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The days of long airfare negotiations are over. For now, a 15-minute Zoom call should do it.
That’s the vision set out by Mark Muren, head of global sales at British Airways who also said the aviation industry should be more transparent, and open up to experimenting with new types of data.
Muren shared his preferred method of dealing with customers and agencies during a virtual conference held by the UK’s Institute of Travel Management on Tuesday. But first, the only contract he wants to shake hands on is a “get flying contract,” because airlines can no longer strike hyper precise deals.
“Really, all of our deals, and all of negotiations, need to be focused on their ‘get flying’ contract. Just get people flying,” he urged. “And as we start to get people flying, we’ll have an understanding of what the shape of travel looks like, then with each of the companies we can start to build programs that are a little bit more long term.”
Speaking on a panel called “Supplier contracting in the new world,” which also included the co-founder of airfare tracker and trading tool Skytra, he added: “The days of fare agreements are probably behind us, not because we’re not willing to make commitments, but because it’s difficult to predict. We’ll be more dynamic, and that’s facilitated by technology.”
That technology, he stated, was video conferencing. Rather than the corporate travel sector fearing its impact, as it replaces face-to-face meetings, it should be leveraged. “We’re able to meet, discuss and modify our relationship much faster than having an event, to schedule a meeting months in advance, or a review or a negotiation session. We can literally have a 15-minute face to face. We’re excited about that,” he said.
Muren proposed these should be held more often and more tactically, allowing both sides to be more transparent. “Your customers want us to be successful, so we can continue to provide them with a network, and we want them to know where we’re going so they can plan around that,” he added.
Echoing United Airlines’ own plea to its corporate customers to help it rebuild its network, Muren called for the corporates to give his team as much notice as possible, pledging that information wouldn’t be used for ulterior motives, but simply to help the airline know where to plan routes.
A Big Gamble
The future will also involve more dynamic pricing, as with so little flight data over the past six months it’s difficult to set new negotiated fares based on prior volumes or market share.
It’s already gaining traction with travel managers setting these types of deals with hotel groups. With room rates expected to remain depressed, a contract based on dynamic prices — where travel buyers negotiate a discount on the best available rate on the day — means companies can take advantage of the troughs in room prices.
Elise Weber, co-founder and chief sales and marketing officer of Skytra, claimed her company was identifying an increased need for more live data, due to uncertainty over where airfares are heading. Skift covered the launch of the controversial platform earlier this year.
“You could rely on a monthly update, but today that’s not possible,” she said. “Air travel buyers and sellers often contract on a negotiated base using public fares… the next question is, what is a public fare?”
Weber said Skytra, which is a division of Airbus, had amassed a global ticketing database covering 83 percent of worldwide tickets, by value, on a daily basis. This could allow both parties to recognize early trends, which could restore trust.
And to protect against any volatility she claimed custom-made Skytra Price Indices, which represent global airfare movements and can be traded, would allow airlines to hedge their yield and corporates to hedge their travel budget. The tool is not yet live, however, as it awaits regulatory approvals.
“Flexibility does matter. You can rethink your contract,” she said, arguing this type of data, coupled with a risk management tool, could bring stabilization to the market.
Moderator Jo Lloyd, partner at Nina & Pinta Consulting, asked British Airways’ Muren if he would use the platform. “You hedge fuel. What about your fares?” she asked.
Muren said that as an airline, British Airways was open to trying anything.
“The fact is, the data we need to bring in to corporate contracts is a different data set than we had previously. So we’ll take whatever data our partners make available to us. It’s about being as transparent as possible. If this type of tool is helpful, we’d welcome that conversation,” he said.
However, as Skift reported, hedging tends to involve two sides. The system may end up pitching airlines, which are on the selling side of the trading system, against corporate travel agencies and corporates, which are on the buying side. One side inevitably loses out — potentially not the transparency airlines are calling for.
Meanwhile, there’s the barrier of corporations allowing employees to travel to overcome. According to the institute’s survey of 145 corporate buyer members in the first two weeks of September, 40 percent said business travel was unlikely to resume in this year’s fourth quarter. It may be worth pencilling in a little longer for those Zoom meetings.