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Air Canada Prods Cos. To Buy In Bulk
By Jay Boehmer
OCTOBER 23, 2006 --
Air Canada last week told BTN that it is offering corporate clients prepaid flight passes as the only way to receive its best negotiated rates. The Corporate Pass, which Air Canada relaunched last month with improved back-office systems, is redeemable on flights in predetermined geographic zones.
Several travel buyers expressed consternation with the air program, while others lauded the program's overall savings on air bookings.
However, buyers who said they are being pushed into the program griped that air passes require travelers to book through AirCanada.com and must be purchased up front—or at least in monthly lump sums—while reporting and tracking capabilities are lacking.
The carrier is not abandoning traditional corporate negotiated rates, but "the better value will always be in the flight pass environment," vice president of sales Marc Rosenberg said. "The traditional contracts still remain. The only difference is they may not be maximizing the leverage in getting the best value. If you conclude that you don't want a flight pass, then I cannot give you flight pass per-segment rates at traditional contract terms. It just doesn't work that way."
Air Canada last week would not disclose adoption levels, but Rosenberg said more companies are signing on to the system following efforts to improve reporting and flexibility in its Corporate Pass product. The carrier last week welcomed its largest Corporate Pass client to date in Canadian telecom giant Telus.
Meanwhile, other buyers are reluctant. "There's concern about the direction that they're going with these passes and the encouragement that's being made by Air Canada for their corporate clients to use these," said Canadian Alliance of Business Travel president Tanya Racz. "It's being met with mixed emotions."
Air Canada is offering three primary tiers of the pass program—for individual travelers, small and midsize companies and large corporate clients. It offers its SME Pass to small and midsize businesses, which includes 30 flight credits assigned to eight employees for use over a three-month period. The Corporate Pass can be used for Tango Plus or Latitude fares by up to 300 employees and offers a higher level of configuration, Rosenberg said. Air Canada in a statement said, "Corporate Pass features easy online management of bookings, upgrades, changes and cancellations; allows single or multiple passengers to fly roundtrip or one way and gives users 100 percent Air Canada status miles."
The carrier released the Corporate Passes in January, but spent much of the meantime reworking its application for companies through focus groups and client outreach, Rosenberg added. The refurbished offering enables "subscription payment" on a month-to-month basis, as opposed to paying for all pass flights a full year in advance, while also allowing the unused dollar value of segments to carry over if the contract is renewed.
"It's customized to each individual client," Rosenberg said. "That is no different than the contracting process we have with these large corporations when they do their preferred carrier contracts. It recognizes their numbers, citypairs, buying habits and delivers back to them a buying proposition—by zone—that allows them to consider the value of buying a corporate pass. The negotiations on the zones, number of segments and actual price is a negotiated process, not a fixed process. You have to take into account the mix of traffic, volume and quality of what they're buying—whether that's low-end fares, business class fares or anything in between."
By purchasing "bundles of flight credits" that use "flat rate ticket prices," Telus director of enterprise services Kathy Pavelich said in a statement, "We estimate Corporate Passes will save Telus several million dollars annually on our travel expenses while providing even greater flexibility for our employees."
The University of Alberta also noted cost savings through the program. Travel manager Joyce Assen in a memo this summer said the university had signed on to the Air Canada's Corporate Pass program. Assen noted it was easy for travelers to book through Air Canada's Web site and garner fares "on average 20 percent lower than our current corporate contract fares with Air Canada."
The university said it purchases "a predetermined number of flight credits up front to be used for flights within two specific zones; the Western Triangle Pass for travel between Edmonton, Calgary, Vancouver and Abbotsford; and the Trans Canada Pass for travel between Alberta, Ontario and Quebec. For each of the passes, the University can identify up to 300 eligible business travelers."
While NAV Canada manager of travel and relocation Alain Legault said his company does not contract preferred carriers since it owns and operates Canada's civil air navigation service, he said many companies in Canada are trying to resist Air Canada's strong push of its pass program. "They are pushing their new product and they're having a lot of resistance," he said.
Canadian Alliance of Business Travel's Racz noted "a few bugs that need to be worked out of the system. It ties back to reporting and adaptability with online booking tools that corporations have incorporated into their policies and procedures. There have been programs in the past where you pay ahead and use as you go, but to have multinational corporations adopt that form of booking policy, it's a different way of doing business."
Air Canada said the Corporate Pass can be customized with clients and managed in conjunction with a company's travel management company. However, the passes are not compatible with global distribution systems, limiting redemption through many corporate- approved channels.
Rosenberg touted the program's GDS independence, which calls to mind the carrier's move in May to shift bookings of lower-bucket Tango fares to its Web site. Air Canada said it restricted bookings of Tango reservations because GDS technology "does not support the new features of Air Canada's simplified fare products."
Rosenberg said global distribution systems do not support its Corporate Pass product—but perhaps would in the future. "GDSs have not yet come to the table with a solution, but they are quite keen on looking at them and trying to solve for it," he said. "If your booking tool has a GDS backbone to it, then it doesn't work. Companies that purchase flight passes now are in a decision tree as to whether they want their TMC involved—many do for obvious reasons." He added: "It is not a direct connect in that it is not linked right now to the third-party software, but over time that will happen."
A U.S.-based travel buyer, who in the midst of corporate negotiations with Air Canada requested anonymity, said that the carrier's pass push is "forcing people to look at alternative strategies. We're finding that WestJet is in a good position to assume some of this business."
Given the pass's incompatibility with GDSs and other third-party systems, the buyer said the program would be an administrative burden, an "accounting nightmare" and ultimately compromise corporate policy. "We've taken a step forward and we implemented our online booking tool in Canada," the buyer said. "Our adoption has increased, it's a great program up there, but this doesn't fit into the program."
While some travel buyers are seeking to avoid the flight pass program, Air Canada said it is hoping to expand it—to both new geographies and more customers.
"The flight passes are currently for North America and we're about to launch into Europe, into the U.K. specifically," Rosenberg said. "Not all business that is contracted to us is flight-pass eligible. You can expect more from us in using flight passes, and being innovative and pushing the envelope in bringing to market a product we think consumers and corporations want to buy."
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