Date: April 13th 2010

PRESS RELEASE

For Immediate Release

 

Corporate Travel Departments And Travel Management Companies Seek Partnership with Airlines Over Merchandising, Distribution

WASHINGTON, DC April 14, 2010 -- More than 200 corporate travel departments, travel management companies and travel groups from 10 countries on April 13 wrote to major U.S. airlines offering to partner in an effort to support innovative distribution strategies and to maximize traveler uptake and resulting airline revenue growth from ancillary products and services, such as additional fees for checked baggage and pre-reserved seating. The coalition of organizations is endeavoring to elevate and inform industry and public-policy debate surrounding the rapid evolution of airline product unbundling and ancillary-fee strategies, including impacts on supply-chain participants and corporate customers.

“The success of managed travel programs is reliant upon travel management companies having efficient access to the full range of airline options for any particular trip, and being able to monitor, track and report on the comprehensive final-cost of airfares plus related services purchased,” stated Michelle de Costa, Global Travel Manager for Sapient. “The verified workflow processes of travel companies and online booking tools that feed into our corporate systems rely almost exclusively upon the airline booking and servicing capabilities of global distribution systems. We are looking for airline partners that acknowledge and respect our needs.”

Unbundling and repackaging strategies bring both promise and risk for corporate managed travel. Corporations, airlines’ most important customers, want a seat-at-the-table and a say in how distribution system changes proceed. They are proactively coming forward with their views calling for a dialogue that will lead to equitable strategies that ensure the success of all supply-chain participants.

Corporate travel managers are calling for adoption of industry principles and standards that, for example, encourage airlines considering unbundling strategies to:

• not undercut the value of corporations’ contracts with those airlines;
• make available their unbundling initiatives in a manner that does not discriminate against a corporation based upon its choice of reservations or fulfillment processes that best meet its needs; and
• to proceed in a manner that respects the efficiencies of prevailing travel procurement processes utilized by corporations.

“Major and far-reaching changes to airline business models, occurring in real time, will have significant impacts on all participants in the supply chain. Corporations that buy billions of dollars in air transportation services, and that keep the lights on at airlines’ headquarters, are making their consumer preferences known when it comes to how they want to buy these services,” said Business Travel Coalition Chairman Kevin Mitchell. “Forward-thinking airlines are listening to what we have to say; some carriers have come to realize that to secure more high-yield business travelers, they must respect the modern procurement and travel management practices of their best customers.”   

“Consumers expect the travel agents they depend on to have complete and transparent access to booking information to do their jobs,” said Chris Russo, President and Chair of the American Society of Travel Agents. “Travel agents do not favor separate silos that will make booking air travel more complicated, opaque and expensive. We urge the airlines to work with us to adopt standards that give fair and equitable access to booking information to all of our members for the benefit of those consumers who choose to buy their air travel through us. Together we can create a win-win-win for travel agents, their customers and airlines.”

The full text of the CEO letter with signatories can be found below. 

CONTACTS
ASTA || Paul Ruden | (703) 915-2481| PRuden@astahq.com
BTC || Kevin Mitchell | 610-341-1850 | mitchell@BusinessTravelCoalition.com

+++++

SAMPLE CEO LETTER

This letter was distributed to United, American, US Airways, Southwest, JetBlue, Alaska, Delta and Continental.

Apiril 13, 2010

Dear [          ]:

As corporate travel departments, travel management companies (TMCs), online travel agencies (OTAs) and global distribution systems (GDSs), we write you to offer our partnership in extending your ancillary products and services in a manner that is consistent with consumer interests and that works optimally with de facto travel procurement systems and practices. We wish to support you in your efforts to maximize traveler uptake and resulting revenue growth from ancillary products and services. To that end, we ask you to ensure the full scope of your products is made accessible and transparent to all travelers, regardless of channel choice.

Your airline has shown that it values its corporate customers and respects the requirements of modern procurement programs. Your most valuable customers rely on the services of TMCs; together they have invested significant time and money in technologies that enable efficient shopping, booking, payment and reporting for airline products and services. The prime objectives of managed corporate travel programs have been to enable companies to control expenses and to fulfill agreements with airlines through enforceable travel policies.

Going forward, the success of these managed travel efforts is fundamentally dependent upon travel intermediaries having efficient access to the full range of airline options for any particular trip, and being able to monitor and track the comprehensive final cost of airfares plus related services purchased. To illustrate, in order to transact and subsequently report ancillary fees such as seat upgrades and checked baggage, TMCs, and indeed all travel agents, booking air travel must have the ability to deliver such fees transparently in the shopping/booking process. Importantly, the well-established and proven workflow processes of TMCs that feed into corporate clients’ systems rely almost exclusively upon the airline booking and servicing capabilities of GDSs.

Similarly, the millions of consumers who shop and book travel on OTA sites every month, which collectively account for some 16% of all U.S. airlines’ revenues, have encountered an increasingly complex landscape of air travel options to evaluate. The current lack of clarity and accessibility of a la carte products prohibits widespread consumer adoption - a hindrance to achieving the revenue generation objectives that predicated your airline’s implementation of an unbundled pricing strategy in the first place.

