This morning I pointed out some new frontiers in managed travel to the Society of Government Travel Professionals. Things like traveler friction, trip tailoring, edit rights, Managed Travel 2.0 and traveler dashboards, along with their implications for the government travel program. (here’s the full deck)
Then I shared this slide to make the point that airfares will go up after the AA-US merger:
Fewer competitors in a market result in higher profit margins for the suppliers. Looks like that basic economic theory holds true in the airline category. (For non-government readers, YCA fares are the U.S. Government’s equivalent of full Y fares – fully refundable, last seat availability in coach.)
Last week in Beijing I made the case for de-commoditizing the airlines. Even though it was a friendly audience at the CASMA Fall Global Conference, there was some sharp discussion during Q&A. Fair enough, as I skewered American’s handling of its Direct Connect value prop to the business travel community. Here are the key points:
Does Distribution Really Matter? Can it Differentiate Airline Products?
Absolutely. Think about how the endpoint of the distribution chain looks today. You still see flight times, carrier logos and prices. Pretty commodity-like stuff, that. From green screen GDS terminals to mobile booking displays, all you see is a long list of racked-and-stacked flight options.
It’s the equivalent of shopping in the paper towel aisle at WalMart. Price dominates.
Lufthansa (LH) has drawn a deep line in the corporate contracting sand this year. It is demanding financial clawbacks and access to detailed, perhaps unprecedented, corporate travel data in return for providing corporate discounted fares. More on this here.
Many buyers, big and small, take advantage of airlines by getting discounted airfares before ever delivering the promised volume or market shares. If those volumes are not delivered, the airline is the loser Continue reading →
Are patents good or bad for the end consumer? OK, that’s pretty broad…how about this specific example concerning Virgin Atlantic and Delta Air Lines:
Virgin recently filed this patent infringement case against Delta over Delta’s use of a herringbone-style seating configuration in its BusinessFirst cabin. Virgin Complaint Against Delta
At issue is Virgin’s patent, granted by the U.S. Patent Office two years ago.
The implications for travel buyers are interesting. Virgin came up with a clever way of arranging its seats in the business class cabin. The advantages include easier access to the aisle, and more seats in the cabin for Virgin.
Airlines invest significant sums in their seating designs, and clearly hope to gain competitive advantages by doing so. In this case, Virgin, by virtue of its patent, has the right to exclude other airlines from copying the features covered (claimed) in its patent. Less competition means some combination of more traffic and higher prices for Virgin.
Let’s set aside the issue of whether or not Delta is infringing this patent. The facts are not clear, and Delta likely believes that either the Virgin patent should be invalidated, and/or there is no infringement. Best guess is this will be settled in court within two years.
More importantly, what do all you travel buyers and suppliers have to say about the pros and cons of a supplier who has patents covering elements of its offerings?
Should innovation be rewarded with this form of protection, essentially as a way to create more incentive to risk R&D funds? Or do the implications of paying higher prices for what amounts to a monopoly on a product turn you off? Vote here and let’s see what you all think.
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If you’re going to NBTA’s Convention in Houston next week, and you’d like to catch up – let me know! I’ll arrive on Saturday afternoon, and leave on Wednesday afternoon. No firm plans yet for dinner on Sunday or Monday, but a few of us are thinking about Tex-Mex on one of those nights…if that sounds good, you’re invited – the more, the merrier!
Last week I delivered an NBTA training course to Delta Air Lines. The workshop was geared to Delta’s global corporate sales team, and naturally we had some good give and take about trends in airline RFPs. Three things puzzled me, and so I throw these mysteries out to you, valued reader, for your insights.
Mystery 1: Which non-price, non-schedule questions really matter? Like RFPs in most other categories, Continue reading →
If Jeff Smisek, Continental Airline’s CEO, was a gambler, he probably wouldn’t play roulette. Why not? The odds are stacked too far in favor of the house.
Mr. Smisek’s risk tolerances came to light at an investors’ conference earlier this month. He made it clear how Continental would handle the risk of being fined up to $27,500 per passenger* by the Department of Transportation for excessive tarmac delays.
“Guess what we are going to do? We are going to cancel the flight.”
Continental is absolutely right. Do the math and you’ll see the DOT could levy a 3-5 million dollar fine – per flight. Newsflash: No airline can afford to gamble that much money.
Bigger newsflash: No flight operations manager is going to play job roulette in the face of such sanctions.
A travel manager in Canada recently asked me for a set of standards that she might use in her Service Level Agreements (SLAs) with her contracted travel suppliers. I had to admit that not only did I not have any templates, but I wasn’t even sure where she might look. I took a quick look on the NBTA and ACTE sites, but didn’t see anything. (If I missed something, please let me know.)