A Proven Method For Airlines To Grow Their Contracted Corporate Business
Several airlines rely on Sales Information Server (Sis) to grow their corporate segment, build a more effective and efficient sales team, and enhance their relationships with corporate customers. The no-risk solution reaps significant benefits for airlines around the world.
The corporate traveler is essential for the success of most airlines. On average, 12 percent of an airline’s travelers fly on a contracted business fare. A 2013 PRISM study analyzing airline financial reports revealed that corporate contracts contribute twice an airline’s average profit. This is not a misprint — corporate contracted sales are essential to an airline’s strategy, success and survival.
PRISM’s solution — Sales Information Server (Sis) ― which was acquired by Sabre Airline Solutions® in 2012, helps grow a company’s most profitable corporate business. The system leverages alliance and joint venture relationships to build an expanded airline network. It helps an airline’s sales staff become more effective and efficient and creates a true win/win relationship with corporate customers.
The strategy is simple and is the reverse of traditional yield management: fill from the front of the plane to the back. By utilizing this strategy and partnering with PRISM, airlines have developed corporate contracting into the most profitable segments of their businesses.
Sis is an integrated, turnkey, customizable Software as a Service solution used by 40 airlines — including the largest carriers on each continent, two alliances and most joint ventures. More than 700 man years of programming have been invested in this patented technology. The solution’s user interface operates in nine languages: Chinese, Japanese, German, Russian, Spanish, Portuguese, French and two styles of English.
An Integrated Contracting And Sales Management System
The PRISM “Star” provides a complete, integrated, customized solution for an airline’s contract management. All airlines have different contracting processes, so the PRISM solution provides the flexibility to accommodate all airlines, regardless of size, business model or geographical location.
Before PRISM’s solution, airlines could not accurately measure corporate contract performance, the revenue contribution of the corporate business segment or the true impact of their market strategies on these customers. Rather than treating their portfolios as investments, airline account managers focused on relationships, hoping companies would choose to book seats on their carriers based on “warm” feelings about these relationships. As a result, airlines routinely offered customer incentives without an ability to measure their effectiveness. It was not unusual for a company to receive multiple conflicting “preferred” deals on the same routes.
Airlines relied on revenue accounting data, which left them unable to compare their relative market positions or measure the total potential value of the account.
Traditionally, some airline account managers spent two-thirds of their time collecting data, preparing spreadsheets, and analyzing and negotiating contracts. In the end, 80 percent of the deals failed to meet the agreed-upon requirements, and the airline wasted millions in lost potential revenue and inefficient account management.
Overcoming The Challenges
PRISM’s Sis technology addresses all of these issues, enabling airlines to build their corporate segments, align their corporate contracts with customers’ needs, realize the revenue offered by corporate customers, improve processes for more-efficient account management, analyze and forecast terms efficiently, and measure contract performance.
Data: The “Secret Ingredient”
PRISM data are completely different from any other data in the airline industry, capturing the complete corporate account picture. Payment and personal data are omitted, and competitor data are masked and aggregated. As a trusted third-party data intermediary, PRISM receives and processes more than 300 million tickets annually from travel agencies, Internet portals and airline-direct bookings. Data is normalized into an airline-defined origin-and-destination format used to structure their markets and networks.
Airlines often use Sis for contracts with market-share requirements. This is the optimum type of contract since increased market share funds the discount, or pays for itself. However, the system manages all types of contracted discounts and requirements including revenue-based, net fares and back/front-end discounts. Before PRISM, airlines could not measure individual or aggregated contract performance. PRISM’s system automates this monitoring and provides decision support needed to optimize contracts over their life cycles.
Corporate Account Strategy
An airline’s strategy for increasing corporate business should include the following steps:
- The corporate customer designates a preferred carrier and directs business to it.
- The airline aligns the discount with the corporate customer’s mix of cabin and quality of revenue.
- The airline targets markets for improved sales.
- Airline account managers and corporate customers collaborate to improve performance in these markets.
- Non-cash amenities such as supplement customer relationship management (CRM) functions to support the contract.
- Contracts are measured and adapted over time as patterns change.