Your airline, your distribution partners and your biggest customers have a responsibility to enable travelers to compare both the true costs and benefits of their full scope of air travel options. The only path to near-term, broad availability of your airline’s ancillary products is to develop and deploy merchandising capabilities within the existing technology framework of your distribution system partners and corporate customers.

As those partners and customers, we have developed principles and standards which we ask you to review and commit to through a public statement of support. We are requesting that you help us help you by working cooperatively, diligently and in good faith with TMCs, OTAs, GDSs, and corporate travel managers on the rapid development of industry technical standards to ensure that your unbundled products are easily accessible by all travelers via any GDS in which you participate.

We look forward to hearing from you at your earliest opportunity.

Sincerely,

Fujitsu America, Inc.
Sapient
Oracle
Merck KGaA
Assurant, Inc.
SAP AG
Manhattan Chamber of Commerce
Wells Fargo & Company N.A.
NetApp
Grant Thornton LLP
Brown Brothers Harriman & Co.
Moog, Inc.
BASF Corporation
UnitedHealth Group
HealthCare California
Symantec
University of Texas
Campbell Soup Company
Freudenberg-NOK
Autodesk, Inc.
BB&T
Tognum AG
Nexion
Watlow Electric Manufacturing Company
NetJets Europe, Ltd
Cox Enterprises, Inc.
CSC
Lowe's Companies, Inc.
Dollar Tree
Eaton Corporation
UCB Pharma
The University of British Columbia
Guild of Travel Management Companies
Scottish Passenger Agents Association
Interactive Travel Services Association
Finnish Business Travel Association
Advantage Focus Partnership
American Society of Travel Agents
Institute of Travel & Meetings
Business Travel Coalition
Stryker Corporation
Tommy Hilfiger
Adidas Group
Brown Jordan International
Carey International
Nordson Corporation
Schaeffler Technologies GmbH & Co. KG
Zetron, Inc.
Cannon Design
The Remington Group Ltd
Crowley Maritime Corporation
Frudenberg-NOK
United Communications Group (UCG)
Regence BlueShield
The Regence Group
General Council on Finance & Administration of The United Methodist Church, Inc.
Hyder Consulting (UK) Limited
Converteam UK Ltd
Cargotec Corporation
Suomen Osuuskauppojen Keskuskunta
Lafarge
Provisur Technologies, Inc.
Freeman
Performance Enhancement Incentives
CLEANTRAKS, LLC
Comfort Inn
Sterling Jewelers, Inc.
Zimmer, Inc.
Hanesbrands Inc.
FLO Corporation
Goss International
Lumbermens Merchandising Corporation   
PAR Travel Tech, Inc.
Provisur Technologies, Inc.
Stephens, Inc.
Westfield Insurance
Medical Whistleblower

ASTA Premium Members

A&I Travel Service, Inc.
ABC International Travel
Accent Travel / American Express
ADA Travel
ADTRAV Travel Management
Advantage Performance Network
Aladdin Travel and Meeting Planners
All About Travel Inc.
All Direct Travel Services, Inc.
All Seasons Travel Agency, Inc./American Express
All-Travel
Azumano Travel
Blue Ribbon Business Travel International
Bon Voyage Travel
Brea Travel
Breton Village Travel Services Inc.
Bursch Travel Agency, Inc.
Casto Travel
CI Travel
Coastline Travel Advisors
Cole Travel/American Express
Conlin Travel / American Express
Colpitts World Travel
Colwick Travel Corporation
Condado Travel, Inc.
Corporate Travel Solutions    
CTA Travel
Designs by Strawberry, Inc.
Ensemble Travel Group
Expedia
Forest Lake Travel
Friendly Travel Inc.
Global Custom Tours LLC
Grueninger Tours and Ambassadair
Hayes Executive Travel
Hess Corporate Travel
Hickory Travel Systems, Inc.
Hurley Travel Experts
Jauntee - Croatia Expert Travel Planning
Let's Travel, A Division of Plaza Travel
Mann Travels
Mansour Travel Company
MAST Travel Network
Maupin Travel, Inc.
Menno Travel Service/American Express
Montrose Travel
MSP Travel Group
Mundi Travel American Express
Nexion
Orbitz Worldwide
Passageways Travel Service
Paul Klein Travel Service, Inc.
Plaza Tours/Viajes Plaza Inc.
Poe Travel
Polk Majestic
Protravel International   
San Diego Travel Group, Inc.
Signal Travel and Tours, Inc
Sterling Travel American Express
Strong Travel
The Alamo Travel Group LP
Total Travel Inc. dba HNL Travel Associates
Travelocity
Travel and Transport
Travel Leaders Group
Travel Leaders/Albertville (Travel Quest)
Travel Planners International
Travel Time Travel Agency, Inc.
TravelFocus     
Travelink, American Express
Travelleaders/Memphis, TN
Travel-On, Ltd.
TravelStore Inc.
Uniglobe Instant Travel, Inc.
UNIGLOBE Travel International
UNIGLOBE Travel Partners
Valerie Wilson Travel, Inc.
Vanguard Travel Unlimited
Wayland Travel
Wilcox Travel/American Express
Willett Travel
Williamsburg Travel Management
Wings Travel Group
World Travel Bureau, Inc.
World Travel Management         
WorldTravelService
Worldview Travel
Child Travel / Albany Travel       
Travel Leaders/WTA
Vacation.com

