Monthly Archives: June 2015

New United Reports Promise More Accurate Emissions Data

[UPDATE, Feb 3, 2017: We published new information related to this article here.]

The U.S. government appears poised to recognize that airplanes cause air pollution. Airlines already know this. They’ve done a lot to mitigate the impact. To help corporate clients with theirs, United Airlines this year created custom emissions reports and carbon offset options.

Delta and JetBlue provide some similar services, as do several non-U.S. airlines.

Some execs say they don’t hear many requests from corporate clients to work together on this issue. Those clients may think they have bigger issues.

Businesses do use other sources for travel emissions data. Many of the larger ones monitor and manage their travel footprints in accordance with the Greenhouse Gas Emissions Protocol. Travel management companies, eco-specialist firms and others help those efforts.

According to Egencia North America reporting program manager Karissa Weeks, “this type of information is almost a de facto part of corporate travel reporting these days, and is a requirement in some countries.”

air-emissionsBecause suppliers may use different formats to report emissions, collecting data directly from all of them can be challenging. That’s why many corporate travel managers get info from their TMCs.

There are lots of methodologies that a TMC or other third party can use to measure greenhouse gas emissions from air travel. Many base data on estimates from carbon calculators. It’s an evolving area.

Amadeus uses International Civil Aviation Organization data. That feeds the company’s distribution platforms, including the e-Travel Management self-booking tool. As with other systems, users can see point-of-sale carbon calculations to compare itineraries and transport modes.

ICAO estimates are “based on the average fleet that covers the city pair, the distance, load factor and class of service,” according to an Amadeus spokesperson. Amadeus also provides custom data aggregation services.

HRG bases client emissions reporting on “U.K. government-defined data,” according to a spokesperson. Egencia offers reporting based on Defra’s methodology.

But according to GBTA Sustainability Committee member Mark Papale, TMC data can be “superficial.” Also Autodesk’s travel operations and travel technology manager, he said reporting derived from GDS data is “a standard formula, based on miles flown.” It does not account for things like headwinds, which increase fuel burn.

TMCs don’t use actual fuel consumption data. Travel and Transport CIO Mike Kubasik said his company’s ecoTTek Green Reporting service is “probably as accurate as you can get without being an airline.” Travel and Transport uses client booking data and estimates from the World Resource Institute.

Kubasik wasn’t sure what would be involved in obtaining data directly from carriers, and hasn’t heard clients request a higher degree of accuracy. “It’s probably worth a simple discussion with our airline partners,” he said.

Bernard Harrop, head of sustainability for the Global Business Travel Association’s Project Icarus, said airline data will be more important — and consistent — as regulators and trade groups push for reporting standards.

He noted the Hotel Carbon Measurement Initiative, which offers a standard for the lodging sector. “It’s basic, but a good start,” said Harrop. “You can now compare hotels like for like. That’s what is missing from airlines. When you get that, you’ll see better reporting and more demand.”

Airing Options

Joanne McNellis Coelho is chair of GBTA’s Sustainability Committee and global travel manager for Wyndham Worldwide. “I don’t know if all the great things airlines are doing are trickling down to their corporate customers,” she said. “Within our travel program we ask our partners to share that information as a practice but we initiated those conversations.”

Wyndham is a launch customer of United’s Eco-Skies CarbonChoice. In partnership with Sustainable Travel International, clients can choose from a variety of offset programs.

United’s director of environmental strategy and sustainability Mihir Thakkar described the program this way:

Using the customer’s specific account code, the emissions report calculations are based on flight level data recognizing actual routes, aircraft type, fuel consumed, payload and customer-specific business travel and/or shipments. This provides each client a specific carbon footprint associated with their travel/shipments on United. Initial calculations are based on the previous year’s flight data with a “true-up” taking place at the end of the year as flight data is finalized. Therefore, each report is customized to that corporation’s travel/shipments on United. As opposed to other carbon calculators that are based on an airline’s fleet-wide average or outdated industry estimates, United’s calculation tool utilizes actual flight level data and applies a next-generation CO2 emissions calculation methodology informed by recent International Air Transport Association and International Civil Aviation Organization analyses as well as European Standards.

Delta reports to corporate clients greenhouse gas emissions data “based on actual Delta fuel and load data from the previous year,” according to a spokesperson. “We also report annual greenhouse gas emissions to roughly 10 customers via the CDP Supply Chain program.”

The airline also provides information to clients on carbon offset programs. “It is not an official program right now,” said the spokesperson, “but we’ve had conversations … because of interest from the customers.”

At JetBlue, an official said the corporate sales team can work with accounts “to purchase offsets for company travel.”

Air France and British Airways also are among those providing corporate emissions reporting. So is Virgin Atlantic, which like Delta does so on request through the Carbon Disclosure Project, according to a spokesperson. “There is a growing demand for corporate clients wanting to calculate their carbon emissions and we see it frequently with requests for proposals.”

SAS also provides such reporting. The Scandinavian carrier indicated that “less than 1 percent” of individual customers booking on its website make use of the offsetting opportunity. It didn’t report stats on corporate usage, but like Virgin noted a growing number of requests from corporate customers. SAS works with The CarbonNeutral Company to provide corporate emissions reporting and offsetting.

Lufthansa pointed to subsidiary AirPlus and its Green Company Account and reporting products. The German carrier also enables individual customers to offset flight emissions on its website. A spokesperson couldn’t say whether it provides emissions reporting to corporate clients not using AirPlus for payment.

Fluctuating Demand

As usual with this topic, interest level depends on who you ask. Amadeus said corporate demand for environmental information “fluctuated” in recent years.

Egencia’s Weeks said that carbon offsetting “is a hot topic” among the TMC’s customers, with interest from a cross-section of corporate accounts.

Not so at Travel and Transport. Kubasik said clients expressing interest are very much in the minority — often nonprofits, tech companies or engineering firms. “Some companies, due to their type of business and culture, are very interested,” he said. “Others don’t care at all. They care more about the cheapest and fastest way to get to where they are going.”

Research conducted by GBTA in spring 2014 showed more attention to sustainability. Among about 100 U.S. travel manager respondents, 40 percent said the topic is more important now than two years ago (with another 58 percent indicating it’s as important). Nineteen percent said their organizations incorporate sustainability into travel policies. That may not sound like much, but it’s nearly double from GBTA’s 2012 findings.

“From a committee standpoint we struggle with whether people really are diving into sustainability and incorporating it into their travel programs and making it a priority,” said McNellis Coelho. “I don’t know that everyone is screaming about it, but it’s happening. We have seen many companies have great success in building sustainability into their travel programs and our goal is to bring light to what is happening to the masses.”

Interest will grow if more companies, including airlines, become subject to regulations mandating emissions reporting.

The U.S. Environmental Protection Agency in June said it is “proposing to find” that greenhouse gas emissions from commercial airplane engines “are contributing to air pollution.” EPA then would seek input on what to do about it. Noting that ICAO expects to finalize global standards in February 2016, EPA may invoke the Clean Air Act to adopt “corresponding” standards. EPA reported that U.S. aircraft GHG emissions in 2013 represented 3 percent of total U.S. emissions and 0.5 percent of total worldwide emissions. It also noted that aircraft in the United States represent “the single largest GHG-emitting transportation source not yet subject to any GHG regulations.”

Airlines for America claims U.S. airlines handled 20 percent more passengers and cargo last year than in 2000, but generated 8 percent fewer carbon dioxide emissions. It credits improved fuel efficiency thanks to new planes, new jet fuels and better navigation.

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Expensify’s Fighting Words Are Not Just For Concur

Expensify CEO David Barrett likes dissing corporate booking tools, and seems to consider travel management his competition. He proudly opines that expense will “eat” corporate travel.

Expensify for the most part has ignored traditional enterprise sales as it targets the end user with its expense app. Popular with startups and “unicorns,” Expensify recently signed Yahoo and its 12,000 users, showing a desire to move up market. That means RFPs and long sales cycles, and starts to look like Concur.

Barrett is vocal about how Expensify is different from Concur. He jumped on the latter’s acquisition by SAP with an aggressive promotion. But the two companies’ attitudes toward travel management seem to be on about the same track.

When Concur three years ago rolled out its open booking plan, it described the program as limited to lodging and ground. By the time SAP bought Concur last fall, its new CEO took the vision through to the obsolescence of travel policy.

Barrett isn’t shy. “I view corporate travel as going through major disruption,” he said during an interview last month. “We’re at peak corporate travel. Expense reporting is gradually going to eat corporate travel. It will take a long time, corporate travel will always be around, but expense reporting is eating the greenfield opportunity that corporate travel wants to get. All the innovation in the corporate travel space is happening in the expense report.”