Before PRISM, airlines could not analyze or forecast contract terms efficiently, nor could they ensure contract fulfillment. Hindered by inefficient processes, a contract proposal took weeks or months for airlines to prepare and cost an estimated US$10,000 to generate a major deal offer. PRISM reduced the process to days and, in some cases, hours using integration and automation. There are several best-practice steps for automating a deal process:
- An airline identifies a prospective corporate customer and approaches it regarding a deal. A data release authorization is issued to request three to six months of historical company data to analyze and forecast the proposal.
- Once data are obtained, the airline’s sales analysis team prepares and analyzes the proposal. Close attention is focused on cabin, market requirements and the ability of the corporation to direct business to the carrier. The optimal customer is a premium-cabin international company that can direct business to the preferred carrier.
- The airline prepares and presents the customer proposal. Although airlines have somewhat different contracting practices, most contracts focus on bundling markets into contract terms based on market characteristics, such as hub, hub-to-spoke and spoke-to-spoke, and performance expectations. Airlines and corporate customers both desire realistic performance requirements.
- As the airline and corporate customer negotiate the proposal, some terms may be adjusted. Once the proposal has been agreed upon, a contract is generated by the system for electronic approval. Fare filing reports are used internally to help speed the implementation process. Documents are archived in the system, and notes are made in the CRM component so history is preserved.
- A prospect has become a customer. Monthly performance reports are sent automatically to the corporate customer and airline account manager. The account manager and customer review the information on a scheduled basis to optimize performance. If terms become unfavorable, they can be adjusted quickly.
An airline’s Sis project manager has a crucial role in ensuring the successful implementation of the solution within the airline. The project manager guides the gathering and quality assurance of key data elements used to populate Sis with the airline’s corporate customers and customer contacts, as well as the corresponding airline staff member assigned to each customer. The project manager also researches and confirms key customization components of the airline’s Sis application, ensuring that it is uniquely suited to how the airline conducts business and deals with its customers.
These components include online airports, network hubs, geographic entities, connection parameters used to construct true O&D and fare-class-to-cabin translations. Following the development and setup of the airline’s Sis environment, the project manager works closely with PRISM’s implementation team to coordinate the airline’s data acquisition processes, user-support functions, new user training and industry preparation. This work contributes to a streamlined and effective rollout of Sis across the internal airline teams that use the system, as well as the corporate customers and their travel agencies who will be guided through the business processes that Sis introduces.
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Several airlines have leveraged Sis to achieve significant results on their corporate contracts, including:
- A U.S.-based airline went from an 89 percent contract failure rate to an 83 percent success rate by using Sis performance data and training account managers.
- The same airline saw corporate contracted revenue rise from 37 percent to 50 percent over three years.
- Two carriers — one in Europe and the other in the United States — received ATI indemnification for a joint venture relationship. Joint contracts were established to provide a single document to a corporate customer, and revenue and profits from the business were shared by the two airlines.
- For the first time, European corporate customers received monthly performance reports, which enabled airline account managers to meet with their top 100 accounts to develop strategies for improving performance. This resulted in US$100 million in additional revenue during a three-year period from corporate-contracted business.
- In the United States, by automating sales processes and eliminating the work of the account manager to obtain data, a carrier was able to triple the number of accounts assigned to each account manager.
- An airline based in Asia developed a mid-size corporate account portfolio to complement its global account strategy. Although these companies produced only 10 percent of the volume compared to that of a global account, the portfolio of these accounts grew to exceed that of the global accounts. This was due to the strong commitment the mid-size corporate customers made to direct business to the preferred carrier.
- An incentive system was designed to reward account-manager performance for increasing business. The same carrier “load balanced” accounts to work was distributed equitably.
- One airline established a simple discount program for customers that provided data. While any company could qualify, many companies were small- or medium-sized companies that had never had access to a discount program before. Those showing the ability to direct business received additional performance-based discounts. The airline doubled its overall contracted companies.
- Fare filing template reports were prepared so input could be formatted more quickly. This process reduced the implementation time so corporate customers could have access to their discounts more quickly after the contract was signed.
- An airline analyzed its corporate portfolio to determine routes where it was not flying. Using this consolidated information, additional flights were added to new destinations with a mini-hub established.
Why This Works
Airline corporate contacts are foundational to an airline’s profit and success. The ability to measure, incent and service corporate business leads to greater profits. As a result, an airline can improve yield and revenue, and sales staff can focus on direct customer activities rather than administrative tasks. Sis is self-funding and risk free, and it can be used in many creative ways to help airlines grow their corporate segment.