Some 60% of consumers, and virtually all managed travel programs, purchase their air tickets through the travel agency and TMC (travel management company) sales channel where airlines participate but yet do not share their optional services fees. Corporate senior management often ask travel managers how the hidden airline fees that they read about in the press impact their managed travel programs. Below are 5 implications all of which have the potential to significantly increase the cost of travel for corporations.
1. Airline Prices & TMC Transaction Fees.Corporations are paying higher prices in the short term because other lower all-in offerings may have been chosen by the traveler were fees disclosed upfront; travelers cannot compare the full cost of air travel across carriers. Longer-term, fees will remain inflated because they are not being disciplined in the marketplace by comparison shopping. What’s more, extra efforts by TMCs to find, explain and purchase these optional services leads to higher transaction fees for corporations.
2. Travel Program Support.Corporations no longer have access to a growing portion of content (fees), including rebundled packages aimed at business travelers. Fragmented content undermines the integrity and cost effectiveness of managed travel programs as well as traveler support.
3. Policy Compliance.With hidden fees - mostly untrackable - travelers have opportunities to spend money outside of corporate travel policy parameters increasing costs for their employers.
4. Data Reporting.The overall hidden fee problem leaves corporate travel departments with incomplete data to prove they have met airline contractual obligations and to effectively negotiate new agreements; this can lead to higher fares-paid.
5. Airline Cost Transfer.Some airlines apparently seek to use required marketplace access to fee information as a lever to flip the economic model wherein TMCs pay airlines for this content and corporate travel programs reimburse TMCs for this cost. In effect, virtually all airlines’ product merchandising and distribution cost could be borne by the customer, with the corporate travel departments having little control over the drivers of these costs.