While airlines’ faith in corporate clients is dwindling, their confidence in the sophistication of revenue management tools to obtain the best financial return per seat is growing. “Artificial intelligence is turbocharging airlines’ segmentation of their customer databases to create dozens of micro-segments and then offer deals to each of those micro-segments to improve their conversion rate and yield,” says Alessandro Cianciamino, vice-president of airline distribution for travel technology company Sabre.
Thanks to better yield intelligence, carriers are realising they can reduce discounts to corporate clients. Miller is seeing airlines tighten up across the board, but especially on routes where they dominate or have a monopoly, and in some cases they are eliminating discounts on these non-competitive routes entirely.
Buyers can also expect airlines to spend far less time negotiating with them. “What we’re seeing most is simplification,” says Amy Rayca, global air practice line lead for American Express Global Business Travel. “When there was more spend pre-pandemic, there would be more carve-outs, more fixed fares and more aggressive discounts. Now we are seeing more network, systemic terms, lesser discounts and fewer fixed fares.
“There is still value in negotiating. Airlines are still coming to the table but in fewer rounds. In joint-venture agreements especially, more frequently the first round is almost best and final, with very minor tweaks in the second round,” says Rayca.
“Airlines are still willing to come back to the table if a client will limit the number of airlines in the programme”
Carriers are clamping down on corporate promiscuity as well. “Clients are still trying to balance multiple airlines,” Rayca adds. “Whether that is sustainable with reduced spend is something we look at. Stricter targets might be difficult to achieve with too many carriers in the programme, when historically maybe clients could support three joint-ventures and multiple global airlines. Airlines are still willing to come back to the table if a client will limit the number of airlines in the programme or suppress airlines on certain routes.”
In terms of how deals are structured, “airlines are still very focused on market share or volume commitments” is the view of the bank travel manager. But, says Miller, “just negotiating deals isn’t the way of the future. It’s programme management through marketing and communications. Airlines are fixated on demonstrating programme marketing.”
Rayca agrees. One example cited by both her and Miller is carriers wanting to see how their fares will be displayed inside the client’s booking tool. Will the airline be promoted as a preferred carrier and listed above other carriers? Airlines are also setting targets for signing up the client’s travellers to their frequent-flyer programmes and even for downloading its mobile app, says Rayca.
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