Airlines tougher on company travel: group
WASHINGTON (Reuters) - Cash-strapped airlines are more aggressively cutting corporate discounts or pulling contracts entirely if businesses fall short of their air travel commitments, business travel executives said on Tuesday.
The disclosure involving mainly U.S. airlines came as corporate travel organizations assessed the impact of the Wall Street meltdown on the global economy and with it, the 2009 forecast for business travel.
A poll by the global Association of Corporate Travel Executives projected less travel from a majority of 131 members surveyed due to economic factors, high energy costs, or internal changes at their companies.
The business travel unit at American Express Co delayed release of its annual outlook on Tuesday in order to get a clearer picture of the most recent economic turmoil that includes the prospect of a U.S. bailout of financial institutions.
Executives said the environment, which includes cutbacks in air service and higher fares and new fees for bags and other extras once covered by the cost of a ticket, will be tougher. But they said there are opportunities for companies to save money and do business on the road even in cautious times.
"Senior leaders have spent more time thinking about travel. Travel has become a boardroom issue," Herve Sedky, vice president and general manager of American Express Business Travel, said in a conference call with reporters. "Increasingly we see travel viewed as an investment."
Among 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.
Sedky's group and other travel experts said airlines are pulling discounts and cutting contracts, in some cases, if companies fall short of their promises to deliver a certain number of travelers or a certain amount of revenue.
"These actions have ramifications on our business and the business travel industry," he said.
Kevin Mitchell of the Business Travel Coalition, a group that represents corporate travel managers, agreed with Sedky that carriers, mainly U.S.-based, have gotten tougher as skyrocketing fuel prices drove up costs and losses mounted.
"It has dramatically accelerated," Mitchell said. "If you're 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," Mitchell said.
Mitchell said some companies do not manage travel well, but he also noted struggling airlines have overhauled operations this year to save money and capture slivers of new revenue. They have reduced frequencies and added connections, which for some companies may make certain travel once covered by a discount agreement impractical now.
The biggest carriers, including American Airlines, a unit of AMR Corp, and Delta Air Lines Inc, would not discuss their corporate travel agreements. But United Airlines, a unit of UAL Corp, noted a certain vigilance.
"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 company said in a statement.
(Editing by Richard Chang)