Expensify CEO David Barrett

Expensify CEO David Barrett

Barrett thinks corporate booking tools can’t compare with what’s available online in the consumer world. He is a big fan of NexTravel and budget-based incentive models like Rocketrip’s. He says corporate travel’s traditional strengths are weakening. (These include the best prices, the best reporting, “controls to influence employees” and centralized billing, according to Barrett.)

“It’s nearly impossible to get a better price than Priceline,” he claimed. “You can do it, and the larger and more focused and disciplined you are, you can beat Priceline some of the time, but most of the market just can’t beat Priceline. So one of the pillars of corporate travel is quickly eroding.”

Acknowledging that “most of the market” really is leisure and unmanaged business travel, The Company Dime checked the price-beating claim with sources in managed travel.

When Topaz International compared 10 trips in Priceline against published airfares available in global distribution systems, it found nine were higher on Priceline. For the tenth, Priceline was unable to offer a price.

Financial Industry Regulatory Authority manager of corporate travel services Carol McDowell has been experimenting with the open market for a few years. She indicated this month during an Association of Corporate Travel Executives online forum that “I rarely see people get better prices outside of the travel management company. During my open booking pilot, we only found one time where the person received a lower fare on the exact same flight. It was definitely an anomaly.”

Yet, Emma De Lange, global travel manager for the Netherlands-based International Baccalaureate Organization, reported “so many cases where travelers find cheaper deals (like for like) than the TMC.”

McDowell thought perhaps different markets drove different experiences. Most of her organization’s travel is within the United States.

Nathalie Seguin, travel management analyst with Canada’s International Development Research Centre, offered further commentary during the same ACTE chat.

A lot of the web fares that have a significantly lower cost (this is often the case with flights within Asia) have much stricter [rules]. So yes you save money but when you need to make a change en route, it’s very complicated and in the end can end up costing more. When an employee brings those up with our TMC and they must be booked outside the GDS, our TMC must get my approval. This has allowed me to check both fares with all rules and advise the traveler. In every case in the past 18 months that I have been here, they had not checked the rules and just “assumed” it was apples-to-apples [and our] TMC was charging us more. Once they were [informed of] the differences, they decided to opt for the TMC one though the GDS.

Barrett and Concur contend that any leakage makes corporate travel reporting incomplete, and it’s hard to argue. This is why some programs require travelers to send to agents off-channel bookings for insertion into the GDS as a passive segment. It’s why the market is considering solutions from Concur, Sabre, TMCs and others for capturing leakage, but how bad is it really?

“What fraction is actually captured by the corporate booking system?” Barrett asked. “In the best-case scenario, you probably get 40 percent to 50 percent of your employees to actually use it.”

That’s simply not a true statement for corporations that actively manage travel.

It can be accurate in managed programs if we’re talking strictly hotel bookings. In a survey of more than 100 corporate travel buyers last summer, we found an average of 65 percent of hotel reservations booked in the program. Most of the remainder were for conference rates that indeed could use some aggregating. But for air? If six out of ten airline bookings are outside the program, you are not managing travel. Many are over 95 percent in-program.

Barrett could provide no source for his figures. Concur repeatedly cites an IDC Research report on its own Fusion conference indicating that “50 percent of hotel bookings and 28 percent of air bookings take place outside of a company’s travel management system.”

When The Company Dime last fall asked for the source of the data, one of the IDC paper’s authors said the figures came from Concur.

“It’s something we’ve heard more and more about over time,” said Barrett, who started Expensify seven years ago after a variety of positions as a software engineer. Yes, we’ve all heard it. From Concur. The linked page cites a Phocuswright report which found that “40 percent of managed travelers don’t always comply with their company’s booking channel policy.” Always? Well, duh. It should be higher. Does it mean 40 percent of bookings are leaking? Of course not. It may just mean that 40 percent of those surveyed at some point had to buy a conference hotel rate directly or an airfare at the airport.

“Regardless of what the number is — and I think that’s probably a fair estimate — no one can doubt that it not being 100 percent is the No. 1 problem travel managers face,” Barrett concluded. “You want 100 percent and the only way to get that is by integrating travel and expense. Once you do that, the value of the corporate travel systems goes down.”

How big a problem leakage is and whether there’s only one way to tackle it are debatable. Certainly, it’s a common challenge. But it doesn’t matter to any given travel manager what the industry figures are. All that matters is what his or her organization’s figures are. If half of their hotel bookings and a quarter of their air bookings are going off-channel, they’ve got leaks.

Machismofy It

Before writing off Barrett’s machismo as the headline-seeking words of a youngish entrepreneur (which of course they are), it’s important to take note of where Barrett is putting his money in support of that mouth.

Expensify is doing some truly travel stuff in its app. The app’s basic innovation, for which the company has a patent, is photographing and reading receipts. “We first got into travel by accident in the sense that we have our smart scan tech which has always identified travel itineraries as a special receipt,” he said. “So now we’ll give you flight reminders, live flight status updates, we’ll even pick up an Uber.”

Expensify also partners with corporate travel companies, though Barrett doesn’t seem to like it much. The company takes their data and combines it with receipt data as well as off-channel bookings whose confirmations are emailed in to Expensify, a la TripIt.

“You get more visibility through the expense reporting system than you could ever get in the corporate travel system,” he said. “So the corporate travel reporting advantage is going away. Our reporting is more comprehensive.”

Pressed for details about what’s valuable in travel data versus expense data, he said, “The feeds Egencia provides us are highly constrained. They don’t give us the data to do a very good travel integration because they view us as competitive from a product perspective. They don’t give us flight numbers. We can reconstruct this information but we have to fight against the providers a bit. They’re holding on to that info in the hopes of defending their turf.”

Expensify also integrates with nuTravel. As for corporate booking tools, Barrett seems to ignore the fact that they’re built to support complex corporate hierarchies, protocols and policies: “To be a corporate travel system is to say you’ll provide a better booking experience than the rest of the Internet combined — that’s a bold proposition. There are hundreds of travel startups out there and the sum of all that innovation is just going to win.”

Barrett in early May said Expensify had 13,000 clients. A month later, speaking during a Global Business Travel Association webcast, he said it was about 14,000. The “bread and butter” is companies like Evernote, Square and Uber. Although Expensify targets the end user and wins on what it called “employee enthusiasm,” it will be attending the GBTA convention this summer.

Additional info: Yahoo declined to comment for this article. Here’s some history on its travel program. Expensify charges about $9 per active user per month, but certain arrangements can bring it down to $5.

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With Its Replacement Under Consideration, Old Defense Travel System Gets New Lodging Capability

[UPDATE, April 8, 2016: We published new information related to this article here.]

The U.S. Department of Defense on June 15 started what may become its first centralized lodging program. The initiative includes new booking policies and modifications to the much-maligned Defense Travel System. Even as DoD looks to upgrade or replace the aging DTS, it’s just now adding the capability to book government-owned lodging options.

Northrop Grumman built DTS in the 1990s. The defense contractor helped the Defense Travel Management Office with the latest software update for the new program. DoD for years has acknowledged how outdated DTS is. Ten vendors responded to a July 2014 request for information related to the Defense Travel System Modernization Initiative. DoD said it’s prohibited from naming them. It’s not required to use ETS2, the master travel program created by the U.S. General Services Administration for non-military federal travel.

army-barracks“DTS, in its current state, does not provide the Department with an optimal travel solution for incorporating future changes,” according to DoD’s Fall/Winter 2014 newsletter. “The National Defense Authorization Act for FY2012 requires the Department to process all travel claims electronically by the end of 2016.”

According to the RFI, DTS currently “enables 2.7 million active DoD travelers to create 3.4 million authorizations per year for temporary duty travel.” DoD wants a “single, web-based access point” for all trip planning and management functions. That would include a “single, integrated traveler profile” and full support for federal travel regulations.

For now, DoD is pushing forward with a revamped lodging component. The rationale is familiar: maintain duty of care, reduce costs, provide booking convenience and hotel amenities to travelers, and improve program management and data collection.

According to an April 2014 DoD presentation, the department in FY12 spent $1.3 billion on lodging. It operates a variety of lodging programs, each serving “a subset of DoD travelers.” Lodging currently is the only one of DoD’s “key commercial travel programs” that is not centrally managed.

The presentation cited a 2013 analysis indicating that “strategic sourcing for commercial lodging” could save as much as $28 million.

