Most corporate discount deals are measured on market share, but buyers can gain leverage if they have high-yield spend like first or business class or full-fare economy available to shift to new suppliers. Airlines also want discounted economy or lowest-logical-fare business providing it’s business the carrier would not receive without offering discounts. Considering that suppliers are consolidating, commit only to the share you can manage.
Discount programmes are structured based on opportunities. If your volume does not meet the minimum requirement, look into revenue or sector-based incentive programmes for back-end rebates, club passes, waivers and favours, upgrades and/or frequent-flyer status.
If your air spend isn’t turning the heads of carriers look into the small-business schemes some carriers offer – British Airways On Business, for example. Some TMCs also offer their negotiated discounts to customers.
Information on past travel spend and routes still has value even if you don’t know what your organisation’s future business travel activity looks like yet. Good data can help you win discounts for city pairs, multiple destinations from one city, regionally or across your travel programme.
A good starting point is to identify at least the top 20 city pairs by segment and passenger count, including carrier and origin and destination data. Establish carrier spend per airline per route for the most recent relevant 12 months. Consolidate information on tickets and value per class of service.
Beware of surcharges on room rates – including occupancy taxes, city taxes and the like – and their overall cost implications which can be considerable.
Airlines increasingly charge for a la carte offerings above the base fare. Ancillaries include seat selection, checked bags, early boarding, WiFi, onboard meals and upgrades. Though many of these fees are not negotiable, travel buyers should attempt to capture spending through expense reporting and corporate card data to show airlines the total amount spent.
Determine whether carriers participate in an airline alliance. Some airline partners offer joint alliance deals, while others even have developed antitrust-immune joint ventures, through which partners manage capacity, fares and corporate deals as one entity. Determine the magnitude of alliance relationships and how it impacts the carrier’s negotiating power. Consider whether the airline requires an agreement through the JV as opposed to either an alliance or individual carrier agreement.
Many airlines conduct monthly or quarterly progress reviews while others will meet only once or twice per year. Generally, more interaction is better, as strong airline reps have a current understanding of market developments and can share best practices regarding contract management and policy.
GIVING IT A GO
Airlines are reluctant to offer trial periods for contracts, but without the appropriate data you may be able to implement stepped agreements in which the level of discount increases with the volume delivered. Such deals are never as good as a formal bid based on historical data.
Be persistent. Airlines are selective regarding the accounts on which they bid. Offering more volume on international routes can revive rejected requests for domestic discounts. Try to tie the two together for maximum purchasing power. Recognise that airlines place higher value on high-yield purchases – such as business class, international service and full-fare economy – and discount accordingly.
Don’t overestimate volume or your company’s ability to deliver it in order to extract a higher discount. Airlines often respond to an inability to meet these obligations by reducing cooperation, which will impact the value of discounts earned in future negotiations and your organisation’s credibility.
DON’T BE DISTRACTED
Make sure airlines’ proposed discounts align with your historical usage by booking class. Eye-popping discounts on seat classes your travellers never use or can’t access at the time of booking have no value.