Cos. Prepare Return To The Air

As businesses get on with travel and travel companies get on with business, corporate buyers and their airline partners will have to work together in a blurred if not unfamiliar framework.

Nearly a month since the Sept. 11 disaster, both sides continue assessing the ramifications and determining how and when to restore corporate programs and a semblance of business travel normalcy. Ongoing two-way communication, critical last month in the immediate aftermath, remains extremely important in clarifying policy and procedural changes, contracting concerns and travel patterns and volumes.

Companies contacted by Business Travel News said travel volumes had returned to anywhere between 30 percent and 80 percent of normal operations. Airline sources confirmed that wide range, estimating general client travel volumes a week ago at half of regular levels and growing steadily.

Looking ahead, travel managers differed on the anticipated pace of business travel recovery. Some said a rebound is primarily dependent on the economy, while others expected a gradual ramp up into next year. In either case, business travel will pick up more quickly than leisure travel, which some industry analysts said would not return to pre-attack levels until next summer. Of course, much hinges on developing national and global events in the weeks and months ahead.

"Preliminarily, we think we'll be back to normal in terms of travel by January," said Marge Gordon, corporate travel manager at Lexmark International in Lexington, Ky. "It will be a rocky road, but we are already back to 70 percent just three weeks later."

Findings from several recent polls echoed those sentiments as most surveyed companies predicted significant—but not complete—recovery by early next year.

The Business Travel Coalition asked 137 corporations what their volumes would look like in January. Only 19 percent said travel will be at or above Sept. 10 levels, while 56 percent said it will be below 80 percent. Of more than 200 corporations responding to a National Business Travel Association survey, 70 percent anticipated travel recovery within three to six months. Another 18 percent expected it to take at least 10 months.

Filling the void in the interim will be a variety of familiar air travel alternatives. State Farm Insurance Companies in Bloomington, Ill., is working to get rental or company cars for travelers still too nervous to fly and Bethpage, N.Y.-based Cablevision currently is in negotiations with Amtrak.

Travel managers also reported a spike in both usage and interest in tele-, video- and Webconferencing in the weeks immediately following the attacks, but whether that represents a short-term blip or a lasting trend remains to be seen.

"I do not think business travel will ever return to the volume it once was and we are looking more at videoconferencing," said Ron Sharer, head of corporate services at Ciba Vision, Duluth, Ga. "We have two facilities and may consider adding more."

CH2M Hill in Greenwood Village, Colo., currently examining its travel policy with HR, also is more seriously considering net meetings and videoconferencing but has not yet enacted any blanket policy changes. However, like many companies already running thinner travel operations due to the weakened economy, CH2M Hill found a few procedures to tweak. For example, it now runs weekly reports from its agency to see where its travelers are going. "It is one thing to get after-the-fact reports, but now we are getting updates on a regular basis," said corporate travel manager Deb Vasseur. "Now more than ever, it is important to use the designated agency."

Lexmark International added more levels of approval for international trips and is discouraging group and office-to-office travel. State Farm is discouraging international travel, "but if you do go, we provide information that we suggest you read first," said Melinda Samp, supervisor of the company's business travel center. "We have been working closely with our security people to make that information available."

Meanwhile, communication between airline sales reps and corporate clients, a traditional area of frustration for many companies, was paramount in the days following the attacks as travel managers worked to get their travelers home. Continued dialogue in the weeks and months ahead will allow travel managers to not only digest and disseminate information on new security procedures and airline scheduling, but also make sense of existing and upcoming contracts.

Buyers universally expressed high praise for American and United and generally positive praise for other carriers. Even so, there were instances of poor communication from specific carriers, vexing travel managers and prompting a reevaluation of supplier relationships. "We have quite a few airline partners and we are seriously considering slimming down," State Farm's Samp said. "This really showed us who are our closer and better partners."

The same is true from the airline perspective, as carriers try to determine how best to piece together operations and sales functions. "It is a two-way street," said Phil Stumpf, manager of national sales at Northwest Airlines. "We are trying to find out from clients how their company is doing, if they are changing policy or restricting travel. We are in search of information as much as they are and asking for estimates."

Buyers also will have to address abnormally high numbers of unused nonrefundable tickets, duplicates and other ticketing issues. "It is going to be an accounting nightmare for this whole period," said Caro Cook, transportation officer at the International Monetary Fund. "But we all need to work hard and quick."

Policies on nonrefundable tickets will be evaluated by each individual carrier on an account-by-account basis, depending on ticketed travel dates. Stumpf expected refunds to be granted for all canceled flights, but not necessarily for flights that have been operating as scheduled. "Carriers will have to have stringent guidelines because they don't have the cash to refund," he said. "Sure, people want their money back. But if everyone gets their money back, there won't be an airline."

Any refunds given to clients likely will be slow in arriving as carriers work to get their books in order.

Meanwhile, many corporations will fall short of contract volume commitments in the near term and airlines will understand why. Also considering protective contract clauses, deals are unlikely to be pulled, though many travel managers have not yet had such discussions. "We hope the airlines will take the initiative to contact us, talk about our contract and work out a better deal that will help both of us," Sharer said. "They recognize the slippage and that volume numbers just can't hold up."

"We will look account by account to see what we need to do in terms of adjusting goals," said a source at a major carrier, pointing out that reduced schedules were not finalized until last week. "But if we reduce by the same percentage as our competitors, there may be no change for market share-based agreements, which almost all of ours are."

Certainly not at the top of the priority list in the weeks following Sept. 11, negotiations for new airline contracts will resume as corporate travelers return to the skies. Northwest's Stumpf said negotiations in progress before Sept. 11 have been ongoing and relatively unchanged, aside from minor legal clauses added to contracts. "The attitude moving forward, on both sides of the table, is that we need to get business done," he said. "I have had more people since Sept. 11 say they want to finalize agreements than saying they'd rather wait. People just need to get back to business."

Other carriers, however, told BTN that many contracts in the pipeline were pushed back until both sides are ready to resume negotiations. Similarly, many contracts set to expire last month and this month are being extended.

Some travel managers, too, have taken a wait-and-see approach. Georgina Smith, Cablevision's vice president of travel, said she will not initiate any contracting discussions before Jan. 1. "I don't think the airlines will really know what is going on much before that," she commented. "Over the next two months, everything should be put on hold because we need to first know what is going on with the 'W' word."

Potential military campaigns aside, it remains to be seen exactly how new contracts will be crafted from this point forward as carriers and buyers appraise altered travel patterns, volumes, competition and negotiating leverage. "You need a few months of solid data before you can even begin assessing," said a source at a mega corporate travel agency. "It will be December at the earliest before all the guesswork can be removed."

Complicating that challenge is the expected change and/or reduction in airline sales reps brought on by companywide layoffs and furloughs throughout the industry. Airline sources confirmed territorial reorganizations and the possibility of accounts losing their familiar sales reps.

Nevertheless, IMF's Cook said it is important to work cooperatively. "I'd be reluctant to try to squeeze more out of a good airline deal," she said. "I expect airlines to support me in difficult times and I'll do the same for them."