Negotiating Airline Negotiating Airline Contracts for Corporate Contracts for Corporate

CustomersCustomers

February 4, 2011February 4, 2011New OrleansNew Orleans

CBTGCBTG

Richard EsmanRichard Esman Kevin O'Malley Kevin O'Malley

*** Parameters ****** Parameters ***

Typically 25 Respondents for each Typically 25 Respondents for each questionquestion

Multiple responses to same question Multiple responses to same question

1.1. What level of air volume are you What level of air volume are you seeing seeing airlines willing to consider putting an airlines willing to consider putting an airline contract in place for a airline contract in place for a customer?customer?

Less than $500K 12 %Less than $500K 12 %

$500K - $750K$500K - $750K 60 %60 %

$750K – 1M 12 %$750K – 1M 12 %

$1M – and above 16 %$1M – and above 16 %

2.2. What are you seeing in the levels of What are you seeing in the levels of discounts being offered?discounts being offered?

Discounts are lower 36%Discounts are lower 36%

Discounts are relatively the sameDiscounts are relatively the same 56%56%

Discounts are increasing 8%Discounts are increasing 8%

3.3. How successful are you in getting other How successful are you in getting other amenitiesamenitiessuch as club passes, memberships, such as club passes, memberships, nominations, upgrades etc… negotiated into nominations, upgrades etc… negotiated into the contract?the contract?

Very little to no success at allVery little to no success at all 24 %24 %

Some success 52%Some success 52%

Very SuccessfulVery Successful 24 %24 %

4.4. How important are the amenities in How important are the amenities in question 3 to your customer?question 3 to your customer?

Not Important 20%Not Important 20%

Somewhat ImportantSomewhat Important 48 %48 %

Very Important 32 %Very Important 32 %

5.5. Would your customers accept a lower Would your customers accept a lower

discount in return for an increase in discount in return for an increase in amenities listed in question # 3 ?amenities listed in question # 3 ?

Yes 4 %Yes 4 %

No No 58%58%

Yes, if the discount was minimally impacted 38%Yes, if the discount was minimally impacted 38%

6.6. How successful are you in How successful are you in negotiating negotiating movement on the market share and movement on the market share and contractual goals set for the contractual goals set for the contract.contract.

Not successful at all 20 %Not successful at all 20 %

Somewhat successfulSomewhat successful 56 %56 %

Very Successful 24% Very Successful 24%

7.7. * When a customer has an airline * When a customer has an airline contract that is not in compliance, contract that is not in compliance, what action(s) is (are) the airline(s) what action(s) is (are) the airline(s) taking? * taking? *

* Multiple answers ** Multiple answers *

Lowering discounts Lowering discounts 38 %38 %

Pulling contractsPulling contracts 54 %54 %

No change 21 No change 21 %%

Lowering goals Lowering goals 12 %12 %

8.8. When there is contract language that your When there is contract language that your customer does not agree with in a contract, customer does not agree with in a contract, how successful are you in getting that how successful are you in getting that language removed?language removed?

Not successful at all 36 %Not successful at all 36 %

Somewhat successfulSomewhat successful 64 %64 %

Very successful 0 %Very successful 0 %

9.9. How successful are you in getting increased How successful are you in getting increased discounts for specific “ carve out” markets discounts for specific “ carve out” markets that are important to your customer ?that are important to your customer ?

Not successful at all 21 Not successful at all 21 %%

Somewhat successfulSomewhat successful 79 %79 %

Very successful 0 %Very successful 0 %

10.10. Are you seeing any airline contracts Are you seeing any airline contracts withwithguaranteed fares vs. normal guaranteed fares vs. normal discounting ?discounting ?

None at allNone at all 56 %56 %

Very few 36 %Very few 36 %

Some 8 %Some 8 %

A lot 0 %A lot 0 %

11.11. * What is the most important * What is the most important amenity to amenity to your customers in an airline your customers in an airline contract ? *contract ? *

* Multiple answers ** Multiple answers *

Upgrades Upgrades 44 %44 %

Nominations 28 %Nominations 28 %

Waiver / Favor fund 20 %Waiver / Favor fund 20 %

Club passes / memberships 8 %Club passes / memberships 8 %

Other 8 %Other 8 %

12.12. * What is the typical term of your * What is the typical term of your customer’s airline contracts ? *customer’s airline contracts ? *

* Multiple answers ** Multiple answers *

One yearOne year 60 %60 %

Two years 40 %Two years 40 %

Three years 4 %Three years 4 %

13.13. Are you seeing customers moving Are you seeing customers moving towardstowardsairlines small business programs vs. airlines small business programs vs. a standard airline discount contract?a standard airline discount contract?

