Airlines remain committed to the corporate market but does the move to modern retailing and shifts in demand mean priorities are changing? Bev Fearis investigates
I’m losing the will to live,” said an exasperated Sue Jones, Global Meetings and Travel Manager for Ingka Group, in a refreshingly frank panel discussion on New Distribution Capability at ITM’s Autumn Conference.
“We can’t find a way through right now. I feel like I’m doing a jigsaw puzzle where half the pieces are missing, the picture on the box is missing – and I’m trying to do it in the dark.”
Based on the round of applause her comments evoked from the conference audience, it would appear she’s not alone.
It’s been just over a year since American Airlines made the announcement about its bold shift in distribution strategy and many travel buyers are still struggling. Since April, American has removed up to 40% of its fares from traditional GDS channels and half of its indirect volume is now coming through NDC.
“We’ve been really pleased with the results,” said Kyle Cumbie, American Airlines Director of Global Sales, also on the ITM panel. “We expect this figure will only increase through the end of this year and into 2024.”
But it’s making life very difficult for Jones and her team. “Where you’re removing content from the channels we use – and we don’t really have an alternative right now – then every day my inbox is blown up by ‘I can find this cheaper if I go direct’, ‘I can do this better myself’, ‘Why do we have an agency?’, ‘Why do we have a booking tool?’, ‘Why do we have you?’ It keeps me and my team awake at night,” she told Cumbie.
Jones understands why airlines want to switch to modern retailing “everyone wants to make money, right?” but believes it just doesn’t work in the corporate space.
“Treating the individual travellers as customers is fine on the leisure side but on the corporate side it’s us, the organisation, that’s the customer,” she argued.
“Corporate buyers, even in the biggest organisations, are having to come round to the reality that they might not have as much clout as pre-Covid”
The main issue, of course, is the risk that frustrated travellers will book outside of the programme. “I can’t, in good conscience, let my travellers go and simply book direct because there’s a cost differentiation,” explained Jones. “I need to keep them contained. I can’t even temporarily let them out because getting them back will be like trying to put toothpaste back into the tube.”
As airlines increasingly cosy up to their travelling employees, corporate travel buyers are naturally feeling left out, and the strong comeback in the leisure market isn’t helping.
“We need you, maybe you don’t need us quite as much as you used to, but the leisure market will plateau and maybe drop off,” said Jones.
According to American Airlines’ own data, 35% of its revenue now comes from leisure traffic, 35% is blended and 30% is business travel.
“Corporate travel is still very, very important to us but what’s interesting about that 30% is that the managed corporate volume is much less than it was and SMEs are growing significantly more, and to levels we’ve never seen before,” said Cumbie.
“That’s what’s driving our strategy. It’s making sure that long-term we’re building out ecosystems, whether direct or indirect, that provide the traveller with the best experience.”
Blended travel is emerging as a lucrative market. Back as far as April 2022, American Airlines Chief Commercial Officer, Vasu Raja, noted this trend. “Those blended trips in the system are coming in at yields that are at 75% to 85% of what were true business-only trips, but they are coming through lower cost-of-sale channels and off of negotiated discounts, so the net yields of them are very often the best things in the system,” he observed.
Airlines took a big hit during the pandemic, with industry-wide losses estimated to be close to $220 billion, so it’s not surprising they’re approaching things differently.
“We need to start to be more rigorous about how we think about profitability and how we sustain the business long term,” Cumbie told ITM members.
“Just because you have business travel volume it does not equal a preferred relationship, discounts or other benefits. This belongs to the past”
Corporate buyers, even those in the biggest organisations, are having to come round to the reality that they might not have as much clout as pre-Covid.
“Just because you have business travel volume it does not equal a preferred relationship, discounts or other benefits. This belongs to the past,” says Paul Tilstone, Managing Partner at Festive Road, who was in the conference audience.
