Air Insights

Start thinking now about what air programs of the future might look like - and how your strategy will have to change.

COVID-19 and Managed Air Programs

Business travel has all but come to a halt. We're seeing there are regions and industries where there is still a small amount of travel, but we’re at somewhere between 5-10% of the pre-pandemic volume.

For the first time possibly ever, there is virtually no air travel for business. What does that mean for Travel Managers? What it essentially means is that right now, there is no program performance to "manage," the current priority being managing the refund process. While that doesn't mean you should totally ignore your program for the duration of the crisis, right now most airlines are not willing - or even available - to discuss future terms. Airlines are scaling down and furloughing employees, and with no visibility into when the pandemic will subside and countries will lift their travel restrictions, it is difficult to predict what will be put back on the market.

The first networks to be reactivated will be domestic (it's already beginning in mainland China), followed gradually and slowly by intercontinental. It will start in Asia, followed by Europe and finally North America. We're looking closely at transatlantic business travel routes - like JFK to Heathrow - to act as a signal that business travel is resuming. It will not only mean that government restrictions are being rescinded, but also that demand is starting to pick back up. Gaining back travelers' trust will be the success factor beyond pricing stimulation. It is unlikely that travel will be back to 2019 levels for several years. A "V" shaped recovery is not a likely situation, with a "U" shape model quickly becoming the consensus today. Unfortunately, we also must prepare for the fact that a "W" shape scenario could also occur.

To source an air program, you need to know your own travel footprint and you need to know the airline’s network. Today, we don’t know either. With little to no business travel, and it is difficult to predict how the return to travel will look for corporates and employees who become used to virtual collaboration alternatives during these unprecedented times. In addition, we already know that airline consolidation will accelerate. Some airlines are likely to be grounded, and we can expect to see mergers as well as Joint Ventures and Alliance’s memberships changes, which will limit buyers' options in the future. So many unknown factors mean that trying to negotiate new terms with airlines today wouldn't make sense. Next year's air programs will likely look very different than last year's. As networks resume, airlines consolidate, new pricing strategies unfold and corporate travelers start to fly again, the Advito Air team will constantly engage carriers to adjust our clients' program to meet corporate buyers and travel managers' goals.

Olivier Benoit, Vice President and Global Air Practice Leader - Advito

"The corporate segment, after the crisis, will remain the most profitable segment for airlines."

Let's explore some other considerations that travel buyers will be thinking about both during this hiatus, and when travel begins to return.

Pricing

Multiple factors impact airline pricing. If we look at a fundamental driver - GDP growth - we can assume that availability will shrink, and different airlines will adopt different strategies to resume business. Some airlines will likely try to avoid a price war, carefully putting planes back in the air to avoid over capacity on key routes. Flooding the market with too many seats will drive prices down dramatically.

We don’t expect all airlines to collectively adopt the same model when rebuilding their network. For example, large legacy carriers that are supported by a domestic market will have a different strategy than other groups, like low cost carriers.

Refunds

From the airlines' perspective, it makes sense that they don’t want to refund cash. While this might not be the best solution for corporate buyers, we are optimistic that large travel buyers will find a solution with their TMC partners. The corporate segment will still remain the most profitable segment for airlines (as it was pre-pandemic).

Refund management will differ by business. Some companies will be able to use the vouchers, and some will need to protect their own cash flow - it depends on how the crisis is affecting the buyers’ side. We believe that the airlines will be more flexible with their corporate clients when it comes to refunds than they will be individual travelers. Refunds or credits will be a negotiation point with airlines when contracting.

Air programs will change, they will become more complex. And the key question will be - how can we engage travelers?

Take a dynamic approach

Ongoing engagement with suppliers adjusts for both the corporate travel footprint and the airline market in real-time.

Clients that have adopted Dynamic Performance Management (DPM) are in a good position to quickly get back to travel when it is safe to do so. We are building models that will allow us to assess the impact of the crisis on their programs, and build a strategy for them to ramp back up in an agile way as airline networks come back online.

Because we are not doing traditional sourcing right now - DPM is the only relevant approach.

Five things travel managers can do to address health & safety concerns

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Educate yourself on the different guidelines established by the top aviation authorities. The ICAO’s COVID-19 Aviation Recovery Task Force (CART), in collaboration with IATA, published a comprehensive guide for air transport operations to mitigate risk during the COVID-19 crisis.

Understand which measures your travelers consider to be most important for ensuring safe travel. According to the results of a recent BCD Travel survey, frequent and enhanced cleaning tops the list, followed by mask requirements and procedures aimed to increase social distancing.

Evaluate new biosafety procedures announced by your key suppliers. Departure, transfer, and arrival airports need to be taken into consideration as well. Which airports are doing more to mitigate risk for your travelers?

Review your travel policy. Think about what constitutes essential travel for your business and what can be accomplished through Virtual Collaboration. What are some policy adjustments you can make to help safeguard your travelers’ wellbeing? Relaxing the requirements for business class approval, for example, can improve traveler confidence and make a critical difference to their exposure risk on longer flights.

Communicate with your travelers. Provide up-to-date guidance on what to expect, how to pack, and new habits to keep in mind as they begin traveling again. Regardless of airline and route selections, travelers should consider the following tips to stay healthy throughout their journey.

  • Keep your distance and avoid congested areas throughout airport checkpoints.
  • Reduce interaction with airport staff by checking in online, selecting electronic boarding pass options, and using the self-service bag drop.
  • Carry personal protection items including face masks, gloves, hand sanitizer, and disinfecting wipes.
  • Bring your own food and beverages (if permitted) to avoid unnecessary physical contact.
  • Pack light and avoid overhead lockers to further limit physical contact. Many airlines have also revised their carry-on limitations.
  • Be prepared to complete a health questionnaire or present a health certificate depending on the policies specific to your airline and/or airport.
  • Choose a window seat to limit your exposure to passengers and crew moving through the aisle.
  • Wipe down your seat and surrounding surfaces with disinfecting wipes as an extra precaution.
  • Avoid moving around midflight or using the onboard facilities if possible.

How will travel buyers' priorities shift in the new future of travel?

Duty of Care. Particularly when it comes to compliance. It is crucial that companies know where their travelers are and how to assist them at all times. Secondly, travel policies will need to be revised. There will be a whole new list of considerations for both travel managers and travelers going forward.

Another area where we expect to see significant investment from clients is Virtual Collaboration. What did we learn from this crisis? That having a virtual infrastructure in place and ensuring that employees know when and how to leverage it is crucial for business continuity when travel disruptions arise. Sustainability will still be a top priority for travel managers going forward and over the next several weeks, we will explore how to link the ramp-up back to travel with program sustainability goals.