Whether you are an employee of a small to medium-sized enterprise (SME) or a larger corporate, as a business traveller your travel experience will be different from that of an individual business traveller. Whether it's better or worse depends to a large extent on the effectiveness and the priorities of whoever is buying the travel for your company, but there is no mistaking the differences.
The merger of Air France and KLM provides a good test case for this. From the perspective of the airlines it was an opportunity to develop a comprehensive travel solution for corporate clients, and one that is tailored to the size of the client.
The name of the product aimed at larger corporates – One – reflects both the aim of merged airlines ("to become one face to the customer") and the idea that in one package, global corporate clients could find what is now often referred to as a "solution".
Vikram Singh is director of business development of Air France-KLM Global Business. He divides the corporate market into three basic segments: "Firstly there are the SMEs. The defining characteristic here is that there's a fair amount of owner initiative involved, with the line between management and ownership often very thin – or even with the management being synonymous with ownership.
"The middle segment would consist of public companies or listed companies, but ones with their own profit and loss, and with local procurement policies and so separate travel managers. Then finally you'd have the global corporations which have consolidated their operations and, more specifically, consolidated their purchasing."
In the case of the merged Air France-KLM, two separate products were developed: Blue Biz for the SME market and One for global corporations.
How do they differ? Firstly, by the way the contracts are negotiated.
"Large companies want to negotiate directly with the airlines," says Singh, "both because of the volume of business they are booking and because they have centralised their procurements. For these companies, the travel and expenditure spend might be between five and 10 per cent of their cost base, so they want to control it as closely as possible and they recruit highly specialised experts who are familiar with the travel procurement process. In many cases they are helped by travel management companies, which have consultancy services to help a company put together a request for proposal (RFP), which goes directly to the airlines."
Other airlines organise things differently (see table). At British Airways, for instance, there is no distinction in the product offering between the SME market and larger corporates.
"The qualification for On Business is volume of travel, and we have all sorts of companies and organisations in the programme," says Alan Burnett, who heads sales and marketing, travel agents, corporate sales force and corporate travel agents.
He gives the example of law firms: "Often they have many regular travellers but little or no co-ordination between them. They have quite a lot of independence, don't have a purchasing department for their travel and so might be missing out on the benefits which accrue from the On Business product, although they may all individually be members of the Executive Club. Once they see that there is a chance for the company itself to earn and redeem points on flights and other products, however, there's an incentive for them to join."
This mention of British Airways' frequent flyer club, the Executive Club, is a consistent element in the product offering for SMEs from airlines – a corporate loyalty programme. The idea is a simple one: if loyalty works for individual travellers, it will also work for corporations. On Business members can log onto the website with a pin number to see a record of their travel and points earned (of course the company controls who has access to this information). Points can be redeemed by anyone within the company, provided the travel manager green-lights the travel.
Alitalia's Alicorporate offers a twist by enabling the individual traveller to earn miles for his or her own benefit, while the company earns cash back. Again, it is the travel manager who decides who benefits from the corporate programme. Cecilia Sabucci, Alitalia's sales and marketing co-ordinator for Northern Europe says: "The individual can still be a member of a frequent flyer scheme but the company can decide, upon signing up, whether just employees, or families as well, can benefit and to what extent."
So, do the various corporate products allow travellers to enjoy lower fares? In the case of British Airways' On Business, savings come as a result of volume bookings.
Burnett explains: "Price plays a part as it would with any airline on volume, and we have a combination of deals in terms of discounts, front-end net deals, up-front discounts, and back-end rebate deals based on achieving certain revenue deals. Then there are hybrid deals that combine these, where, for instance, there are significant volumes on certain routes for, say, large regional companies in the UK."
For multinational companies, travel deals are almost always negotiated directly with the airlines. Air France and KLM's One programme currently has over 100 global accounts. It involves the airlines in direct contact with those companies, but there are obvious efficiencies on both sides.
Vikram Singh says: "For example, UK companies are investing in places like China or India or in mainland Europe. So invariably, business travel is influenced by foreign direct investment. If you map the trend of foreign direct investment and business travel, it is completely in line. A company might be based in the UK but have its factories elsewhere, and these companies will deal with carriers accordingly with regard to their network coverage. Companies normally contract with more than one airline, having a preferred airline, then a number two and perhaps a number three."
In the Fortune 500 list the combined Air France-KLM is the number one airline in the world, based on revenues of US$24 billion, and the UK is one of the five biggest countries in terms of business for One, together with France, Germany, the Netherlands and the USA.
"Scale is important, given the dynamics I've described, for a carrier to make the preferred choice," says Singh, who describes One as "more a proposition than a solution".
One requires a high level of spend. To qualify, a company would need to have at least E1.5 million spend on air travel with Air France and KLM. It would also need to have a contract covering two or more countries and be willing to commit to that contract.
"They would want to be treated in a preferential manner and so do we," says Singh. "Whoever it is contracting with us, we have to be sure they will steer the business in our direction."
For the client company, the advantages of being linked so closely to the airline are lower prices on a combined global network, and an advanced, secured website where travel managers can view everything from declassified security information to punctuality statistics on a certain route – even what their travellers are complaining about. The travel manager can set filters to decide who is to read what, and so could give employees limited access for holiday deals. There are also the advantages of purchasing consolidation, the transparency of one central process and, in the end, increased control by way of management and central monitoring.
For the individual traveller, who perhaps knows little more than the fact that it is company policy to fly with KLM between London and Amsterdam, the experience will be decided by the contracting company.
"It can be a non-card based recognition, or we can identify the person by loyalty programmes," says Singh.
There's also the enticing prospect of being awarded a personal high-level tier card.
"A company might look at the travel patterns of its employees and, depending on how much they travel, request the appropriate card for them," says Singh.
The same is true in many programmes, including On Business, says Burnett. "We set criteria, so would look at the revenue generated against the number and level of cards given, but it's the corporate customer who decides who gets the card."
Singh explains: "We've tried to link the business-to-business proposition with the business-to-customer. So where we have four tier levels for the consumer card (ivory, silver, gold and platinum), it's the same in business. And there's no upper level platinum for the corporate buyer because to do so would erode the credibility of the consumer segmentation and the card itself."
Keeping in touch with customers and predicting their concerns is essential to minimise loss of custom. To keep hold of the SME market Alicorporate is flexible.
Sabucci says: "Even though we have a minimum threshold of 5,000 flights before we give the five per cent cash back reward, if we see that a company is not going to make it we discuss alternatives with them and come to some arrangement."
British Airways relied heavily on its contacts with individual travellers recently, to rebuild confidence after the summer's problems.
Burnett says: "Customers have recognised how well we have treated them. We've kept individual customers informed of the situation because we have their email contacts."
Air France and KLM keep a close eye on their customers by holding customer panels. At these meetings nothing is off-limits, from basic complaints to severe service delivery mishaps.
Singh says: "They have a very strict follow-up on what actions have been taken and what has been done. It's a very important insight."