Instead, he believes the relationship will depend on other factors, such as an organisation’s business mix, its ability to ‘direct’ travel and whether it can consume content from multiple sources.
“Airlines (and other suppliers) are being much more discerning about where they distribute their content, knowing where their business comes from and the importance they place on different types of travel. And not all corporate travel is equal.
“It’s no good just saying ‘We achieved 20% discount off market rates in 2019 so we should be hitting that again in 2024’. The world has changed,” he warns.
While shifts in leisure and business demand will always be subject to economic cycles, Tilstone believes there’s something more permanent about the air volumes of enterprise travel programmes being broadly down as organisations look to cut the time, cost and carbon impact of their travel.
“I’m sure business travel will be back in fashion with the airlines someday, but whether they see the existing corporate travel management ecosystem as the route to that demand or whether they will place different values on different channels remains to be seen,” he observes.
David Oppenheim, Director Global Sales for British Airways, sat on the same ITM panel alongside his Oneworld partner and told members that while BA’s leisure business has grown “tremendously” business traffic is “meaningfully below what it was”.
Changing dynamics means the gap between what a leisure and a business passenger pays is narrowing, he explained.
Speaking after the conference, he insisted the corporate market was still important to BA and acknowledged that for many ‘high-value’ travellers, it’s their relationship with an airline as a business traveller that drives their decisions for leisure travel, largely down to the power of loyalty programmes.
While corporates might be tightening their business travel budgets, they still give their airline partners access to a potentially lucrative travel ‘tribe’, pointed out Jan Jacobsen, Global Procurement Director Travel & Mobility at Accenture, in the lively ITM debate. In his case, that’s a tribe of 740,000 employees who will likely become loyal to an airline they use for their business trips and then book with them for their city breaks or family holidays.
Jacobsen and team share promotions and marketing on behalf of the airlines and believe this should be accounted for in RFPs and strategic negotiations.
Membership of airline loyalty schemes remain a key driver. “The tension between traveller loyalty to airlines and a corporate programme’s need for compliance has existed for many decades,” says ITM CEO Scott Davies.
“The recent evolution of airline retailing represents another chapter in this intense love triangle! Is someone’s heart going to get broken? Only time will tell.”
Guy Snelgar, Global Business Travel Director for Advantage Travel Partnership, believes the influence of points and rewards might be waning. “Loyalty schemes are king and always have been for the corporate traveller. However, many of our member TMCs report that they feel some airlines schemes are becoming more restrictive and the corporate travellers are noticing this.”
Representatives from the TMC community were noticeably missing from the infamous ITM NDC debate, but are crucial players. Their NDC readiness varies significantly and will have a big impact on the experience of their corporate clients. But Snelgar believes things are moving in the right direction.
“While this was a potential problem early on, when technology did not always deliver NDC fare options, as this new content begins to appear through the GDS it will become business as usual more and more.”
Andrew Clarke, Commercial Director for the BTA, reports that the feeling among TMCs towards the shift to NDC is mixed.
“Some acknowledge that airlines may look to shift away from a corporate market focus. Others disagree,” he says.
Some hopeful TMCs don’t expect other airlines to follow suit on NDC, believing that as leisure volume starts to reduce, they will refocus on the business travel market.
Virgin Atlantic showed its commitment to the corporate market earlier this year when it launched Virgin Atlantic for Business, based on 18 months of research.
Covering all bases, it’s aimed at business travellers, travel managers and TMCs, giving them a suite of marketing assets, tools and support. For TMCs, it also runs the Sky High Club, rewarding front line agents for every Virgin Atlantic flight booked with retail vouchers and access to exclusive events and experiences.
While American Airlines has scaled back its UK presence, Virgin has doubled the size of its corporate account team and bolstered its support teams for business travel, working closely with its Joint Venture partner, Delta Air Lines. The two celebrate their 10th anniversary next year.
