Onwards and UPWARDS

The way corporates negotiate deals and manage air travel spend is shifting. Gillian Upton takes a look at best practice

For years airline RFP negotiations have gone in one direction, rewarding volume on key routes. It has shaped travel policies, putting pressure on corporates to ensure compliance to preferred carriers so that targets are met and discounts secured.

But in a more dynamic air market, where fares fluctuate and competitors undercut each other, an RFP doesn’t necessarily manage spend the best way. Overlay that with all the changes in the distribution landscape – by aggregators, GDSS, NDC and ONE Order – and clearly there has to be a better way.

“Many corporates are asking if the RFP cycle and model continues to make sense in the light of this evolving environment. They are now looking at a dynamic pricing model to best take advantage of maximising their savings,” says Mark Cuschieri, Executive Director Global Travel at UBS. For a large player such as UBS to espouse such views means that it’s time for a rethink.

A real sea-change could materialise by the end of 2019, with airlines out of the driving seat and buyers taking control. Olivier Benoit, VP & Global Air Practice Leader at consultant Advito, has tracked eight-year cycles in the aviation industry and reckons the current cycle is coming to an end.

“The expectation of global economic uncertainty in Europe and the slowdown in the Chinese economy could lead to a lower GDP growth and airline growth is correlated to global GDP growth,” he says.

“Secondly, operational costs for the airline are on the rise due to increased fuel costs so they will need to increase their revenue and put up ticket costs and that will negatively impact demand, so there will be more scope for corporates to negotiate.”

Corporates could achieve more bang for their buck. The opportunities are greater on competitive long-haul routes and results