Travel- Some Insights

Although most major U.S. carriers publicly proclaim that they don’t negotiate corporate discounts below published market fares, the American Express survey on business travel management found that 38 percent of U.S. companies had access to, or already had implemented, negotiated airline discounts. The availability and mechanics of these arrangements vary widely by carrier.

Fred Swaffer, transportation manager for Hewlett-Packard and a strong advocate of the net-pricing system, has pioneered the concept of fee-based pricing with travel-management companies under contract with H-P. He states that H-P, which spends more than $528 million per year on T&E, plans to have all air travel based on net-fare pricing. “At the present time, we have several net fares at various stages of agreement,” he says. “These fares are negotiated with the airlines at the corporate level, then trickle down to each of our seven geographical regions.”

Frank Kent, Western regional manager for United Airlines, concurs: “United Airlines participates in corporate volume discounting, such as bulk ticket purchases, but not with net pricing. I have yet to see one net-fare agreement that makes sense to us. We’re not opposed to it, but we just don’t understand it right now.”

Kent stresses, “Airlines should approach corporations with long-term strategic relationships rather than just discounts. We would like to see ourselves committed to a corporation rather than just involved.”As business travel expenses nose upward, companies are realizing that better cost-management techniques can make a difference.US. corporate travel expenses rocketed to more than $143 billion in 1994, according to American Express’ most recent survey on business travel management. Private-sector employers spend an estimated $2,484 per employee on travel and entertainment, a 17 percent increase over the past four years.

Corporate T&E costs, now the third-largest controllable expense behind sales and data-processing costs, are under new scrutiny. Corporations are realizing that even a savings of 1 percent or 2 percent can translate into millions of dollars added to their bottom line.