“Together we are 100% clear. We remain focused on the business travel industry, we will continue to invest our time and resources on this valuable channel, and we will continue to work incredibly hard to build and maintain valuable partnerships right across the business travel ecosystem,” says Luke Goggin, its new Vice President Global Sales (see page 10).
Here’s an update on the latest air travel developments aimed at business travellers:
Air New Zealand
Air New Zealand won ‘Gold’ in this year’s Cabin Concept of the Year Award (run by our sister magazine, Onboard Hospitality) for its new B787 aircraft’s FACE programme (Future Aircraft Cabin Experience). Air New Zealand’s new Dreamliners, due to arrive in 2024, will feature a new Business Premier Luxe seat, designed for customers looking for more space and privacy, and Skynest – the world’s first sleep pods in the sky for Economy travellers. Skynest offers a lie-flat “rest experience” through a standalone monument comprising six bunks. In 2024 Air New Zealand will be adding two new ATR72-600 turboprop aircraft and two new Airbus A32 aircraft into its fleet, adding 768,000 seats per year. It has also redesigned its premium check-in area at Auckland airport, now featuring concierge services and self-serve kiosks.
Virgin Atlantic, which won Silver in the 2023 Cabin Concept awards,has completed the rollout of its new-look A330-neo cabins. These feature two upgraded front row Upper Class Suites, known as the Retreat Suites, and a social space at door two, known as The Loft. Each Retreat Suite allows up to four people to socialise in their own private suite. There is wireless charging in Upper Class, the social space (The Loft) and in the Premium cabin too. This autumn Virgin has resumed flights from London Heathrow to Dubai, operating four times a week, and in May 2024 it will launch a direct route to São Paulo, Brazil, plus Manchester-Las Vegas. In March, Virgin Atlantic joined SkyTeam as the first and only UK member airline. Through SkyTeam and with its JV partner, Delta, Virgin Atlantic now offers seamless connections across 1,000 destinations in over 170 countries.
Delta Air Lines
Delta One Suites – each with individual privacy door, aisle access and fully flat-bed seats – are coming to more transatlantic routes, including Heathrow to Los Angeles. Delta Premium Select, which offers more spacious seats in a dedicated cabin, is now on almost all transatlantic routes. Free Wi-Fi is now available for SkyMiles members on most domestic mainline flights and will be available globally by the end of 2024. Delta has also rolled out Delta Sync, which features smart TV features unlocked by SkyMiles Membership on select Airbus A321ceo aircraft. Its SkyMiles loyalty programme has also been updated to improve accessibility, flexibility and rewards. The fifth and final Delta Sky Club has opened in Newark Terminal A, with elevated views of the airfield. Delta lounges have also opened at JFK and at LaGuardia on Delta’s new Terminal C facility.
Etihad has added multiple new routes to its network this year, including Abu Dhabi to Osaka, Boston and Kolkata. Next May it will begin daily flights to Nairobi. In October it welcomed a new Boeing 787-10 Dreamliner to its fleet. Earlier this year the airline boosted its in-flight connectivity by offering new Wi-Fly ‘Chat’ and ‘Surf’ packages on its wide-body fleet. Every passenger will get complimentary in-flight ‘Chat’ messaging with access to popular messaging apps like WhatsApp, Messenger, WeChat and more. At Abu Dhabi International’s new Terminal A, passengers in premium cabins can use kerbside drop-off outside of the First and Business class exclusive check-in area, with porters on hand to assist with luggage.
United has enhanced its Bluetooth connectivity with new wireless headphone capabilities and debuted wireless charging. Two new United Clubs have opened at Denver International Airport, including its largest site yet. The lounge will feature grab-and-go food and drink, a bar showcasing premium local and craft beers, and more capacity. A new digital filter on united.com shows which aircraft can accommodate different sized wheelchairs and Braille has been added to cabin interiors. United has also reintroduced daily flights to Shanghai and added more South Pacific flights.