The Pilot

Authorized to run to 2019, the Integrated Lodging Program Pilot covers stays of at least two nights at seven locations. When DoD dispatches a service member or civilian to one, they must book through DTS. If available, they also must book accommodations owned by the government, often located onsite at military installations.

If none are available, the traveler must book at an available preferred commercial property in the vicinity. (In those cases, the policy also covers one-night stays.) Either way, if travelers don’t comply, DoD will limit reimbursement to what they would have spent if they did.

Bookings that don’t use available government or preferred commercial lodging prompt users to justify their choice by selecting a reason code. The booking gets a “pre-audit flag” and the system notifies the traveler’s Authorizing Official.

An Office of the Under Secretary of Defense Memorandum in 2008 mandated that DoD use DTS as the sole online travel system. But “there was no specific regulatory requirement to use DTS to book lodging,” according to a DoD official.

DoD intends to “eventually” mandate DTS for lodging for all travelers and all locations. That, said the official, is in keeping with the Federal Travel Regulation.

DTS already had a “tabular” display within the lodging reservations module. Now, four tabs represent government-owned lodging; preferred commercial lodging; other commercial lodging that meets Federal Emergency Management Agency and DoD safety requirements; and other.

DoD designed the system to automatically bring travelers to the most appropriate tab. For example, if travel is to a military installation where government lodging is available, the DoD Lodging tab will be the only one active. In those cases, users must decline “available, directed lodging” to activate the other tabs. The system adds a “certificate of non-availability number” when government lodging isn’t available.

The Properties

Along with Northrop, DoD worked with the Defense Logistics Agency and DTS Program Management Office to update the interface. It also worked with each military service branch to incorporate its lodging system. “Making the technology modifications for this program was a larger, more involved effort than just displaying certain lodging properties in DTS,” according to the DoD official.

DoD is adding pilot sites and its own lodging facilities in a phased approach. For example, Air Force Lodging currently is available in the system. Navy Gateway Inns and Suites, Army Lodging, Navy Lodging and Inns of the Marine Corps will be added later. So will capabilities for booking “privatized lodging.”

To book government lodging before now, travelers either went to DoDLodging.net or called a res center or on-base lodging facility.

The new program also introduces to DoD “preferred” commercial properties. “Travelers were able to book commercial lodging in DTS; however, most travelers booked outside the system. This is something the Department is aiming to change with this program,” according to the official. “We often find that when people travel, they spend some time trying to figure out where to stay. They may search online, ask the hosting point of contact or just make a blind guess. We are taking the guesswork out of it by providing lodging options from which travelers can confidently choose.”

Many of DoD’s preferred properties are part of the U.S. General Services Administration’s FedRooms program, operated by CWTSato. But the official said FedRooms participation was not a prerequisite.

CWTSato and other travel agencies serving DoD were not directly involved in launching the program, though they “support it on a daily basis.”

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Sabre Claims Lead In ‘Early Days’ For Itinerary Apps

TripCase, TripIt and WorldMate have been the granddaddies of itinerary apps since the App Store’s infancy. Using WorldMate’s API for email parsing and its GDS for agency synchronization, Sabre claims the lead with 30 million TripCase itineraries managed last year.

“It’s early days,” said Sabre senior vice president for traveler solutions John Samuel. “This is a new space and we’re all experimenting and learning more about what the traveler really wants.”

Image: Reuters/Benoit

Image: Reuters/Benoit

Among 110,00 Sabre-connected agencies is American Express Global Business Travel. “TripCase is our supported tool right now,” said Amex GBT’s vice president of digital traveler Evan Konwiser in March. “We have lots of customers on that. We’re in the early days of figuring out our mobile strategy.”

The TMC might build its own apps, like some competitors have.

During an online chat hosted this month by the Association of Corporate Travel Executives, Konwiser wrote, “I think mobile is still the biggest [trend] having an impact on travel programs. That ship may have sailed in the consumer world, but for corporate programs, we’re just scratching the surface. Think about the value created from having an always-on connection to your travelers.”

TripCase hasn’t done much with white labeling, but Samuel said “we are working on opening up our platform and allowing third parties [for a fee] to build things on top of it. That’s not launched yet but we’re doing a hack day in London at the end of June and have told participants we’ll expose some of the TripCase APIs and let people build some cool stuff.”

TripCase already integrates with services including CheckMate, Instagram and Uber. It has commercial agreements with those players and also charges for TripCase Corporate. Launched in mid-2014, the corporate version integrates with GetThere, facilitates policy messaging and aggregates non-GDS booking data.

Globalizing TripCase is “the single largest project we have taken on,” said Samuel. The iOS version currently is available in English and German.

WorldMate also has been working on going international, starting in Japan. Its Trip To Go and B-Schedule apps went to market in February in partnership with the JTB-CWT Business Travel Solutions joint venture. Carlson Wagonlit Travel is WorldMate’s parent company. Trip To Go is for unmanaged business travelers and offers hotel, car rental, insurance booking and airline mobile check-in. B-Schedule also synchronizes itineraries for bookings made by managed clients through JTB-CWT.

TripCase and Concur’s TripIt are offering “glanceable” info on the Apple Watch. TripCase is also on the Pebble smartwatch and in Samsung’s Gear line of wearables. TripIt is available for Google Glass and Android Wear, though SAP/Concur senior vice president for global product management and strategy Sanjay Almeida said “adoption is pretty minimal at this point.”

“We don’t have anything on Apple Watch today,” said WorldMate vice president Ian Berman. “We’re still in a little bit of a wait-and-see mode, waiting for critical mass. It seems like it’s selling well so I think it will happen soon. It’s really a matter of when, not if.”

For its iOS app, WorldMate soon will enable ticket purchases for local activities, concerts and sporting events.

TripIt in March enhanced its traveler profile so users can store contacts and copies of documents like passports, driver’s licenses or NEXUS Pass ID. TripIt claims more than 11 million users; officials said the service sends more than 1.5 million flight alerts every month and issues 70,000 refund alerts every year. The company declined to provide a figure for the total number of itineraries managed.

WorldMate’s website claims 11 million users and 13 million trips managed.

Sabre’s 30 million trips managed last year includes those coming from more than 40 airlines that use TripCase as their primary itinerary management tool for direct bookings.

While these apps are emphasizing distinct areas of new development, and there are just a few differentiators between them beyond the basics of itinerary management, the traveler’s choice often comes down to personal preference.

“I think the choice between the two is like the Coke and Pepsi thing,” one frequent flyer posted on FlyerTalk.com. “Depending on what type of itineraries a person has and how they are formatted, one product may be better than the other.”

These three apps are not the only ones in the market. Kayak offers an itinerary aggregator. A newer firm called Trip38 looks slick. Even expense management app Expensify parses emails and consolidates itineraries. Google is ramping up its game, too, with new bundling that brings together travel-related emails as part of its Inbox service.

“There are other vendors doing a few things,” said Concur’s Almeida. “They have capabilities but where we are is it’s a package that contains the features a user really wants to use. Google has the capacity to do a lot of things, but from the data perspective and putting all that together, it’s still not there.”

Here’s a look at selected features.

Itinerary Apps

 TripCaseTripItWorldMate
ProviderSabreConcurCWT
Compatibility iOS 7.0 or newer,
Android 4.0 and up
iOS 7.0 or newer,
Android 4.0 and up
iOS 7.0 or newer,
Android varies
Apple Watch
iPad version
Itinerary syncCalendar, GDSCalendar, TripLink*Calendar
Email parsing
Flight alerts✔*
Hotel booking
Air refunds✔*
Employer messaging✔*
LanguagesEnglish, GermanEnglishEnglish
Notes:
Updated June 2015. Checked features may be available only on the app’s iOS version.
Sources: iTunes App Store, Google Play store, product websites
*Premium service

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CWTSatoTravel Wins 20 ETS2 Accounts, Preps Government App

Twenty of the past 22 U.S. federal agencies to select a vendor in the E-Gov Travel Service end-to-end program chose CWTSatoTravel, a spokesperson said.

CWTSatoTravel has implemented 16 agencies on its E2 Solutions end-to-end desktop product. Four more are due this year. The company had already serviced 11 clients under the first E-Gov Travel Service program (see list below). In the current program, also called ETS2, CWTSato’s technology subcontractors are Sabre GetThere, Northrop Grumman and Oracle RightNow.

But CWT’s own To Go itinerary app is the basis for its government app, which is near deployment. CWTSato expects an Authority to Operate review by GSA to wrap up soon. That includes a third-party assessment of adherence to U.S. National Institute of Standards and Technology security controls.

Also part of E2 Solutions is an expense management system that some government contractors have used. It handles government per diem rules and auditing capabilities. It offers an HTML5-powered mobile website for expense approvals.

