The death of the standard corporate deal with airlines has been one of the most regularly predicted events in the business travel industry.
Despite the dictat of many corporates that their travellers must use the best deal of the day and the consequent rise of the “spot” market, the airlines deals seem to be hanging on it there.
Blatant disregard by companies to produce the promised volume in return for their discounts are still rare although North West Airlines in America was making gruff noises a year or so back about what it intended to do to defaulters.
But there is little doubt that they have changed. The rise of the low cost carriers, the highly competitive and more flexible short haul fares that legacy airlines like BA now offer has reduced their value. Signed deals may now not always deliver the cheapest fare.
While for many companies these standard deals remain the strategic bedrock of their air spend, there are other companies which are moving away from them and looking at alternatives.
TravelpoolEurope (TPE), the travel advisory and buying consortium representing 22 companies in Scandinavia, looked at some of these alternatives in its most recent newsletter.
The one to which it gave most attention was the idea of an “index-linked deal.” But is this feasible and would any airline be interested in signing one?
Soeren Schoedt, managing director of TPE), said his consortium's policy was driven by getting the lowest fares on the day. This has led to a drop in route deals from 75 in 2001 to 11 in 2004.
However he sad the number was now increasing as TPE had found new ways of doing corporate deals but going direct to the airline and not using either GDSs or credit cards.
It had also persuaded some airlines to sign deals capping the price “not from the bottom but from the top so we never have to pay more.”
The TPE feature said that airline deals, to regain their simplicity, would have to be the cheapest option “nearly all the time instead of only some of the time as is the case at present.”
But with the market changed, it said: “It is becoming nearly impossible to agree a discount against the published fare or even a fixed fare while pricing is so fluid that one cannot set a stake in the ground for measurement.”
Mr Schoedt said the market was now split and going in several different direction with more players, like Galileo and Sabre seeking to sell more tickets.
The question was whether airlines could vary their prices as the market changed as some other industries do.
“One option might be to agree index-linked deals where the price paid by the clients is based on an average fare booked over the previous six or 12 months,” TPE said.
“Such a solution would recognise the value of the corporate clients and ensure they get the best prices on the market instead of some of the highest.”
But while clients have approached airlines on such a basis and even used average fares paid over a set period as a negotiating tool, no such deals have yet been signed on these lines.
Airlines would be understandably reluctant to sign a deal which blurred the price they would get for their tickets. They like any other organisation when putting pen to paper want to know precisely what they are going to get.
They also argue that their websites offer good deals through direct and easy access so such index linked deals are not so necessary.
But if as TPE argues, that “everyone” in the industry knows the current model is broken, replacing it is going to become increasingly urgent. Currently there are no real front runners.