JetBlue launches seasonal daily flights from Dublin to JFK and Boston on March 13 2024 and flights from Edinburgh to JFK on May 22. Earlier this year it upgraded its loyalty scheme, Mosaic, to allow members to customise their rewards. Depending on the level, rewards include Heathrow Express upgrades, early boarding, fast-track security, upgrades to Mint class, or helicopter transfers from JFK or Newark to Manhattan.
In early 2023 Air France launched a new long-haul cabin concept on its B777-300 ER aircraft. New features include bigger seats with 124-degree recline in Premium, and ergonomically-designed, reinforced seatbacks in Economy. Customers in all cabins can access Air France Connect to send and receive messages and see information about flight connections for free. Paid-for options are also available. In October it began a daily service between Paris Charles de Gaulle and Abu Dhabi, operated by Airbus A350-900. It has also recently reopened its fully-refurbished lounge at San Francisco airport, complete with free Wi-Fi, showers and a buffet.
Iberia’s new fleet of A350 Next aircraft features a Business Class with lie-flat seats, aisle access and sliding doors to provide full privacy. The airline continues to reinforce its commitment to Latin America, with more flights to Peru and Venezuela. Furthermore, Iberia has joined forces with Qatar Airways and British Airways to offer increased connectivity for travellers. As part of the agreement, Iberia will add a new daily service from its Madrid hub to Hamad International Airport from December 2023.
KLM’s new Premium Comfort Class, unveiled in August 2023, has improved space, privacy and other added comforts, including a premium F&B offer, amenities, premium baggage allowance and airport privileges.
New KLM Crown Lounges have opened at Toronto and Houston airports, both offering complimentary Wi-Fi, work areas and hot and cold buffets.
Three new routes to India have been added from Heathrow and the airline has restarted flights to Beijing. BA also launched thrice-weekly services from Heathrow to Riga and Belgrade, as well as a 12-times weekly service to Cologne. BA’s Whispering Angel rosé bar has opened at Heathrow Terminal 5, and a refresh of its Club Lounge at Heathrow Terminal 5B brings a live food preparation area with new seasonal menu, fresh interior and a ‘quiet zone’. The airline has changed its Avios rewards programme so that customers will earn points based on the amount paid rather than distance travelled. Travellers can also now collect Avios points on ancillary purchases.
Singapore Airlines has rolled out free unlimited Wi-Fi for all Business class passengers, PPS club members and PPS Club supplementary card holders. KrisFlyer members can expect free three-hour Wi-Fi plans when travelling in Premium Economy and two-hour plans in Economy class. The service has since been extended to all cabin classes. Singapore Airlines has also ramped up its services to destinations across its network and rolled out a baggage collection service at Heathrow Terminal 2.
Emirates has unveiled the Emirates Inflight Meal Preordering Service across 92 routes globally, with 30 new routes including Riyadh, Jeddah, Delhi, Mumbai and Kuala Lumpur. The new service allows passengers in Business to pre-select their main course between 14 days and 24 hours in advance of departure. Emirates has also extended its Premium Economy offering to Sao Paulo, Tokyo Narita and India. A third daily flight has been added to Hong Kong.
Lufthansa has introduced a new Suite Plus private cabin in First class, a separate double cabin with ceiling-high walls and an entirely closable door. In Business class, travellers in the first rows can enjoy extended personal space, with a wardrobe and personal minibar. The First-Class Suite Plus will be introduced in 2024 on new Airbus A350s. Lufthansa has also expanded its selection of pre-orderable main courses in Business class on long-haul flights.
Qantas has unveiled the cabin concept of its specially-designed Airbus A350s that will fly direct from Sydney to New York and London from late 2025. First and Business class features a personal wardrobe, extra-wide fixed bed, cushioned leather ottoman and a large dining table. A new Wellbeing Zone sits between the Premium Economy and Economy with sculpted wall panels, integrated stretch handles, a guided on-screen exercise programme, a hydration station and refreshments.