A court in September 2013 authorized CWTSatoTravel to bid on federal agency business under ETS2. CWT had challenged the procurement agency, the General Services Administration, partly for picking only Concur in its master contract award three years ago.

As of a year ago, Concur had won 62 federal agencies and commissions, according to The Beat. At the time, GSA said Concur resolved some implementation challenges with one particularly large agency, the Department of the Interior.

Concur in December released a mobile app for government clients on Android and BlackBerry, followed a month later by Apple’s iOS. It brings authorizations and vouchers to the forefront and highlights hotel rooms from GSA’s FedRooms program. Users log in with a password created for their profiles in the Concur Government Edition desktop system.

A Concur spokesperson indicated the company is “pleased” with its own task order awards and implementations that “went faster than expected.”

GSA released the original ETS2 solicitation almost five years ago. It’s designed to address travel planning, authorization, reservations, ticketing, fulfillment and expense reimbursement. ETS2 sought to take advantage of cloud computing, mobile platforms and content outside global distribution systems.

It also aims to support tracking and reporting of carbon footprints. The CWTSato spokesperson said it is working with GSA and the agencies on “methodology and reporting so there is a common template” for emissions tracking.

The Concur Government Edition can track emissions for flights and cars or sort flight shopping displays by fuel efficiency, according to its website.

New And Renewed CWTSato U.S. Federal Agency Accounts

Department of Education*
Department of Transportation
Corporation for National and Community Service*
Government Accountability Office
Consumer Product Safety Commission
Securities and Exchange Commission
Commodity Futures Trading Commission
Institute of Museum and Library Service
National Endowment for the Arts
National Labor Relations Board*
National Transportation Safety Board*
Social Security Administration*
U.S. Holocaust Museum*
Woodrow Wilson International Center for Scholars*
Federal Trade Commission
Millennium Challenge Corporation
Overseas Private Investment Corporation*
Broadcasting Board of Governors*
Railroad Retirement Board*
U.S. Trade Development Agency*

* Incumbent user of CWTSato in ETS1

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When Are Refundable Fares Permitted By Policy?

Most organizations favor nonrefundable airline tickets because they’re almost always cheaper than unrestricted options. Industry data suggest corporate travelers use the lower fare classes for around 85 percent of trips.

Although corporate managers encourage that booking behavior, airlines charge fees and impose rules for applying the resulting unused credit. Optimal use of nonrefundable airfares requires some diligence. Still, the more expensive refundable fares are almost never acceptable by policy. Here are some exceptions.

refundablesWhen the fully refundable fare isn’t too much more than a nonrefundableFees for changing nonrefundable tickets can be higher than the fare itself, sometimes making a refundable fare a cheaper option in the end. Many companies track ticket exchange rates. Based on some research and buyer anecdotes, such rates generally fall between 10 percent and 20 percent. Some travelers tend to change their plans multiple times before a given trip.

Knowing that kind of behavior helps managers write policies and establish thresholds. If the refundable fare is less than $100 more expensive, maybe it’s okay to book it. Maybe the threshold is much higher.

Logistics company Crowley Maritime Corp. changes most tickets purchased because of the nature of its business. “Our agents review the fares and if the refundable fare is within the same range as the nonrefundable change fee and the nonrefundable fare, and the travel is outside of the void window, they can go ahead and issue the refundable ticket,” said corporate travel and meetings director Jeannie Eisenhart. “Our agents have the ability to make the call based on the specifics of the travel, as we run into out-of-the-norm situations quite frequently.”

Crowley books most tickets within three days of travel. If the travel is to occur the next day, “we will issue the nonrefundable ticket as it makes more sense to void the ticket than to pay the higher refundable fare.”

A Global Business Travel Association webinar in November presented some scenarios based on published fare data for nonstop flights operated in October 2014. For travel between Los Angeles International and New York JFK, a traveler could have bought a 14-day advance purchase nonrefundable economy fare, made two changes (at $200 a pop) and still paid 8 percent less overall than the least expensive fully refundable economy fare.

Similarly, between JFK and London Heathrow, a 14-day advance purchase nonrefundable business fare still would have been about $2,500 cheaper than the refundable business fare — even after two changes each incurring a $400 fee.

“Where you have done a terrific job negotiating unrestricted economy fares, it might be that you can only make one change” on a nonrefundable before it’s more expensive, said Chevron global category manager for commercial air and car Alicia King. “And if you made maybe three changes, you could be paying more.”

King said travel managers should analyze travel patterns in top markets, fully understand fare rules and assess the impact of extra travel agency transaction fees. Attempting to negotiate waivers or discounts on changes (including name changes) is another avenue.

Software maker SAS uses nonrefundable tickets “as a general rule,” said travel operations director Richard Clowes. “We find that even if we have to change the tickets we still come out ahead.”

SAS operates as an ARC-accredited Corporate Travel Department. It uses an online booking tool and some of its own automation to keep tabs on unused tickets, which in 2014 amounted to 15 percent of the company’s total. Because SAS reused up to 90 percent of those, “overall roughly 3 percent of our tickets expired completely,” Clowes said. “Dollar-wise, we lose about 1 percent to 2 percent of our total ticket spend in expired tickets, which is peanuts compared to the amount of money we save by accepting nonrefundable tickets.”

When nonrefundable fares are not available. This may be the bigger issue. With load factors at or near record levels, planes are pretty full. Airlines tinker with fares and inventories all the time. They look to close out lower-fare buckets and push travelers into higher-fare ones when they can.

“From a travel management perspective, price is critical. But the other criticality is availability: being able to travel and make your travel dates,” said Peter Pearson, The Coca-Cola Company’s global travel programs manager, also speaking during the GBTA webinar. “If I am going to wait until the last day I might get that really cheap nonrefundable economy fare. However, I might be pushed up into that premium fully flexible economy fare.”

When travel is time-sensitive or questionable. Organizations generally don’t gamble that a cheap unrestricted fare will be available close to departure. Changes in business priority mean they don’t always have a choice. Travel booked well in advance, meanwhile, isn’t always suited for nonrefundable purchases if travelers’ plans may change. It comes down to judgment calls incorporating some guesswork on that likelihood. With senior executives, for example, it’s a better bet that they’ll revise schedules anyway.

When travel is international. Long-haul travel outside the country is expensive and managers may not risk such high-priced tickets going unused. Depending on industry sector, marine and offshore fares may offer some savings without losing refundability. Crowley Maritime uses that option whenever possible.

Another option to consider when hammering out deals with airlines is use of bookdowns, sometimes called down-bucketing. With a similar premise, carriers have their own twists on the practice. United Airlines managing director of sales operations and resources Karen Catlin last month described it this way: “It gives the customer the fare rule flexibility of a higher booking class but requiring them to book in a lower booking class. It is almost exclusively for international tickets. It’s fairly common, but not every customer has it.”

When there’s an alternative program. Airlines have set up other programs to make refundable fares more attractive to some corporate customers. Bulk prepaid programs, for example, provide flexibility.

“The top tier travelers — the ones that change all the time, that I have to approve all the time — I put into American Airlines’ AirPass and that was a godsend,” said Stonegate Mortgage travel manager Monica Whitehead. She noted that enrolled travelers are satisfied because they get elite status, club access and other perks. And she’s satisfied by no longer worrying about change fees for that group of travelers.

Additional information:

According to Travel and Transport, 87 percent of domestic tickets booked by clients in this year’s first quarter were nonrefundable. For all last year it was 84 percent, up from 83 percent in 2013. Travel Leaders Corporate has tracked similar numbers. Nonrefundable usage among its clients during the past four years accounted for 87 percent to 89 percent of all tickets.

Meanwhile, auditing firm Topaz reported that the average domestic segment price in 2014 was $213 for nonrefundable fares versus $263 for negotiated fares. That $50 gap was the smallest in at least three years. Where nonrefundable fares also are discounted through a corporate deal, Topaz puts those in the negotiated category.

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Big Air Automating Waivers

Soft-dollar benefits in airline relationships traditionally don’t get the same kind of play as negotiated discounts, but they’re worth real money too. A few years ago, Delta Air Lines created a banking system that assigned value to waivers and favors, and now American Airlines is automating the concept. Delta and United Airlines also expect to soon make waiver requests self-service.

In the past, clients or their agents always had to place phone calls to airlines for these policy exceptions. That’s still the case in many situations.

AA in an early June memo to clients claimed it’s now the only airline to offer waivers online, anytime. This can be quicker and less costly since clients pay extra for agents to make phone calls.

