Tuesday, August 22, 2006

BTC's Position Paper

My apologies for being off the radar for a few weeks. I've been called back by the U.S. government (GSA eTravel project) to assist with a major software procurement. I can't go into much detail, but the solution has the potential to save some significant dollars (as in Billions) for the U.S. taxpayer.

I wanted to comment on the position paper published by the Business Travel Coalition (BTC) in April and which has acted as the organization's talking points concerning corporate buyer's view of the current changes in travel distribution. For those not familiar with BTC, the organization has been around for approximately 10-15 years. BTC's leader Kevin Mitchell is a well known advocate of corporate buyers. The BTC membership consists of some of the largest U.S. corporations. Mr. Mitchell came to prominence in the 1990s when he took center stage at a NBTA convention calling on the major U.S. airlines to abandon their frequent flyer programs due to their counter productive effect on corporate policy compliance.
BTC's latest stance has some valid points. There is no question the current distribution changes may have a negative impact on corporate buyers through additional fees and lack of total content. Where I disagree with Mr. Mitchell is BTC's complete dismissal of the issue of U.S. airline health. Over the last 4 years the major U.S. airlines have racked up more losses than all other prior years combined. During that same period we've seen consistent profits from the GDS and large TMCs. It is in the best interest of U.S. corporations to recognize the need of these airlines to cut costs through distribution so that they can remain profitable . The key point missed by BTC's position paper is the need for corporate buyers to gain control of the distribution of their travel expenses. Whether this involves traditional methods such as switching (or threatening to switch) GDS at a particular location(s) or working with the so called GNEs who have the ability to direct sourcing at a segment level, the key message has to be purchasing leverage. Alfred Kahn's (the Father of airline deregulation) comment at the NBTA conference in the 1990s regarding the airlines still applies: the definition of "yield management" is "you yield to my management". Rather than complaining about the evolutionary changes happening in distribution, BTC should be focused on educating their participants and corporate buyers in general on strategies to regain leverage in airline negotiations by controlling distribution.


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There is no question the current distribution changes may have a negative impact on corporate buyers through additional fees and lack of total content.

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