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Containing Corporate Travel Costs in the Consolidated Skies

February 27, 2014 Corporate No Comments Email Email

Increased market pressures in the consolidated airline industry have reduced corporate travel options and discount opportunities thus increasing the planning complexity for corporate travel managers, according to a report released today by Egencia®, the business travel company of Expedia, Inc. (NASDAQ: EXPE).

Choice is the biggest issue for most corporate clients. The number of carriers has declined dramatically in the last two decades and the typical load factor (the number of seat occupied per plane) has climbed from 70 percent in the early 1990s to almost 85 percent today. As a result, there are fewer flight options and the remaining carriers do not have the same incentive to offer corporate discounts to attract the all-important, often last-minute, business traveler.

Egencia’s Consulting Services new report titled, “Corporate Travel in the Consolidated Skies,” highlights how discounts available to corporations can drive incremental share in competitive markets. It also shows that airlines are being more selective about signing or maintaining preferred-carrier contracts. If companies fail to deliver the load share that they promised, airlines are cancelling contracts—sometimes as early as 90 days after being signed.

Complications may arise for corporations that have contracts with more than one network or alliance; travelers then must choose between preferred carriers. As consolidated airlines become more entrenched in hub cities, routes are more likely to overlap. For example, if a company negotiated a Newark preference with one airline and an Atlanta preference with another, it could find it difficult to sustain share goals, for either carrier, on a Newark-Atlanta route.

“To maximize air contract discounts, it will be increasingly important for corporate travel managers to make travelers aware of their preferred carriers and to ensure these air partners appear at the top of their booking displays,” says Mark Hollyhead, Egencia’s senior vice president of the Americas. “We can expect carriers to be increasingly diligent about managing contracts as airline consolidation continues. Thus closely monitoring the use of preferred vendors is key for all travel managers.”

Egencia’s data shows that 67 percent of all travelers book their flights from choices found on the first page of the booking tool. If your travel management company (TMC) is not sorting your company’s air preferences effectively, travelers can easily miss the best deals – and ultimately your company can lose valuable saving opportunities. This becomes ever more prevalent when the itineraries are international and the choices substantially complex.

“The fundamentals of travel management haven’t changed but the ability to manage air preferences should be,” says Hollyhead. “A 21st century TMC should be able to attractively display clients’ preferred choices within the booking tool, with integrated approvals and real-time reporting on compliance. The ability to control ‘sort order display’ should be in the hands of the travel manager to act quickly and adjust when necessary.”

For more information or a complimentary copy of the report or to engage with Egencia’s Consulting Services group, please email consult@egencia.com or call 866-328-0110.

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