Waivers allow a corporate account or its travel management company to, for example, get the seven-day advance-purchase fare six days out. An airline may clear an upgrade in an otherwise non-upgradable situation, allow name changes, dispense with a change fee or offer preferred seating to a traveler who doesn’t have sufficient loyalty program status on that carrier. Many of those benefits fall into the soft-dollar bucket.

Sources said waivers can add up to millions of dollars in savings for big accounts.

With the banking systems, this is savings that travel buyers can report to CFOs.

AA also is offering “real‑time reporting” as part of the Flex Funds program, which is embedded in its Sales Link online portal for agencies and corporate clients.

Delta since 2011 has been ascribing value to waivers, covered by what the airline terms “beyond contract value.” They now are based on points as part of the carrier’s Edge program for corporate and agency accounts. An account’s specific Delta relationship determines its points, which are debited as they are used up, according to vice president of sales operations Kristen Shovlin.

At the moment, clients can request special assistance waivers by calling Delta’s 24/7 sales support group. There are, however, certain waivers that agencies can do themselves.

“It’s kind of a two-tiered approach — some are general, blanket waivers, open for use within some parameters, so they can just apply it,” Shovlin explained. Helping customers with flight disruptions during irregular operations is one such example. Another is making changes within 24 hours of booking.

Delta expects to provide further waiver automation via online tools later this year.

Similar to Delta, United offers its “best customers” a 24/7 support service, “including a wide variety of waivers,” through the dedicated United Executive Accounts Desk, according to a spokesperson. Based on feedback from corporate and agency customers, United now is “building a new business portal that will include self-service waiver and favor redemption and robust reporting capabilities.”

Waivers can be important to travel programs, perhaps more now than ever. “I feel that this is one of the more valuable aspects of airline contracts, especially in domestic programs where the value of negotiated fare savings can be negligible,” said Open Society Foundations global travel manager Chris Gremski, who noted his TMC handles waivers for his company.

Advito vice president Bob Brindley cited change fees and high load factors as reasons why waivers are still so valuable. “Access to the right-priced inventory is critically important,” he said. But Brindley also noted how airlines in the past few years “are being more selective in where they are using these resources. They are tied to clients performing very well or target clients that they want.”

For example, waivers are a key tool for airlines to use in a competitor’s hub. “All three airlines engage in that,” said one airline source who requested anonymity. “Waivers have gone from being allowed on an unlimited basis for preferred accounts to being limited, which assigns a value.”

“Where you are getting waivers and favors that are reduced is for name changes and things like that, but only somewhat modestly,” said Hickory Global Partners president Chris Dane. “What’s new is automation and a budget. ‘You have $10,000 for waivers and this how you can use them.’ ”

Airlines also provide waivers directly to some agencies, which is helpful for those organizations that don’t get their own.

In a Travel Leaders Group late 2014 survey of 429 U.S. owners, managers and frontline agents specializing in business travel, waivers and favors ranked second among the areas deemed most valuable to clients this year. That was behind 24-hour service and ahead of tracking nonrefundable tickets.

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Max Pax Policies Common, Not Universal

Concerns about too many executives or employees on a flight date back to well before 9/11, the event that began the travel risk management era. While it’s perhaps the oldest travel risk management policy, the maximum passenger rule isn’t applied as widely as one might expect.

A US Airways flight six years ago crash landed on the Hudson River carrying two dozen people working on the Bank of America/Merrill Lynch merger. The Miracle on the Hudson prompted the Association of Corporate Travel Executives to poll 101 firms about their related policies. Sixteen percent had no policy restricting the number of executives or employees who could travel together on a corporate or commercial aircraft.

More recently, Freescale Semiconductor had 20 employees on Malaysia flight MH70 that disappeared last year en route to Beijing.

Image: Thinkstock

Image: Thinkstock

“That was a wake up call for firms to implement policies and standard procedures,” said FCm Travel Solutions senior director of global travel risk management Charles Brossman. “The loss of course includes the most valuable of resources, people, but also impacts a company’s reputation and business continuity.”

In a straw poll of 33 travel buyers conducted during the past few months, The Company Dime found that one-third had no such policies.

“It’s surprising how many don’t do it,” said International SOS executive vice president Tim Daniel.

Managers whose companies do not have such policies sometimes cite comfort with their firms’ succession planning. Others say they watch for it but have no concrete policies, while some have pushed for such rules without success.

“We went to our general counsel and said, ‘We have our president and our CFO on the same plane — should we be concerned?’ ” said a travel manager who requested anonymity. “He said, ‘It’s not against the law, even for a publicly traded company.’ On another occasion, we had 110 people on a chartered flight. There was a lot of talk about risk management.”

Among those policies in place, most relate to senior executives. The ACTE poll found that twice as many firms applied such rules to the executive level than among employees in general.

According to recent conversations with travel buyers, limits can range from no more than two execs flying together to as many as five. Some specify that their CEOs and CFOs should not fly together. For all employees, policies tend to range from no more than four flying together to as many as 30. Some companies limit the number of co-workers sharing a boss who can fly together, or the number in the same unit.

Notification systems can alert companies to plans that exceed the threshold. This requires consolidated and dynamic booking data feeds.

“It is a very difficult thing to manage,” said iJet International CEO Bruce McIndoe. “When travel managers receive the notification, they look for how many VIPs or top executives there are, and they will make a judgment call once they see who is on the plane as to whether they intervene or not, which seldom happens. These notifications are coming after booking and/or ticketing, which makes the process harder to reverse. It would make more sense for companies to make this a selectable feature during the booking phase to avoid these types of situations from occurring.”

Some pre-trip procedures can message agents or travelers tying to make bookings beyond the caps specified by such policies.

Exceptions to max pax caps typically require approval from a C-level exec, business unit head or travel or risk management leader.

Jeff Winton, director of sales for Concur Risk Messaging, this week said that such policies are more common than in the past, especially among large organizations. “There’s no less risk for private versus commercial air travel,” he said during a Global Business Travel Association webcast. “In fact, the risk is probably higher for private aircraft. It’s a key part of TRM for any organization.”

McIndoe said smaller companies almost never have such policies. Daniel said closely held midsize companies sometimes create such policies to address insurance requirements.

“We always talk about catastrophic events with air being one of the more obvious ones to address,” said Daniel. “But we also see this impact people in ground transportation, where they may have four or five in a rental car. It’s hard to manage, but probably the place with the most inherent risk.”

Travel management company procedures can limit the number of employees or execs allowed in the same car service just as they can with flights, though ground transport plans are not as often booked through TMCs.

The Company Dime also asked the 33 buyers whether any of their firms limited the number of employees who could stay in the same hotel, perhaps at least in high-risk destinations. Not one said yes.

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Direct Selling Point: Systems Integration

When building a new company, one way to establish an identity is to offer something no one else does. These days that typically means unique technology. But fast-growing U.S. travel management company Direct Travel is under no illusions of being an IT shop.

This makes the company an attractive client for travel tech developers. At the moment, Direct Travel CIO Darryl Hoover has Concur and Cornerstone Information Systems in suspense over which quality-control solution the acquisitive company will make standard.

Direct has established an underlying technology partner in Saca Technologies and telephony with West IP Communications. It has GDS relationships with all the main players. It’s migrating to Unit4 Business Software’s CentralCommand for back-office accounting and uses Booking Builder for web fares. Cornerstone is in place for traveler messaging and data reporting, with tripBam for hotel re-shopping and Sabre for hotel RFPs. Mantic Point provides its main Android and iOS apps, with TripLingo in the mobile mix, too.

Darryl Hoover

Direct Travel CIO Darryl Hoover

Direct has done some proprietary programming work, particularly for data reporting alongside agreements with agency network GlobalStar and Cornerstone’s iBank.

“Almost all those activities are now in our managed environment,” said Hoover, referencing the cloud infrastructure from Saca. “That’s done a lot for us — allowed us to focus on the core business and repurpose resources. That was the biggest move we made … data centers, security, redundancy. We’re not staffing internally anymore.”

With all that behind the scenes, clients can benefit from the output of Direct’s “data publishing strategy.” The company simply points client data at the appropriate vendor, be it a travel risk management firm or expense management tool. In general, Hoover demands flexibility.

“When we’re looking at acquisitions of other travel agencies, we take all these factors into consideration,” he said. “For example, if we have a large segment on Deem we’re not going to rush in and convert them to another online booking tool just for the sake of doing it. It goes back to that data publishing strategy — Concur, Deem and GetThere are not for everybody. I see no value in developing singular solutions. When you do that, you have all eggs in one basket, which is never a good idea.”