Core ASTA Members

Anthony Travel
Caldwell Travel, Inc.
Central Travel
Commonwealth Travel Advisors
Express Travel
I Want My Travel
Jade Travel
JourneyCorp Travel Management
LXR Travel, (an affiliate of Travel Experts)
Millstream Travel, LLC
Travel Experts, Susan Ferrell
Travel Management Partners, Inc.
Travel Partners
World Travel, Inc.
World Travel Management

Non-ASTA Members

ABC Travel Time
Austin Travel
ACCESS Destination Services
Advanced Travel Partners (UK) Ltd
Blue Marine Travel
Buon Viaggio Travel
Capitol Travel Service, Renee
Christopherson Andavo Travel
Corniche
Corporate Travel Partners (UK)
CorpTrav
Cresta World Travel (UK)
El Sol Travel, Inc.
Eton Travel Agency
Klatt Travel Inc.
MMC Travel
S.R. Travel Service/a BCD Travel Affiliate
Sanditz Travel Management
Shrivan Travel Service
Stone Mill Travel Company
Travel Leaders, Mike Van Dyck
Travel Management Corporation
Travelnetworkers (dba All Star Travel)
Travelwise International
Travelworks
US Travel
Amantz Travel
Sundancer Travel
Conference & Travel  

+++++   

Airline Product Unbundling Principles & Standards

PRINCIPLE #1
Airline product unbundling initiatives should assure full consumer awareness and choice.

Standard: Airlines should ensure that all airfares, along with unbundled products and their associated costs, as well as any new types of bundled offerings with included components, be made available through industry distribution providers in which the airline participates in a manner that enables transparent, easy-to-understand and comparative displays along with offerings from other airlines, so as not to prevent consumers from having complete and accurate information at an early stage of the shopping and booking process. 

PRINCIPLE #2
Airline unbundling initiatives should reinforce and not undercut the value of TMCs’ or corporations’ contracts with those airlines

Standard: Airlines should not alter mutually agreed contractual principles in terms of discounts, commissions or other negotiated benefits based on the TMC’s or corporation’s use of any particular distribution channel so long as that industry distribution provider is one in which an airline participates to sell its products and services.  

PRINCIPLE #3
Airline should make available their unbundling initiatives in a manner that does not discriminate against a TMC or corporation based on a TMC’s or corporation’s choice of reservations or fulfillment processes that best meet its needs.

Standard: Airlines should not withhold content or otherwise discriminate against TMCs or corporations with respect to access to airfares or discounts, including unbundled products and services or new types of bundles offerings, based upon the TMC’s or corporation’s choice to obtain such access through any industry  distribution provider in which the airline participates.

PRINCIPLE #4
Airline unbundling initiatives should be made available in a manner that increases or at least maintains the efficiencies of the prevailing travel procurement processes utilized by TMCs or corporations.

Standard: Airlines should commit at the CEO level to work cooperatively, diligently and in good faith with distribution system providers, travel management companies and corporate travel managers to develop solutions to address existing and potential new challenges related to efficient procurement (from shopping to booking to consumption to reporting) of airline ancillary items and product bundles - including cooperation in development of and adherence to industry-wide technical solutions.

PRINCIPLE #5
Airline unbundling initiatives should avoid economic models that create a classic “free-rider(1)” problem wherein an airline has no incentive to use merchandizing and distribution services efficiently or economically because corporations shoulder the cost.

Standard: Airlines that choose to introduce new merchandizing initiatives in order to increase revenue should be responsible for the costs of making those offerings available to corporations that buy those services, and to the TMCs upon whose services those corporations rely - and upon whom airlines rely to sell and service their products. 

(1) <<MORE ABOUT FREE RIDER>>

If airlines get GDS services for free, then economists will tell you that you have created a classic free-rider problem in which the user of the services has no incentive to do so efficiently or economically because someone else bears the freight.  The concept is simple.  Anyone who consumes a service that is paid for by someone else has the inherent incentive to over-indulge.  Airlines themselves recognize this in their business model, which is why they assess a hefty service fee every time consumers using all but the highest priced tickets make a change.

Examples of how an airline might “over-indulge” in GDS services if the tab is paid for by corporations could be helpful.  Two examples:

a. Today, airlines have a disincentive to make very frequent schedule changes because each time they do, they generate a cancel and a rebook in the GDS, both of which result in an added charge to the airline as both transactions drive added DP costs in the GDS – as well as added costs for the travel agency who must notify the client.  If GDS participation is free to the airline, why would airlines not engage in more schedule change churn to respond to “maximize” fleet utilization?

b. More globally, an airline that knows the corporation pays the GDS bill will have no disincentive to demand from the GDS added functionality the carrier may want – like more ability to merchandise and sell unbundled products to corporations, like pre-reserved or special seating for a fee, often in an ad hoc non-standardized way, because for the airline, “price is no object.”