US-based airlines will get more tough on corporate travel discounts

As a part of their frantic bid to survive, airlines based in the United States have decided to cut corporate discounts or withdraw from contracts totally if businesses fail to meet their travel commitments.

In addition, these airlines will raise fares and make ticketing rules tighter in the wake of the situation created by exorbitant prices of aviation turbine fuel and a weak economy, the American Express Business Travel has disclosed.

As a result, flights will become more expensive and more difficult to schedule in 2009, according to the American Express Business Travel, a unit of the American Express Company which helps manage corporate travel accounts.

The 2009 forecast for business travel, which mainly concerns United States-based airlines, was arrived at through a poll conducted by the global Association of Corporate Travel Executives. A majority of 131 members of the Association surveyed blamed the bleak situation that is likely to come about in 2009 on economic factors, high costs of energy, or internal changes in their companies.

Herve Sedky, vice-president and general manager of American Express Business Travel, told reporters at a news conference: “Senior leaders have spent more time thinking about travel. Travel has become a boardroom issue. The result is that many companies are becoming more cautious about business travel, increasingly viewing it as an investment rather than simply a cost of doing business.”

According to the finding by the American Express Business Travel, “among the issues corporations must address in planning for 2009 is the more aggressive posture by airlines to hold businesses to their travel agreements, which have not been tightly enforced over the years.”

Kevin Mitchell, of the Business Travel Coalition, a group that represents corporate travel managers, was quoted by the website money.cnn.com as commenting on the outcome of the poll: “Carriers, mainly those based in the United States, have gotten tougher as skyrocketing fuel prices drove up costs and losses mounted and this trend has accelerated dramatically. If you are at an airline, every single manager is under the gun to produce or to go deeper or go further. You can’t give discounts that you can’t demonstrate to senior management bring in new business or maintain high yields.”

“While some companies do not manage travel well,” Mitchell added, “struggling airlines have overhauled operations in 2008 to save money and capture slivers of new revenue. The struggling airlines have reduced frequencies and added connections, which for some companies may make certain travel, once covered by a discount agreement, impractical now.”

The American Express Business Travel disclosed that some of the biggest of the United States-based carriers, including American Airlines, a unit of AMR Corporation, and Delta Air Lines, refused to discuss their corporate travel agreements.

However, United Airlines, a unit of UAL Corporation, revealed as much: “We are being very disciplined with how we manage these accounts to ensure contract (compliance) and that we are getting a return on investment from the discounts and commissions provided.

The study found that the average airfare paid for trips originating in North America rose to $260 in the second quarter of 2008 from $236 in the same period a year ago. And, the average international fare rose to $1,980 from $1,788 over the same time.

It also came to light that hotel rates in 2009 should be more favourable to guests than in recent years, as the room supply in the United States is increasing. However, occupancy will not fall in gateway cities like New York since international travellers take advantage of favourable exchange rates.