Even so, Direct is a Concur Preferred TMC Partner. “We are at the highest preferred level with Concur as we are leveraging the products and services required to meet that status,” he said. “It wasn’t fun to be in my seat [when Concur had its outages]. Customers are saying ‘You have the relationship, go fix it.’ ”

Hoover is aiming to keep it loose with the GDSs, as well. Direct doesn’t have hundreds of thousands of segments going through Amadeus, he said. That doesn’t mean those parties shouldn’t have a relationship for certain tools. Preferring a given partner might win some short-term gain, but Hoover argued that TMCs are “not going to be overly successful” in the long run if they put that before client demands.

While working with a single vendor can create business continuity risk, Hoover said certain pieces like the back office and mid office by their nature require one solution.

In mobile, the company’s Direct2U apps are based on technology from Mantic Point. Hoover thinks its itineraries are the best in the business. The apps offer typical TMC-style mobile services plus customized client branding and messaging for both travel and risk management.

“Our core competency is not mobile app development, and why should it be?” asked Hoover. “I can partner with someone who is very competent in that space.”

Direct Travel last month acquired Hobson Travel of Naperville, Ill. It bought meeting and incentive company Creative Group the month before. In November, it bought Best Travel & Tours and Peak Travel, its fifth and sixth acquisitions last year alone. While this may sound dizzying, Hoover and others on the Direct Travel team have done it before. They learned lessons building Navigant, a rollup of many dozens of acquired TMCs bought by CWT in 2006. The playbook now is very similar.

“My background is in building business intelligence platforms,” said Hoover. “It’s not something that needs to be done on a grandiose scale like we did at Navigant and CWT. When I look at the money we invested in those platforms, in hindsight I would have pulled that way back.”

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BCD Travel On Lufthansa Fee: No Viable Alternatives

Germany’s largest travel management company is not happy with the country’s dominant airline. BCD Travel has been discussing with clients how to react to Lufthansa’s decision to levy a 16 euro fee on bookings through GDS channels. There a few options, none particularly good.

That’s according to BCD Travel executive vice president Rose Stratford. She knows of no “viable” alternative that provides the efficiency and comparison shopping of global distribution systems. “Otherwise,” she said, “it would already be in place.”

Rose Stratford, BCD Travel executive vice president, global supplier relations and strategic sourcing

Rose Stratford, BCD Travel executive vice president, global supplier relations and strategic sourcing

Spokespersons from American Express Global Business Travel and Egencia also pointed to comparison shopping as a chief concern. It’s a common sentiment around the industry. The Business Travel Coalition called for an investigation in Germany.

Tools like BookingBuilder or Flex (formerly ProcureApp) can help plug gaps. But “toggling back and forth to a different tool to see what a Lufthansa fare is versus what the rates are on the other carriers has a huge impact on our efficiency and productivity,” Stratford said.

That means more resources, and more systems integration. Agencies need to bring bookings into back-office systems. Sometimes they’ll need to use passive GDS segments, which come with a fee.

All things considered, using a third-party tool or direct agent portal like Lufthansa’s won’t have much cost benefit over the carrier’s GDS surcharge, Stratford suggested.

She added that agent portals furnished by airlines in certain markets, including the United States, “never had much traction.” There’s been limited success with smaller agencies in markets where a dominant airline has forced the issue, “but most customers expect you to shop for the best fare available, not just Lufthansa,” she said.

In some cases, companies may direct bookings to Lufthansa’s competitors. That’s hard in a lot of places, but Stratford said many customers are asking where it makes sense. “We are not saying that’s necessarily the answer,” she said.

The most immediate and simplest remedy is to book a partner’s code for a Lufthansa-operated flight. “For North America-based programs the impact is negligible as buyers can simply avoid the fee by purchasing tickets on United or Air Canada,” according to GoldSpring Consulting partner Neil Hammond.

That won’t work for the many domestic German and intra-European routes not covered by code shares. (When it does apply, though, Lufthansa may realize backdoor distribution cost savings. GDS “home and away” pricing means a United U.S. point-of-origin transaction incurs a smaller fee than a Lufthansa booking for the same flight. In their transatlantic joint venture, the airlines share revenues and costs. Travelport in a 2014 presentation to investors noted that “away” air segments in the prior year accounted for 43 percent of total air segments, while revenue from those segments generated 62 percent of total air segment revenue.)

A last option is for corporations to simply accept the GDS surcharge. Depending on the circumstances, that “might be the best thing for them,” Stratford said.

Unencumbered by full-content obligations to GDS operators, Lufthansa is free to differentiate by channel. When special pricing, product attributes and other perks are offered in one place but not another, that changes the value equation. Using a TMC to book Lufthansa through a GDS wouldn’t just be a question of 16 euros.

Matching by competitors would help Lufthansa stick to its guns. Press reports indicate that Air France is considering a similar move.

Maybe it’s just posturing after all. Lufthansa and Amadeus negotiated a new baseline participating carrier agreement (which Amadeus calls a Global Distribution Agreement) but not a full-content one. It doesn’t mean they won’t reach a deal by Sept. 1 to stave off surcharges and make the hunt for alternatives less urgent. That’s happened before.

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Why Lufthansa?

Some suggest Lufthansa is making its bold move in business travel distribution out of desperation. The airline company itself attributed Tuesday’s announcement to profit improvement efforts. Carriers attempting similar programs in the past usually were bleeding. While the German aviation group’s earnings could use a boost, the company’s competitive strength gives it leverage.

It’s anybody’s guess as to which airlines — if any — would follow Lufthansa on this path, but it’s instructive to consider where the airline group stands and how peers stack up.

LufthansaFor starters, just how rough is Lufthansa’s shape? Operating profits and have been declining for the past three years. Net profits, too, have slid, from 1.2 billion euros in 2012 to 55 million last year. The passenger airline group had 2014 EBITDA of about 1.7 billion euros, down 20 percent year-over-year.

This year’s first quarter had plenty of red ink. A series of pilot strikes between January and March and the March 24 Germanwings crash dragged down financial performance. The company also is dealing with lingering sluggish economic growth in Europe and the weak euro. Its pension obligations are debilitating. Low-cost carriers on shorter-haul European routes are applying increasing pressure. So are fast-growing Gulf carriers in longer-haul markets.

In a May 5 report shared on Lufthansa’s site, Standard & Poor’s viewed the airline’s cost position as “a competitive disadvantage.” It also noted that profitability “is trailing some of its peers.”

But S&P maintained Lufthansa’s “stable” corporate credit rating. Moody’s in late May reiterated a “positive” outlook. It noted Lufthansa’s scale, diversified network and “solid liquidity position.” Fuel costs also are down. “Despite challenges,” Lufthansa in its first-quarter report said the company is “on track” to achieve full-year adjusted EBIT of 1.5 billion euros.

The picture is neither rosy nor desperate. It is far better than the dire straits some of the other airlines were in when they attempted to unload distribution costs (see ‘GDS Bypass, A History’ below).

But how about compared with peers? Air France-KLM racked up more than 3 billion euros of net losses during the past three full calendar years, and another 559 million in this year’s first quarter. British Airways parent IAG has fared better. It achieved more than 1 billion in after-tax profits in 2013 and 2014 combined, but reported a net loss of 26 million in this year’s first quarter.

Lufthansa signed its previous distribution deals with Sabre and Amadeus more than five years ago. That meant they likely came up for renewal as Lufthansa embarked on its latest plan. Lufthansa signed a Travelport deal in 2012. IAG and Air France-KLM signed deals with all three GDSs more recently than that; it appears they have not reached expiration.

Meanwhile, the big U.S. network airlines appear to be at peace with the GDSs right now. And they are in fine financial shape. They’d love to reduce distribution costs, too, but can’t claim financial troubles as the reason if they tried.

A big airline’s distribution expenses amount to hundreds of millions of dollars (or euros), but they’re a drop in the bucket.

According to Lufthansa’s 2014 annual report, “expenses for computerised distribution systems” for the year came in at 339 million euros. “Sales commissions paid to agencies” amounted to 322 million euros. Each represents around 1 percent of the Lufthansa Passenger Airline Group’s total annual expenses, and even less of the company’s total costs. And each was lower in 2014 than in 2013, without a commensurate drop in passenger revenue or enplanements.

Market Power

While Lufthansa Group isn’t raking in the dough, its competitive position provides leverage in distribution. For sure, the company faces new-entrant competitors. But it’s pretty dominant in its key markets.

According to OAG (as reported by The New York Times), Lufthansa is the largest airline group in Europe with a 13 percent share of all seats.

