Negotiating the best corporate air rates can be tricky at the best of times – and there are many external factors that are making the task even harder. Ever-tighter profit margins, fluctuating oil prices and increased competition from smaller and LCC carriers are creating tougher market conditions for airlines.
In addition, the growing complexity of the ancillaries landscape is leaving legacy carriers with less control over the passenger journey. Smaller, low-cost carriers – which can make up to 40 percent of their revenue through ancillary sales – are entering the space with innovative offers and services and flexible options to bundle or unbundle a fare based on individual needs.
This puts immense pressure on traditional airlines to offer the lowest possible fares to get passengers onboard – making it harder for TMCs to secure discounted corporate rates, and adding another layer of complexity to negotiations. Travel buyers will therefore only secure a good deal if they prepare the right way, know what to ask for and can back up their wish lists with solid data.
Consider the following three steps before beginning negotiations, and you’ll be more likely to come out with the best outcome for your company and its travelers.
Benchmark against other airlines – price-track air fares for your most important segments
Before entering negotiations with an airline, be sure to understand how its prices compare to those of its competitors. Consider your most popular flight segments and check multiple airlines’ prices on these routes as close to the time of purchase as possible. This will enable you to judge whether your business is getting the most cost-effective options, and will enable you to benchmark against other airlines when you enter discussions.
Data is a powerful tool, and will arm you with the knowledge you need to convincingly approach suppliers. Pricing trend data – which is available through online fare-tracking tools – will enable you to gain a thorough comprehension of historic spend and patterns. With this, you’ll be able to analyze fluctuations in air fares and will gain valuable insight into the best pricing practices.
Understand the volatility of your most important segments
Before starting negotiations, you should develop a full understanding of the segments that are most popular with your business travelers, and are therefore the most critical for your business. Are there cities or countries that your employees travel to on a regular basis? Do these routes receive more traffic from your business at a specific time of year? And do they usually require business or economy travel?
Obtain and analyze this data, and then use it to negotiate the supplier’s best price. Understanding who is traveling to where and when can help you significantly undercut your travel and incidents spend.
If you have negotiated a set rate on certain routes, use data intelligence to find out how often the fare price fluctuates under that agreed rate – and to work out how much money you may be losing as a result. If the price of the ticket regularly undercuts your agreed rate, you will have valuable ammunition to negotiate a better rate with your travel supplier.
Compromise to gain larger discounts
In today’s ever-changing travel industry, it’s important to approach supplier negotiations with a degree of flexibility. Airlines are facing tougher competition than ever, and therefore may not be able to agree to everything on your wish list. The pressure to offer low fares and restricted tickets to the market at rock-bottom prices means that carriers can be unwilling to offer further discounts for corporate travel.
Therefore, negotiating outside of base airfares and discounts can result in a better deal. Depending on your business’ needs, consider accepting a lesser deal on economy fares in return for a larger discount on business fares. Or opt for savings on ancillaries and other travel perks instead of on fares themselves.
A more expensive total ticket price that includes regular services such as meals and luggage can yield greater savings that a cheap ticket with no frills. Such no frills tickets often require travelers to book and expense add-on services at a later date – often at a greater cost to the company.
Work out what your business needs, and therefore what strategy makes the most sense. Understanding and adapting to the changing airline landscape, and being creative and flexible in your approach, will mean you’ll be more likely to make those all-important T&E savings.