New Players, New Rules

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New Players, New Rules New Expectations Are No
Frills Carriers Ready To Form A New Era In
Business Air Travel
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• New Players, New Rules New Expectations Are No
  Frills Carriers Ready To Form A New Era In
  Business Air Travel
• David Pettigrew
• Regional Director
• Business Travel International
• 20th February, 2004

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• Low-cost airlines are now carrying almost half
  the passengers flying and regional jet service
  has grown 140 percent over the last two years,
  according to a report from the Department of
  Transportation
• CNN Monday 12th Jan

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• In the US low fare carriers out-carry every
  major network carriers in the markets they serve
  in common

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Low-Costs Carriers are here to stay ?

• Depending on who you believe there will be 10- 20
  low-cost carriers in three years
• Some will survive and prosper
• Others will go bust
• They wont go away and they will impact on your
  business
• We have to learn to live with them

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Why are they so Successful ?

• Easy to book (Internet)
• Popular Short Distance Destinations (Leisure)
• Cheaper than Charters own car
• Opportunity for more vacations

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The Low-Cost Model ?

• More seats Less seat pitch no galleys
• Fast turnaround Faster check-in - restricted
  luggage no freight
• Labour Cost Fewer crew multi-task no
  overnight flexible employment terms
• Maintenance costs Single aircraft type leased
  out-sourced maintenance
• Secondary airports Lower landing charges and
  handling fees subsidies more slots
• Distribution No commission. On-line booking.
  E-tickets

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The Catch ?

• Limited Number of Seats at Lowest Cost
• No Frequent Flier points
• Advanced Booking
• No GDS Booking
• Trail of Restrictions
• Schedules Timing
• Secondary Airports
• No lounges to work
• No seat allocation
• No Meals no free headphones no papers
• Price is a moving target

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Issues to consider - Client

• Will use of low-cost carriers dilute your
  existing airline deals
• Are you prepared to accept cancellation charges?
• How do you capture the MIS?
• They often cancel flights if loads are poor
• Will impact on productivity and costs of your TMC
• There will be consolidation some will go bust
• Have to be booked with INDIVIDUAL credit card
  not lodge card or BTA
• Look at TOTAL cost of trip Door-to-door not just
  airport-to-airport

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Issues to consider - TMC

• How will you book
• You will have to search multiple sites
• Unlike scheduled carriers price can be
  immediately perishable
• How will you capture MIS manually? Passive
  segments?
• How much will you charge?
• Quality control
• Security issues

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Experiences from US/Europe

• Big hype to start with but then died down
• There are always some Anoraks who love low-cost
  carriers and internet fares
• 21 of the business travellers using the low cost
  airlines tend to spend more on their hotel
  accommodation thereby negating any saving made on
  the cheaper flight.
• TMCs have deployed software which automatically
  scans multiple sites
• Scheduled carriers reacted to lower fares by
  removing some restrictions
• TMC transaction fee sometimes higher than airfare

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What do we do - Client

• Analyse which of your city-pairs matches
  schedules of low-cost carriers
• Compare fares with existing preferred carriers
  and assess whether its worthwhile also impact
  on carrier agreements
• Ask TMC to include low-cost option in fare
  comparison for these routes may need to mandate
• Review your travel policy to cope with
  cancellations etc.
• Implement procedures for capturing MIS
• If you are using SSR then some of these tools can
  search for web fares
• Pay your TMC for the work they do!!

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What do we do - TMC

• Telling the client to book it themselves wont
  work
• Review work processes to cope with low cost
  airfare search
• Will US/European technology work here?
• How will you capture MIS? Dummy segment Nil
  invoice?
• Be sure your clients understand risks and who is
  taking it

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Discussion Time