In November 2014, CAPA also cited OAG data in reporting Lufthansa’s 54 percent share of weekly domestic capacity in Germany. At that time, the carrier claimed a further increase. By comparison, the largest U.S. carrier today, American Airlines, claims about a 20 percent domestic market share. That’s after swallowing US Airways.

From its hubs in Frankfurt and Munich to all European destinations, Lufthansa’s 2014 share was near 70 percent.

Its low-cost competitors “have so far not captured a substantial market share in Lufthansa’s home market,” according to Moody’s.

Lufthansa has hubs in Zurich and Vienna, bases of subsidiaries Swiss and Austrain Airlines, respectively. It’s also got a tight transatlantic partnership with United and Air Canada that drew scrutiny from competition authorities.

Its top German competitor, Airberlin, can’t compete effectively for lucrative corporate business against Lufthansa’s leading global network.

S&P wrote that Lufthansa has “excellent competitive position, driven by its strong market positions, the diversity in its operations and its good exposure to high-yield premium traffic.”

Moody’s anticipates Lufthansa only extending its dominance: “It has participated in industry consolidation in the past and is likely to do so in future.”

Is all that enough to enable Lufthansa to determine what GDS users should pay, or to shield the company from the inevitable reaction from travel agents? If so, the better question is why not Lufthansa?

“When I ask airlines what prevents them from going direct, they say they can’t do what they potentially want because of the power TMCs have,” said Galiant Consulting CEO Andreas Wellauer. “This development clearly shows that airlines are no longer afraid to act in ways that may compromise TMCs. This is an important insight as it underlines the further marginalization of TMCs.”

On the other hand, some see the Lufthansa announcement as another airline ploy to extract better GDS terms. “We believe that this is an attempt by Lufthansa to drive down the fees charged by the GDS and especially by Amadeus and may be part of a price negotiation process,” according to Bernstein analysts.

Lufthansa chief commercial officer Jens Bischof on Tuesday said the company had new agreements with Sabre and Amadeus, but Amadeus said the airline mischaracterized the situation. The company told subscribers that there’s no new deal. Rather, the relationship between the two reverted to an earlier framework of higher fees and no full-content commitment.

So?

Two big questions: Will Lufthansa stick to its plan despite industry pushback and will any other airlines follow in discouraging GDS bookings?

On the first, Bernstein analysts said that by ceding a price advantage to other carriers, Lufthansa’s jeopardizes revenue. “We do not believe that the online travel agencies will want to invest in building special purpose integrations directly to Lufthansa to access their flights and avoid the [new fee],” they added.

One wrinkle is that Lufthansa’s joint venture with United and Air Canada seemingly mitigates the risk of losing transatlantic customers. Travelers can still buy tickets through GDS channels for flights on Lufthansa airplanes and not incur the 16 euro fee. That’s because tickets issued by partners for codeshare flights are not covered by the German carrier’s new policy. The partners share costs and revenues, so Lufthansa doesn’t really “lose” anything (perhaps other than goodwill).

On the second question, Evercore analysts don’t think other airlines will follow suit. In a research note they wrote that “the GDS channel is the best way for airlines to attract high-margin business travelers and high-end consumer travelers. Airlines’ direct-to-consumer distribution channels that bypass GDSs are not growing rapidly as they were a decade ago.”

GDS Bypass, A History
Northwest, 2004 – 2006
In the quarter Northwest announced its infamous fees for GDS bookings, the company reported a $46 million loss. It was $436 million in the red year to date. It had reported nearly $2 billion in operating losses in the previous three calendar years. Here’s how it ended: Then under bankruptcy protection, Northwest came to agreement with the GDS in 2006.

United, 2005 – 2006
United was operating under Chapter 11 bankruptcy protection when it started experimenting with new distribution models and third-party players. Here’s how it ended: Agreement with the GDS.

Air Canada, 2006 – ?
Air Canada recorded a net loss of Cdn $74 million in 2006 and $20 million in 2005. It had reorganized under bankruptcy protection the year before. The airline created a web portal for travel agencies while pressuring GDSs on price and merchandizing capability. The conflict peaked with the airline removing many of its fares and GDS companies reacting by biasing against it in displays. Here’s how it ended: Full content only in a modified model.

Lufthansa, 2008 – 2009
When Lufthansa and Swiss last announced fees for GDS usage, in 2008, the parent company was on its way to a 1.35 billion euro operating result for the year and 599 million in net earnings. The company had earned 1.66 billion euro in the prior year, and 800 million the year before. Here’s how it ended: Agreement with the GDS.

British Airways, 2013 – 2014
BA parent IAG was in the midst of a recovery year following a loss-making 2012 when it threatened to withdraw content in a now-public dispute with Travelport. Here’s how it ended: Agreement with the GDS.

American Airlines, 2009-2014
After a profitable 2007, AA recorded net losses of $2.1 billion in 2008 and $1.5 billion the next year. In 2009 it announced a Direct Connect program. Sabre didn’t take kindly. Here’s how it evolved: Bad blood, lawsuits, settlement, agreements with the GDS and later a passenger services system deal to boot. Legal activity is ongoing between Sabre and US Airways, now part of American Airlines Group.

Lufthansa, June 2015
Here’s how it started: Lufthansa claims it no longer needs “full content” agreements with the GDSs. It accepts the higher fees but fewer restrictions associated with traditional GDS participation agreements. It announces a charge to the client to cover those expenses, and alternatives that also come with cost and headache to the client.

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Direct Airline Booking Isn’t Legit For Lufthansa’s Clients That Manage Travel

Lufthansa Group on Tuesday said corporate clients could avoid its 16 euro surcharge for GDS bookings after September by using its websites. That’s not a genuine alternative.

Without workarounds, direct airline booking requires users to jettison price comparisons and complex bookings. Companies would forego data reporting for policy and spend management, duty of care and CO2 tracking. For many, it means they’re not using their preferred online booking tool, unless Lufthansa integrates with players like Concur, GetThere and KDS.

Lufthansa fragmentationAir Canada has had a travel agent portal for more than a decade. Southwest Airlines’ Swabiz corporate site is ubiquitous among corporate programs in the U.S. market. Just because it’s been done before, however, doesn’t mean it will work for corporate clients.

Seth Perelman’s BookingBuilder product facilitates airline website bookings for travel agencies. “There’s so much more involved in the process than just making a booking,” he said. “How does that get to the back office? How are changes handled? How does the after-hours service deal with it? How does it get into the other tools, for example for duty of care? Not to mention the obvious surface things like interlining. When traveling across continents, interlining is common.”

Without interlining, travelers need separate tickets when they’re using more than one airline on a trip. The International Air Transport Association has only just begun efforts to enable interlining for website bookings.

Lufthansa has not answered questions about how its direct options would support reporting for traveler tracking. Maybe they just won’t. The company listed the following as advantages of using a GDS: complex bookings, comparison shopping, integrated billing, technical linking and CO2 documentation. All that for 16 euro.

It’s not that Lufthansa couldn’t build some of the things the corporate market needs for direct bookings.

Take data reporting, for example. Although the vast majority of data still comes from TMCs, travel risk management firm International SOS has been taking an XML feed from Swabiz for years. “The only airline where we have a meaningful direct connection remains Southwest,” said International SOS executive vice president Tim Daniel. “We’ve had exploratory conversations with several other airlines but typically they haven’t been sufficiently motivated by duty of care to tackle the technical issues on their side. If suppliers want to capture direct bookings from corporate accounts, they’ll be forced to develop open interfaces for the various downstream consumers of itinerary data, including but not limited to duty of care systems.”

The Swabiz XML feed goes to International SOS several times a day. The data associates traveler information with their company names.

“We need how they’re going, where they’re staying (still a struggle), their mobile number,” said Daniel. “A lot of companies want fields like business unit, email or nationality fed from a profile system. We’re not interested in fare or class of service — we throw that to the side.” Such integration comes with a nominal fee for clients, he said.

Another corporate safety firm, Anvil Group also takes data from airlines as well as rail providers and hotel booking services — on top of the more typical TMC/GDS data.

Airline data lacks “elements most corporations require, like hierarchy information,” said Grasp Technologies president and CEO Erik Mueller. “A lot happens to the data after ticketing at the TMC.”

“TMC back-office data tends to be more robust,” concurred Tom Tulloch, managing director for North America at business intelligence firm Pi. “PNR data normally captures things like employee ID, cost center information, ‘UDID’ fields, project codes and other important fields. These fields might not be included in a direct supplier feed. That doesn’t mean that it can’t, but it probably doesn’t right now.”

