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March April 2017
For Business, Corporate Travel & Meeting Buyers & Arrangers

Ask the experts: how to manage ancillary spend

AIRLINE ANCILLARIES HAVE BEEN around since low-cost carriers entered the market, and when legacy airlines launched their own versions – remember British Airways’ Go and KLM’s Buzz? – this brought ancillaries into their domain. Nearly two decades later, some of those airlines formerly known as ‘full-service’ are now mining ancillaries as a new revenue stream.

The latest expression of that is British Airways’ ditching of free meals and drinks in short-haul economy class, forcing passengers to buy refreshment onboard or at the airport. Meanwhile, American Airlines’ passengers travelling on its new ‘Basic Economy’ fares are not allowed to use the overhead lockers and must pay for any bags too large to fit under their seat to be put in the hold. Charges for lounge access, fast-track through security, seat choice and more are now also fair game – and none of this is likely to be picked up by TMCs or expense management systems. However, as the following illustrates, there is a disparity of views on the subject. Read on...

PETER SNOWDON, multi-national account manager, FCM Travel Solutions

AS AIRLINES INCREASINGLY COMPETE WITH LOW-COST CARRIERS on front-end pricing, there is an opportunity for additional revenue growth via ancillary services. Examples of this include airline lounge selection, which Emirates offers for US$100. Some airlines allow travellers to bid to upgrade their cabin and Virgin offers an option to pay for chauffeur­driven transfers regardless of cabin class.

Recently, the industry has seen consider­able growth in premium economy class, with airlines such as Iberia, Delta and Singapore investing in this product, which appeals to both the corporate and leisure market. This opens up an opportunity for corporates to review policy and consider traveller satisfaction, productivity and budgets, perhaps combining the use of cabin classes: using premium economy on a medium-haul day flight, with business class on the overnight flight, to maintain employee productivity.

Buyers need to work with their TMC to understand additional charges, determine travel policy and take advantage of tools to measure compliance. A key consideration for FCM in moving to the Amadeus GDS platform was to be able to provide richer content and a better end-to-end service. It allows us to book and pay for some ancil­lary services at the point of sale. Any items added by the traveller through expenses can then be fed into the TMC’s reporting tool with a connector, providing the cus­tomer with visibility of the total trip cost.

There is also an opportunity to include ancillaries within the corporate deal, but corporates need to consider the impact on existing fares and what percentage of travellers will use these additional services. Is there a genuine business requirement to include them?

MARGARET BIRSE, senior consultant, CTBR

THE ISSUE OF AIRLINE DEALS AND CHOICES, and having visibility and controls in self-booking tools, keeps rearing its ugly head. Air Canada has been a problem for one travel manager because giving travellers access to the airline’s best fares in a self-booking tool also allows them to purchase lounge passes. Maybe this gets caught up in the expense process, but she isn’t OK with that.

Air Canada passengers can also purchase meals and seat choice, and you cannot report on it or control it. The travel manager has put a message on the website that says, ‘you are not permitted to do this’. However, after somebody reads that once, will they ever look at it again? The airlines see the opportunity to gain revenue through ancillary charges, but where will it end? Where are the controls going to be and what are employees going to have sight of?

The flip side is ensuring your travellers are fed and looked after properly. And with greater focus on traveller wellbeing, do they understand what they are buying; are they making bad decisions that will affect them or their health? For example, if travellers start paying for baggage at the airport and making decisions there, that can get expensive and it’s stressful because they will worry about whether they have made the right decision. The opportunity is negotiating ancillaries into deals. When I was working for Serco, we negotiated extra baggage and ticket changes.

Decision-making based on savings or controls alone might end up creating new costs, especially in airline ancillaries. You need to understand your travellers and your business: are the items you’re including/excluding important to your travellers, and do they match the needs of the business? If the answer is no, then you have potentially added a cost without a reciprocal value – or you have actually driven your travellers outside the programme.

I think the ancillary fee issue is big. For example, if Air Canada is adding ancil­laries for domestic travel within North America, the next stop is transatlantic and worldwide.

Ancillaries are applied to economy class travel, but I suspect premium economy will be exploited for new ancillary fees soon.

RUEDIGER BRUSS, corporate purchasing, global category manager – travel & mobility, Continental Tyres

WE DON’T REALLY MANAGE ANCILLARY CHARGES. Generally, we reimburse in-flight internet, following the logic that we would also reimburse employees on internet in a hotel. Otherwise, the travel­ler can book food items, seat reservations etc if they want, and they pay for that. It is not part of our policy. I can’t think of any other ancillaries that would be relevant, apart from additional baggage, and that is not new. If you are travelling in economy class with two pieces of luggage, you have been charged for the second piece for a long time now.

If flying long-haul, that’s all part of the product. We are mostly in business class, where you can choose your seat, have something to eat and drink and some air­lines have included wireless, so it’s only on short-haul where ancillaries are relevant. If we have engineers going to one of our plants, or to customers, and are taking a lot of equipment, even in business class that isn’t covered because they could be travelling with three, four or five cases. Those are exceptional cases and we have to pay for that.

We have a global policy which defines the maximum that is allowed and each country can decide to be even stricter. I know one or two countries that say if you are travelling just for an hour, there’s no need to pay €15 for internet. And most people check-in online 24-hours before a flight and can choose a seat then. On a short-haul flight, I don’t really like being stuck in the middle seat but it is just for an hour or two.

To me, the problem with ancillaries doesn’t really exist. You can cover all that through the policy and, of course, the more you allow under the policy, the more travel managers create problems for themselves to build that in for all bookings. If one service is provided by one airline and isn’t by another, then they have to figure out how to get that information into the comparison. Take the simple road and don’t allow anything, or allow it and people have to pay for it themselves.

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