Delta Goes Direct - 2001-01-29

<B>Delta Goes Direct</B>
<I>First To Deliver Broad E-Access To Negotiated Rates</I>

By David Jonas

Delta Air Lines last month became the first major network carrier to offer direct online access to negotiated rates for all contracted corporate accounts.

The new system allows clients to cut out transaction costs and to direct their travelers to the Delta Web site to access both negotiated fares as well as special Web fares, which now apply to corporate marketshare agreements.

Delta said the system finally went live after working out technical difficulties it found during extensive beta testing. In just the first few weeks of live operation, the carrier had funneled more than $200,000 in flown revenue through the system and volume continues to grow rapidly. The seven companies that participated in the beta test, as well as a few additional accounts, already are accessing the system. At least 17 more buyers are expected to start soon.

The rollout came 18 months after Delta's Vince Caminiti, now senior vice president of e-business, promised the industry a workable solution to the contentious issue of Web fares (BTN, Aug. 2, 1999). Since that time, several smaller carriers have made available direct corporate bookings through their Web sites, including Alaska Airlines, Frontier Airlines and JetBlue Airways. Other large carriers, including Continental Airlines, Northwest Airlines and US Airways, are in some stage of developing similar, widespread functionality for corporate buyers. American Airlines and British Airways, meanwhile, have been fashioning customized extranet connections for specific accounts.

Despite interest from both buyers and suppliers, several issues need to be ironed out before direct corporate bookings take hold. For one, buyers are concerned their travelers will be confused when confronted with additional booking methods. Also, both sides need to determine exactly how such third-party facilitators as E-Travel and GetThere fit into the equation.

Nevertheless, a few of Delta's beta test customers said the system works well and offers an incremental savings value. "We are not trying to do anything revolutionary, it's simply good supply chain management," said Dan Tappen, IBM global lead for airline procurement. "There are routes that fit the procurement model where the agency need not be involved. It is another expense we can forego as long as the purchasing decision can be handled through Delta's fulfillment." IBM began using the system for just a handful of simple city pairs to examine the system's functionality. It now is reviewing expanded usage, but said more complex itineraries still will be handled through its agency. The company also uses a similar, more individualized extranet connection to American.

Southern Co. of Atlanta also was part of the initial beta test group and recently boosted its usage of the Delta system. "In the course of the beta test, I saw lots of improvements and streamlining," said corporate travel manager Gail Trombley. "The travelers love looking at the seating charts and itineraries, and the switch from corporate.delta-air.com to simply delta.com helped a lot."

Southern, with $8 million in annual air spend, began by directing its 50 most frequent travelers to the Delta site. It now is informing more travelers of the system's availability. "We are going to net-nets in February, so now is a perfect time to tell our people that delta.com is another avenue they can use to save us money," Trombley said. She said most trips also include hotel and car bookings that require transactions through the travel department, and there is no targeted goal for savings through transaction fee reductions. "But for repetitious trips, direct booking is a great tool. We tell the travelers to think of a gas station: Use the travel department for full-service and delta.com for self-service."

Though travel managers are seeking to share in any distribution savings realized by the carrier--an approach now being explored at Continental, for example--Delta general manager of corporate programs Scott Slater said it is more of a cost-savings scenario than a discount-enhancing one. "For us, we don't have to pay GDS fees. For corporations, they don't have to pay transaction fees," Slater said. However, he acknowledged that Delta is educating its salespeople to "expand conversations beyond the standard share-for-discount."

Slater added that Delta's savings will be earmarked for the system's operating costs, including research and development and support. That support includes a dedicated 800 number that travelers can call to make changes to their itineraries since, after all, the account's travel agency would not be involved in such reservations.

In developing the product, Delta changed its strategy regarding such third-party facilitators as GetThere and E-Travel. Initially, the carrier had been looking at customized screen scrapes, internal coding that would allow a third party to access the Deltamatic booking engine. Now, Delta is creating a common booking engine for third parties.

That common booking engine is expected sometime this year and first will connect the booking mechanisms of Delta.com and airport kiosks. It then will be applied to external connections, such as those facilitated through corporate online booking engines.

"This common front door is more efficient for us because we no longer have to develop individualized direct connections," Delta's Slater said, citing the potential benefits of XML development. "One set of code will always work."

Delta's direct booking module captures all necessary data--including O&D, passenger and ticket information, fare used and any resulting savings--and makes it available to travel managers in a separate area on the site. That information, updated within 24 hours of new reservations, then can be uploaded into standard spreadsheet programs for reporting and tracking purposes.

The carrier is working on a Web-based SkyMiles management tool that allows travel managers to easily update Delta's database of all qualified corporate travelers instead of inputting all the information manually. The carrier also will continue to consider hotel and car rental bookings on the system, as well as meetings functionality, which could be facilitated by a third party.

Though some corporations welcome the idea of empowering their travelers while cutting out extra costs, others are not so keen. "Expecting travelers and travel arrangers to access multiple sites to book travel reservations is inefficient and cumbersome," said Pete Buchheit, director of travel and meetings services at Towson, Md.-based Black & Decker. "I have neither the staff, time nor interest to manually integrate multiple databases, nor do I have the budget to hire a third party to do it for me. When it comes to data, fragmentation is bad; consolidation is good."

Furthermore, travelers themselves can become confused when confronted with multiple booking options, especially when they are accustomed to simply picking up the phone.

Slater said Delta had anticipated the difficulty. "We found that the more successful corporations using this are doing so by sending travelers through a travel intranet page," he said. Such intranet pages can instruct travelers on which channel to use, depending on the trip they have in mind, and provide a direct link into Delta's corporate booking system. IBM, for one, links directly to the system from its heavily trafficked intranet travel page.

"This is not a complete solution to a company's travel program," Slater added. "It is a niche product used best in high volume markets where we have a clear schedule advantage. We can't and shouldn't influence how a corporation interacts with Delta. The strategy is to create a portfolio of options."

US Airways, which is developing its own direct booking product for corporate accounts, agreed that a new distribution option means added confusion for travelers. "The challenge for a larger corporation with discounts on more than one carrier is deciding when and how travelers can shop online," said Theresa Fox, US Airways director of e-commerce and distribution strategy and development. "But our system is designed for large corporations located solidly in our core markets where they need not compare two or three discounts."

Though the carrier did not report much progress since early last year (BTN, April 3, 2000), it continues to work on its own initiatives in a "business as usual" approach while it works through the proposed merger with United Airlines. Fox said a short period of beta testing with a handful of corporate accounts will begin by the end of the quarter, followed by a wider rollout. Like the Delta system, special Internet fares will count toward volume or share agreements, and savings will be realized through the more efficient channel.

US Airways also has not come to any meaningful agreements with third-party facilitators, though discussions are ongoing. "We are concerned about GDS fees, but with some third parties, there won't necessarily be significant savings," said Paul Leyh, the carrier's global director of corporate programs. "In some third-party deals, those savings just move from one pocket to another and we don't see much at all."

Some buyers, however, prefer third-party involvement. "What I have continually discussed with the airlines is to open a porthole to the corporate booking products--GetThere, TripManager, etc.--so that their Web fares are available through our preferred automated product," said Cindy Heston, manager of worldwide corporate travel for Thomson Consumer Electronics in Indianapolis. "I will not encourage travelers to jump from Web site to Web site collecting their air/hotel/car from different sources. This is going backwards. We need to improve the GDS processes, not abandon them.