Mueller suggested that TMCs can adapt to Lufthansa’s new environment, but it won’t be seamless.

“There are tools for processing web bookings,” he noted, referring to products like BookingBuilder. “A back-office system could have a live connection with Lufthansa and could then add cost center, employee ID, etc.”

As many already do with web bookings, travel agents could use passive segments to insert information into GDS records for data reporting and risk management. That comes with a fee to the GDS and a productivity cost.

“For reporting, getting that data into one place including changes, cancellations credit card reconciliation and so on gets tough when data comes from sources other than the TMC,” said Perelman. “You also have a lot of tools that agencies use — everything from pre-trip authorization to quality control — and when you have a small airline flying to a handful of airports within a specific country, you can get away without a lot of that. For a major multi-continent airline, can things be adapted? Sure, to an extent, but do TMCs really want to be an IT shop?”

There’s also debate about whether Lufthansa can enable corporate travelers to book negotiated rates on its website. If Concur’s TripLink initiative has proven anything so far, it’s that this sort of thing is pretty hard to build.

“Concur has relationships with certain suppliers so that when a corporate identifier goes in, the supplier can transmit that to Concur but it’s a huge can of worms,” said Perelman. “A lot of technology is being developed to facilitate all this, but it doesn’t happen overnight. It takes time.”

HRG Consulting official Daniele Sthel asked Lufthansa how it would manage data security for direct corporate bookings. “They didn’t have an answer yet,” she posted to LinkedIn. “It will be interesting to see how they intend to protect corporate data and client profiles.”

When asked Wednesday, a Lufthansa spokesperson still didn’t have an answer.

It’s not clear how difficult it would be for the airline websites to authenticate users as deserving of a given corporation’s negotiated rate.

“I don’t think they can verify,” said Andreas Wellauer, CEO of Germany-based Galiant Consulting. “I understand why they want to do this but it is open for a lot of abuse. And I don’t think they can control it. What about all the people traveling on my company’s behalf? Could there be verification through the corporate credit card? It could verify if that’s a company-registered credit card. But is that available at this moment? No. I think what they’re doing is a little too fast. If [unauthorized] people start booking discounts on business class fares which are thousands of dollars, it takes a heck of a lot of transaction fees to make up for that.”

Clear Sky Associates consultant Ellen Keszler didn’t think it would be much of an issue.

“Fraud is a big issue in any online transaction offering,” she said. “Airlines have a pretty good handle on that so I don’t know how this is significantly different. I would think they want the traveler to enter their email address and it’s matching up. Online booking tools get an HR feed to authenticate the user, so there’s no reason Lufthansa couldn’t do something similar.”

In any case, all this would come with added expense for business clients. The TMC loses its GDS incentive, which can as much as half or more of Lufthansa’s add-on surcharge. It also might have to pay the likes of BookingBuilder to make bookings easier or Grasp to consolidate data. Its agents would spend more time shopping, processing the booking and inserting data, hurting productivity.

And then when the flight is canceled because of a strike at Lufthansa, who helps the travelers?

A Lufthansa official said that for those corporate travelers who book directly, “There are telephone support lines.” Agents using the portal can service records there, or they too can call the airlines.

“If you’re connected in the airline system, how do you move them to another airline?” asked Wellauer. “What about a refund? Lufthansa now has to take over the service and fulfillment issues so I don’t think they thought that through.” Some airlines, notably Lufthansa partner United, have been exploring ways to reopen bookings for servicing by agents via web interfaces.

Wellauer is not the only industry source who thinks the airline company may not have considered all the implications.

“In the press release, Lufthansa quoted that with this new commercial strategy they will be providing customers with ‘the exact tailor-made services that they are looking for and wherever they are looking for them,’ ” said Belgium-based veteran travel buyer Corrado Simontacci. “I’m not sure that this is exactly what corporate clients are asking for and I’m wondering which ‘customers’ they are referring to.”

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Lufthansa Remodels Corporate Travel Distribution With New Fee, Direct Play

Lufthansa Group in September will add a 16 euro per-ticket surcharge to bookings made through global distribution systems. The idea is to lower distribution costs by encouraging customers to use direct channels. The strategy dismantles agreements that required the airlines to include all fares and inventory in the systems. Corporate accounts instead can have travelers book on the group’s airline websites, where negotiated rates are available. This sacrifices easy comparison shopping.

The charge will not apply to tickets purchased using the sites of Austrian Airlines, Brussels Airlines, Lufthansa and Swiss. The same goes for their service centers and airport ticket counters. The airline group’s travel agency portal also is exempt.

Jens Bischof

Lufthansa German Airlines chief commercial officer Jens Bischof

These direct channels are cheaper for the airlines, and currently account for 30 percent of Lufthansa’s bookings. “We are redistributing the financial burden,” Lufthansa chief commercial officer Jens Bischof told reporters Tuesday.

“We are just not willing to pay the bills of others,” he added. GDS users include corporate accounts, online and offline travel agencies and a variety of others.

Bischof insisted that Lufthansa is not bypassing or abandoning GDSs. The airline group negotiated new agreements with Amadeus (effective Monday) and Sabre (effective July 1) that do away with content parity. A similar deal with Travelport is in the works. Bischof said the new agreements “allow us more freedom. We can decide where we are going to display, what price, what product and in what channel.”

The price of that freedom is a higher per-segment fee levied by the GDS operators. Bischof said the average GDS per-ticket cost is around 18 euro and the average price of internal distribution channels is about 2 euro. Lufthansa settled on the difference for the new GDS surcharge.

Bischof noted his frustration with the GDSs. Amadeus didn’t sound pleased, either, despite the new deal.

“Travelers today are looking for consistency, transparency and choice across all channels and we as an industry can deliver that best by connecting and integrating all players,” the company stated. “The Lufthansa Group have chosen to go in a different direction by introducing charges that will penalize travelers based on the shopping channel they use.” Amadeus noted the possibility of “extra IT costs” borne by agencies “that may ultimately be passed on to the traveler.”

Sabre and Travelport did not immediately offer comments.

Bischof said there’s no intention to penalize, since there are alternatives.

“The supply chain isn’t free,” said Paul Tilstone, founder and CEO of Festive Road, an industry consultancy. “Buyers should be having strategic discussions with airlines about price, value, distribution strategies, etc., and as part of that process then considering the value of the indirect channels in servicing their needs.”

The move impacts relationships between travel management companies and both airlines and GDS providers.

“It will definitely change the business model of the TMC and create more competition between airlines’ direct booking channel and the GDS,” noted Frederic Lourdin, regional category manager for travel and entertainment, marketing and office supplies at Holcim Technology Ltd. in Switzerland. “I am interested to see how the other airlines will react and if they will follow this trend or not.”

“I’m not amused at all,” said Denise Pozzi, travel manager for the European region at AGCO International. She said Lufthansa last summer cancelled certain corporate discount programs for her company and others. A 3 percent discount that remains offers “not much benefit.”

The Alternatives

One option is direct bookings of negotiated corporate rates on Lufthansa Group websites. It’s made possible by using corporate identifiers. Bischof couldn’t say how much usage this alternative already has.

Pozzi said offering corporate rates on the airline sites is insufficient. “We don’t want agents to go to different web pages — one for Lufthansa, another for Swiss. Where is it going to end? We want one tool, which is the GDS.” She could think of no recourse.

Paraexel director of procurement and travel Benjamin Park envisions TMCs implementing direct connections, meaning “we have to pay a higher transaction fee.” He added that “as long as suppliers and GDSs do not work on the same goal, our future managed travel program will be difficult to sell as a value-adding process.”

Another option is a direct agent portal, for which Lufthansa claims 8,000 enrolled agencies in Germany, Austria and Switzerland. That portal has been in a “soft launch” and now will get enhanced technologies and marketing.

Bischof said customers may either use “full-blown” agency services via GDS distribution that incur the 16 euro fee, or tell the agency to book via the direct portal.

Another avenue are direct-connect channels facilitated by developers like Farelogix. Bischof said Lufthansa already has a few of those in place, though implementations are challenging. “This step will encourage technology providers to invest more in these technologies,” he claimed. “We can clearly feel the high interest, especially from the travel industry, for agencies and corporate customers. We are supporting the trend.”

Tilstone suggested the Lufthansa Group action “simply builds on some of the pass-on fees which were introduced by a number of carriers over the last few years.” He applauded Lufthansa “for placing a stake in the ground and bringing the debate out into the open. The question is, though, how big that stake is and whose toes did it just go through?”

“Somebody has to do it,” said Bischof. “The market and the technology is ready for a change.”

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