The Knowledge > Buyer perspective


What to do... ABOUT BA'S NEW CHARGES


Emotions are running high over BA’s planned introduction of new handling fees in March. Tom Stone offers some advice


Tom Stone FOUNDER AND MANAGING DIRECTOR, SIRIUS MANAGEMENT Sirius founder Tom Stone has specialised in corporate travel since the mid-1980s. After starting out as a business travel agent, he switched to a career in travel manage- ment procurement for Sony Music Entertainment, followed by SmithKline Beecham, Seagram and Universal Music International. In 2003 he set up Sirius, providing fixed contract, outsourced travel management and project-based consultancy for all areas of the travel category, including change management. Tom is a past chairman of the ITM and has served two terms on the executive board of governors of ACTE.


SOME MAY SAY, that announcing a cost increase on the day that England lost its bid to host the 2018 World Cup could be seen as a good day to bury bad news. Be that as it may, British Airways’ decision to implement a £4.50 handling fee for economy tickets booked via a credit card on the basis of harmonising the charging operated by BA.com was always bound to attract some opprobrium. There is a coherent rationale in favour of this charge, certainly from BA’s perspective, but also in terms of the transparency it provides to charging mechanisms. This type of charge has been in place with legacy carriers in other countries for a while and is common in the purchase of other services such as theatre tickets. So why all the fuss? In the corporate


travel world there is a feeling that organisations that enjoy commercial agreements with BA should be ring- fenced (in the same way that they were protected from the excesses of charging for seat assignments). This time, everyone who books an economy sector will be impacted including travellers in First who include a local or domestic economy sector on a long haul trip. There is also a perception in some quarters that BA engaged with the GTMC rather than representatives of the buyer community such as the ITM, to develop its strategy. BA has implemented this charge ostensibly to bring charges in line with those applied by BA.com and in order to increase its bottom line from the


“Other carriers will sit back, let BA take the flak that comes their way, and then implement a similar charge themselves”


costs associated with


selling reduced rate of fare buckets. There is no doubt that this action will be a significant revenue generator for them, however, the argument regarding whether it is justified or not will fizzle out. What can corporates do about it? The first action


needed is to ascertain the potential financial impact, and the appointed TMC should be able to advise of this.


The second action is for them to engage with their BA account manager and discuss the impact and explore ways of mitigating it in the context of a wider commercial agreement. Smaller organisations may want to persuade their TMC to exercise the 'special relationship' that many claim with BA and request that they push back on their behalf. Some TMCs have jumped to promote a move from credit card payment systems to the utilisation of TMC credit or invoice accounts, which would avoid the fee. This is ironic given the amount of effort expended by TMCs to move clients on to card-based payment systems in the past 15 years but in theory could prove advantageous. Before rushing to switch, however,


corporates will need to consider a few points such as the loss of any rebate linked to total T&E card spend and provision of accurate data. Other issues will include possible increases to resource needed to process invoice payments from both the client and TMC perspective. This aspect could be significant as/when BSP decides to increase its frequency of collection to bi-weekly or even weekly. Finally, any credit given by the TMCs is likely to come with strings attached which could impact on cash flow or indeed require pre- payment to avoid the consequences of sudden failure. What will happen in the future?


Other carriers will sit back, let BA take whatever flak comes their way over this, and then implement a similar charge themselves. A precedent for this already exists, based on when BA cut travel agency commissions from nine to seven per cent and other carrier later followed. What will the impact be? The impact will vary according to travel profile but looks to average around 0.2-0.5 per cent of total BA spend for typical organisations, depending on the use of economy fares. There is of course no guarantee that the fee will not rise in the way that the Congestion Charge in London rose, after assurances that it would not.


JARGON BUSTER ➔ ACRONYMS: sadly you just can't get away


from them in the dynamic world of business travel. So to help you out we've listed some of the most commonly used ones below, just so you don't get your hotel booking agents confused with the Hospital Broadcasting Association.


ACFO Association of Car Fleet Operators ACTE


ADR average daily room rate APIS ATOC


BAPCO


BAR best available rate BTA BTC


Association of Corporate Travel Executives


Advanced Passenger Information System Association of Train Operating Companies


British Association of Professional Conference Organisers


business travel agent business travel centre


CDW collision damage waiver CRM CRO CRS CSR


DDR daily delegate rate ETES end-to-end solution FFP


customer relationship management central reservation office central reservation system corporate social responsibility


frequent flyer programme


GDS global distribution system GTMC


HBA hotel booking agent HBAA IATA ITM KPI LRA MI


Guild of Travel Management Companies


Hotel Bookings Agents Association International Air Transport Association Institute of Travel & Meetings key performance indicators last room availability


management information


MIA Meetings Industry Association MPI


OTM online travel management PNR passenger name records RFP ROI SBT SLA


request for proposal return on investment self-booking tools


service level agreement


SME small and/or medium-sized business/es TEM travel and expense management TMC travel management company


Meetings Professionals International


8 I THE BUSINESS TRAVEL MAGAZINE


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