None 8 %None 8 %

Very fewVery few 12 % 12 %

SomeSome 68 %68 %

A lot A lot 12 % 12 %

14.14. * Who negotiates your customer’s * Who negotiates your customer’s airlines contracts * airlines contracts *

* Multiple answers ** Multiple answers *

TMCTMC 72 72 %%

Consultant 0 %Consultant 0 %

Travel manager 44 %Travel manager 44 %

Finance / Procurement 44 %Finance / Procurement 44 %

Other 12 %Other 12 %

15.15. * What point of sale commission * What point of sale commission programs are you successful programs are you successful in negotiating for your TMC ? *in negotiating for your TMC ? *

* Multiple answers ** Multiple answers *

International International 80 80 %%

Domestic 8 %Domestic 8 %

Specific international markets 44 %Specific international markets 44 %

Specific domestic markets 36 %Specific domestic markets 36 %

16.16. How successful are you in negotiating How successful are you in negotiating amenitiesamenities (soft dollars, upgrades, marketing funds, (soft dollars, upgrades, marketing funds, bonuses) into your airline TMC accounts ?bonuses) into your airline TMC accounts ?

Not successful at all 8 %Not successful at all 8 %

Limited successLimited success 72 %72 %

Very successful 20 %Very successful 20 %

17.17. How successful are you in negotiating andHow successful are you in negotiating andgetting changes made to the financial terms getting changes made to the financial terms and goals of your TMC airline contracts ?and goals of your TMC airline contracts ?

Not successful at all 16 %Not successful at all 16 %

Limited successLimited success 80 %80 %

Very successful 4 %Very successful 4 %

Additional thought and commentsAdditional thought and comments

“ “ Each airline varies greatly in this regard. We Each airline varies greatly in this regard. We have most success with Delta.have most success with Delta.

Worst place is a tie between AA ( universally Worst place is a tie between AA ( universally intransigent) and UA. intransigent) and UA.

UA in particular has been aggressively pulling UA in particular has been aggressively pulling upfront contracts while at the same time upfront contracts while at the same time pushing the Prepay Pass Plus Program which pushing the Prepay Pass Plus Program which we are having more and more success selling. we are having more and more success selling. “ “

Additional thought and commentsAdditional thought and comments

“ “ We have been finding that we We have been finding that we are much more successful in are much more successful in negotiating better amenities for negotiating better amenities for clients with United Pass Plus vs. clients with United Pass Plus vs. their traditional CSA contracts. their traditional CSA contracts. They are not so concerned with They are not so concerned with market share. “ market share. “

Additional thought and commentsAdditional thought and comments

“ “ Our clients are mainly corporations or small Our clients are mainly corporations or small businesses with under 2 mil in travel vol. businesses with under 2 mil in travel vol. Quite a few are small companies with higher Quite a few are small companies with higher volumes of international business / first class. volumes of international business / first class. While some companies have domestic and While some companies have domestic and international carrier contracts, they are small international carrier contracts, they are small and not very attractive. We would prefer not and not very attractive. We would prefer not to promote the United or Continental to promote the United or Continental corporate contracts to our clients…due to the corporate contracts to our clients…due to the loss of commission to the agency…but we do loss of commission to the agency…but we do offer. “offer. “

Additional thought and commentsAdditional thought and comments

“ “ Regarding question 7 “ Regarding question 7 “

When a customer has an airline When a customer has an airline contract contract that is not in compliance, what that is not in compliance, what action(s) is (are) the airline(s) taking?action(s) is (are) the airline(s) taking?

“ “ We have seen airlines pull or reduce We have seen airlines pull or reduce Elite status nominations if the account Elite status nominations if the account is under-performing. “ is under-performing. “

Additional thought and commentsAdditional thought and comments

“ “ Most answers are based on Most answers are based on customers being able to mandate customers being able to mandate use of preferred carriers. “use of preferred carriers. “

Additional thought and commentsAdditional thought and comments

“ “ Volume still drives these Volume still drives these negotiations and is not equal negotiations and is not equal between companies and of course between companies and of course market lift still plays a role. “market lift still plays a role. “