January 28, 2010 - With industry solutions slow to emerge, the
lack of data on ancillary air purchases remains a roadblock for negotiations and policies that address bag fees and other add-ons estimated to represent as much as 10 percent of most companies' air travel spending. But participants in a ProMedia.travel Content Solutions webinar this week encouraged travel managers to take action.
"Speak up," said Sandra Gennrich, vice president and business leader for global commercial products at MasterCard Worldwide, which sponsored the webinar. "Talk to us. Let us know what's important to you."
Gennrich spoke after Rita Visser, Oracle Corp. senior manager and global air procurement lead, listed several moves and talking points travel managers and buyers could make as they work with airline suppliers, including:
• Searching card, expense or general ledger data for airline charges of under $75. "Then, have your [total] estimate in your back pocket," Visser said. Airlines "may say they can't substantiate it, but if you have it, that's a great place to start the conversation." Then, she said, ask questions: " 'Does my company have a share in that? Does it go to our [contract] hurdles? Do airlines see it as additional spend coming from the company's pocket?' "
• Challenging airlines over whether the added fees come with improved services. "What's in it for our travelers?" Visser said. "Our travelers may say, 'It's fine for me to check two bags because I'm getting the business done,' but will their bags always show up? If it doesn't, will they be refunded? They're paying at the counter, and can they assume the person behind the counter gives them better service? Travel managers should ask where that money is going to improve services."
• Considering unorthodox approaches. "I know there are a number of companies out there saying [they] can tie something to a ticket designator behind the scenes and when company XYZ steps up and the guy hands over the bag, the person behind the counter will say 'You're with XYZ so you don't need to pay for that,' " said Visser. "Is it a challenge? Yes, it's a challenge from a procurement perspective, because what if the guy does get charged?"
• Double-checking the value of negotiated arrangements. "Will a traveler save $100 if they go with their preferred carrier because they have status with them [and thus avoid bag fees]? I know there are companies out there looking at it and saying, 'If a traveler can save $100 and it's only a $50 [higher fare] to take their carrier,' " perhaps using the published rate is best. But "is there room in a travel policy for that kind of logic? And what does that cost" in terms of supporting preferred contracts, she asked. Nevertheless, Visser said, "There are a number of corporations out there right now for whom the bottom line is key, so lowest fare on the day wins and low cost wins."
Visser and others also suggested buyers may change their key metrics. Average ticket price "is going down, but is the total airline cost going up?" asked Gennrich. "Is ATP the right metric to track? Should it be average cost?"
"We as travel buyers need to make sure that [senior managers and budget holders] plan for it and budget for" airfare unbundling, said Visser. "It's here to stay."
Purchases Remain Rogue
More than one-third of travel buyers do not have enough information to estimate the share of their organizations' air travel spending that goes to ancillary fees, but another 27 percent said that share is less than 5 percent and 23 percent said that share is between 5 percent and 10 percent, according to a ProMedia.travel Content Solutions survey. Taken in advance of the webinar, the survey also found that 8 percent of 265 travel buyer respondents estimated the ancillary portion of the air travel pie to be between 10 percent and 15 percent, while a negligible fraction estimated higher percentages.
Ingersoll Rand strategic sourcing director Tom Barrett estimated the share at 6 percent for his company and noted the lack of standardized data. "As if procurement didn't have enough challenges, when you try to negotiate any agreement, the basis of the agreement is the data," he said. "It's up to our partners to come forward and give us transparency on this. Management is not very [agreeable] to any of us who are managing a commodity if we say, 'Well, I have no control or influence on this.' "
Responding to a poll taken during the webinar, 93 percent of 101 buyers indicated they had not succeeded in negotiating ancillary fee waivers. Many likely have not even tried. "You have to be able to know what you're looking at to ask these questions," said Visser. "When we see there are 90 percent on the call who haven't had the opportunity to negotiate these fees, it's because the tracking and the data are not there."
Three-quarters of the initial 265 buyers polled said their primary source of data for managing travel is the travel management company, followed by 12 percent indicating the expense reporting system and 7 percent selecting "bank card." In another webinar poll, 45 percent of 110 respondents said ideally they would generate data on ancillary airline fees from "all" suppliers, followed by 24 percent indicating "credit card," 14 percent choosing airline and just 10 percent selecting TMC.
The industry is creating solutions, such as
ATPCo's work to allow airlines to distribute optional services info as they do with fares, the electronic miscellaneous document with which ARC and global distribution systems would enable TMCs to sell and track ancillary purchases, and collaboration between certain
airlines and card companies to aid reporting on airport and other direct purchases by travelers.
"We're working with our corporate partners to create a task force with the International Air Transport Association to help set the standards--including the credit card partners, our TMCs that have to manage the process, online booking tools and expense reporting systems," said Continental Airlines global accounts director Cyndi Hunter during the webinar. "Let's find out the data requirements, coding options and implement and test."
