GUEST COLUMN MAIREAD HAYDEN
THE KNOCK-ON EFFECTS OF FALLING CRUDE PRICES ARE WIDE-RANGING
lunging oil prices may be good news for motorists, but the fact that the price of
Brent crude has almost halved since last June is having a huge impact on companies operating in the energy sector in terms of revenue shortfalls. Even the major oil
This is having a huge impact on companies in the energy sector
cheaper fare is available on an alternative airline. Corporates are also cutting back, particularly domestic travel to internal meetings, and opting for videoconferencing instead. Crews still need to transfer on
companies have announced job cuts and restructuring, which underlines how the industry is being squeezed. All companies are reducing their capital expenditure budgets, and searching for economies and cost reductions. Travel is an integral part of their business – employees cannot suddenly stop travelling, and crews need to get on and off rigs. Nevertheless, travel programmes haven’t escaped scrutiny – travel buyers are looking to reduce costs and turning to their travel management companies (TMCs) to help them during these challenging times. Around 90 per cent of our clients in Aberdeen are affected, because most oil companies based here have major interests in North Sea oil production. The knock-on effect is also impacting on firms specialising in drilling and exploration. Companies are putting a hold on finding new oil and gas sources because of cost.
Another big part of the industry is the service sector. Suppliers who provide support and services to the oil companies are also suffering.
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As fewer employees are currently working on the rigs, demand for food provisions and similar services has fallen. Cutbacks in exploration programmes will impact on companies providing rigs, drilling equipment and so on.
CASE-BY-CASE TMCs who specialise in the energy sector are working closely with their clients to re-evaluate their travel policies, modify behaviour, and find savings where possible, without comprising on safety – which is a critical aspect of travel management for oil and gas companies. Our account managers have held emergency meetings with buyers to look at their travel programme on a case-by-case basis. Clients are still travelling, but
are making changes to policy, such as moving a proportion of their air travel from business class to economy. Some travellers can only book business class if the flight is over eight hours, for example. They can no longer choose their preferred carrier if a
and off oil rigs at the start and finish of their rotas, so clients need us to find savings. Does the crew member really need a flexible ticket, for example? The responsibility falls to a TMC’s operations staff to offer clients the most cost-effective options, not to wait until the traveller asks for the cheapest fare. If the client declines the lowest fare, then we produce missed savings reports to give travel buyers visibility over which fare was chosen and why, in order to analyse and influence traveller behaviour. We have also been
evaluating opportunities with airline suppliers, benchmarking different deals and driving hotel programmes to provide pricing relief. The International Air Transport Association is predicting that average fares should drop by 5 per cent in 2015, and we have seen a couple of airlines reduce fares already. I expect to see further decreases in fares over the next quarter – all of which will help to ease clients’ travel spend. The cutbacks in budgets
will result in a slow-down and reduction in major new investments across the world. The impact of this means less travel for drilling and exploration purposes. The energy industry is very project-led, and these
OIL ON TROUBLED WATERS P
companies aren’t awarding as many projects in the current climate. The effect will be felt beyond 2015 even when oil prices have recovered, because fewer contracts will be awarded this year. Yes, oil prices will recover – we just don’t know when. Last year, the oil business was booming, now it’s in crisis – this industry is cyclical. For now, everyone is tightening their belts and it’s our job as a TMC to work in partnership with our clients to help mitigate the impact on their business.
Mairead Hayden was appointed as operations director Scotland for FCM Travel Solutions in 2013. She is responsible for 75 staff managing travel for clients across Scotland, including 70 Aberdeen- based companies in the oil, gas and marine sector. Her career in the travel industry spans ten years, including five years as area manager in Scotland for FCM’s sister travel management division, Corporate Traveller.
BBT MARCH/APRIL 2015 119
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