLAs are bland text in standard contracts.
The move by both Delta and United adds weight to what every industry observer believes, namely that corporate travel management best practice is no longer about negotiating the best individual unit price for a product. Instead both buyers and suppliers are moving towards a more strategic approach which includes a holistic view of travel costs and benefits and modern techniques for adjusting price.
These techniques come in different guises in different areas. The risk-reward or gain-share model acknowledges the partnership element in any contract and aims to incentivise both sides to gain mutually from any success. By the same token gamification has been developed to reward those travellers who comply with policy or in some other way deliver to the corporate objective through their individual behaviour — again, both sides could potentially 'win'. And personalisation enables a supplier to identify specific needs and tastes of a client — whether an individual or a company — and use this information to target the offering and cater to special requirements.
And now airline agreements are moving away from a rigid cost per transaction to a contract which stipulates what the purchaser is entitled to from that fare over and beyond a formula to fix the fare. And punctuality is one aspect of what a fare is conceivably buying. To focus only on price in a contract without also addressing the expectations of what that fee will deliver for a customer in terms of service is becoming old school as much for suppliers as it is for TMCs. Both are moving from unconditional to conditional pricing models.
Technology is enabling new — and more targeted — means of selling, managing, buying.