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Several U.S. carriers made a heart-warming gesture this week by abolishing charges for changing or canceling a domestic ticket.
There’s a range of caveats, of course, but overall the move is intended to rejuvenate the leisure travel market. Airlines recognize coronavirus will affect travel plans, and so passengers will need to make last-minute changes. It’s also a costly gesture, with these types of fees reportedly netting airlines billions of dollars overall in 2019.
Apart from the cost savings for passengers, which can reach $200 per amendment, it’s got some in the corporate travel management community thinking: could this catch on?
The whole topic of fees is a contentious one. In short, corporate travel agencies may want to think about ditching their own transaction fees, and instead think more about subscriptions to hedge against future downturns.
Since the refund debacle began earlier this year, many airlines swiftly waived change fees, but it’s only this week they’re saying it’s goodbye for good.
“We’ve said before that we need to approach flexibility differently than this industry has in the past, and today’s announcement builds on that promise to ensure we’re offering industry-leading flexibility, space and care to our customers,” Delta CEO Ed Bastian said earlier this week.
Agents of Change
Will travel management companies decide it’s time they take a similarly flexible approach as well? They should, according to AmTrav’s president, who wants to see an end to “penny pinching” and “menu pricing”.
“There’s more discussion surfacing regarding different pricing models, but it’s all about the travel management company, because they need a different pricing model to survive. But it’s going in the wrong direction, it needs to be about the customer,” said Craig Fichtelberg.
He argued business travelers have never really liked their agency’s classic transaction fee model. “The problem is travelers don’t like calling the agency because every time they do, they get charged,” he said.
Fichtelberg believes this latest airline change fee development plays to a new vision of travel management turning into a software-as-a-service model, and gives license to agencies to also end their fees.
“You’re not going to be penny-pinched for a change, or an after-hours call,” he said. “Travel management companies today have this menu pricing, and there are different fees for everything. That model becomes harder, because even airlines aren’t charging for those same services.”
He added American Express Global Business Travel’s reported introduction of a $25 contact fee per call or email, which applies when its consultants communicate with employees of clients that pay Amex GBT on a transaction basis but no transaction occurs, goes against the grain of where travel management should be heading.
“What was Amex GBT’s knee-jerk reaction to Covid? We’re going to start charging every time you contact us. It’s crazy,” Fichtelberg said. “Travelers didn’t want to call before because they were getting hit with a different fee, like a change. It’s the typical knee-jerk reaction from the travel management space. They want to raise the revenue, because they don’t have the power to better automate things through one platform to lower their costs … the platform I’m envisaging is a central platform that includes support, the technology, reporting, so you don’t have to pay other charges.”
One consultant disagreed though, arguing that agencies have a challenge ahead of them and Amex GBT’s move is simply its way of nudging clients towards using self-serve online platforms.
“Amex GBT has done the right thing. They’ve set something in motion that everyone will follow,” said Martin Warner, principal at MW Travel Consultancy. “The customer will scramble to try and understand what the implication is, how can they can avoid or minimize the cost. There’s an education of the traveler here — look, you can do these changes online for free, either through the original agency booking tool, or with the airline. A lot of company travel managers will need to educate the traveling workforce.”
Amex GBT told Skift the contact fee was introduced due to extra demand for its travel counsellors, with travelers calling for guidance. It also launched a free-to-use information platform, Travel Vitals, in response.
“This situation has highlighted how the transaction fee model is not sustainable in the long-term,” said Martin Ferguson, vice-president, global communications and public affairs at Amex GBT.
“Itinerary-specific information is delivered via GBT’s digital channels, and travel managers can also send automated, timed notifications to their travellers via mobile app, email or SMS. Of course, our counsellors continue to be available via phone, email or webchat, but to make sure all our services are sustainable, a contact fee has been introduced for customers on a transaction fee pricing structure,” he added.
Adding It All Up
However, automation doesn’t come cheap, and is easier said than done when it comes to the complex world of airline distribution. And while airlines may remove the fees, it doesn’t mean there’s no work involved in amending a ticket.
“If travel management companies have to perform an activity, then they’re going to want to charge for that. Whether it does, or doesn’t, mean there’s an additional collection being taken is almost irrelevant,” said GoldSpring Consulting associate Chris Pouney. “Just because the airlines aren’t charging, it doesn’t mean travel management companies don’t have to.”
However, he added that if the physical act of changing it can be automated, the agency has much less of an argument for charging a fee.
Meanwhile, the removal of any barrier should be welcomed, as frictionless travel continues to be the industry’s holy grail.
“Anything that removes barriers and delivers more flexible booking conditions must be good for the recovery of travel. There’s little doubt people will hesitate to make future reservations if they feel there is going to be a battle over change fees, cancellations and obtaining refunds in the event their trip is affected by Covid,” said John Harvey, managing partner at consultancy Harvey & Heywood.
“The simpler and more transparent the process can become, the better. This applies equally to direct sales as well as sales made via intermediaries. Airlines need to make all channels as frictionless as possible and encourage customers back to make forward bookings.”
Spreading the Love
While U.S. carriers are leading the way, there are tentative signs that greater flexibility could make its way across the pond. EasyJet is offering its managed corporate customers up to 30 percent off its Flexi fare during September and October. That fare includes extras like the ability to change the date of travel, free of any charges, within one of day either side of the original travel date. “We hope the discount will encourage business travel as well as provide travelers with enhanced levels of service and comfort,” James Marchant, senior business development manager at easyJet, told Skift.
As for the U.S. carriers, the question remains as to how long the goodwill will stay in place. “It’s a step in the right direction, although I am unsure if this will be permanent in the long term,” said Gaurav Sundaram, president of ProKonsul Consulting. “It will be interesting to see how legacy carriers in a post-Covid world recover revenues that they lose by this action. Given the enormous pressures on the bottom line, I would not be surprised if some of this gets added back in the medium term.”