May 22 - Impacts of Hidden Airline Fees on Managed Travel Programs


By Kevin Mitchell

Chairman, Business Travel Coalition

There are 2.4 billion viable travel routing options between San Francisco and Boston alone. If airline ancillary fees were added to the mix, the number of travel combinations (fares, fees, routings) would grow exponentially with the addition of each fee.



It takes massive computing power for travel management companies (TMCs) to efficiently present relevant routing options, let alone if ancillary services and associated fees were included. Combined fare and ancillary services prices are currently not automated and presented to travelers for comparison-shopping purposes because airlines have refused since 2008 to provide TMCs with ancillary fee data in a transparent and purchasable format.

Corporate travel managers understand this and are frustrated over the many wholly avoidable problems caused by airlines denying them the automated and dynamic ancillary fee data necessary to run managed travel programs effectively and efficiently.  A static list of services and fees on an airline website hardly represents transparency and offers little benefit for travel programs, particularly when you consider that these fees may or may not apply to any individual traveler on an itinerary-by-itinerary basis.

Consider that the fees may apply to some fares, but not to others according to an individual airline’s fare rules. It may apply for some negotiated rates but not for others. Some travelers may receive ancillary services for free based on the charge card used or frequent flyer tier status; others may not.  The list goes on and on and on.

In order for there to be true transparency, ancillary services and fees need to be combined with airfares via this massive computing power so that fully priced, side-by-side comparative travel options can be presented for a traveler’s consideration. Otherwise, fees remain, for all intents and purposes, completely obfuscated from the millions of disparate options that were once so efficiently comparison-shopped.

True transparency requires that fees be purchasable during the same transaction with airfares. In this symbiotic relationship, there can be no real transparency without purchasability and no effective purchasability without automated and real-time transparent fee data.    

The consequences of this problem for corporate travel managers are significant and growing with each day that airlines refuse to provide their best customers with what they require for success within modern managed travel programs.

Consider these top-line negative impacts:

     - budgeting and forecasting are rendered unreliable;

     - shopping, purchasing and data collection processes for TMCs are more costly;

     - clarity of total air travel spend is clouded;

     - airline negotiations are made more arduous from the lack of comprehensive data;

     - ineffective comparison-shopping reduces marketplace pricing discipline on fares and fees;

     - financial, travel policy and audit controls are rendered less effective;

     - traveler confusion and frustration are growing; and

     - managed travel programs are being undermined.

Lets now examine the role of these fees and the problem of being denied access to them, in a fully transparent and purchasable format, in the larger managed-travel context.

Mission

The mission of modern managed travel is to control costs through travel policy, sourcing strategies, efficient travel management company and travel department operations and the ability of travelers to choose travel options that best balance cost, productivity, convenience and safety for each given trip.

To achieve this mission corporate travel departments and TMCs have the following requirements:

Transparency

Travel departments need ancillary fee and other data as well as price transparency; they need to be able to track employees; they need data to integrate with back-office accounting systems and processes that are workable on an end-to-end transactionable basis.

Clarity of Total Spend

Spend data need to be made clear and in a manner that allows integration with all the other data from airlines A, B, C, etc. The data have to knit together or else they are useless. 

Comparison Shopping

Relevant air travel offerings (airfares and fees) need to be able to be efficiently compared across multiple airlines on an apples-to-apples basis.

Control

All of the processes - the many moving parts, if you will - need to work in a way that enables travel departments to control travel policy and drive compliance. Absent that, organizations cannot manage policy even if they have clarity of spend.

Management Tools

TMCs have an interdependent relationship with their corporate clients; they need what their clients need, and the tools to support them. It is unrealistic to think that TMCs should invest in costly workarounds or manual processes to provide business travelers with airline ancillary services and prices and travel departments with data.

CONCLUSION

The most significant problem with hidden airline fees is the erosion of the effectiveness and benefits of a professionally administered managed-travel program - in short an escalation in costs deriving from diminished control. After four years of airlines stonewalling their most financially important customers’ demands for ancillary fee data, the only reasonable conclusion is that there is a market failure that apparently will only be remedied with U.S. Department of Transportation intervention.  

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