Airline Woes Mean Lower Yields For Travel Agents

by Marilee Crocker
Airline Woes Mean Lower Yields For Travel Agents

Photo: Jordiet


While terrorism and the global economy persist as the biggest wild cards for travel in 2017, the embattled airline industry is a wild card of its own these days. In the face of fierce and intensifying competition from low-cost carriers, the majors remain vulnerable, Travel Leaders executive Michael Boult told travel agents at the recent Travel Leaders Network International Conference in Orlando.

Resulting low air fares may be great for consumers, but they’re “not so good for us,” he said. “You’re working hard, but yields are in the toilet.”

Those were among key takeaways from a rundown of trends shaping corporate travel in 2017 by Boult, who is senior VP of sales for Travel Leaders Network and Travel Leaders Corporate. While Boult touched on other factors, he devoted the bulk of his discussion of business travel’s outlook to the state of the U.S. airline industry.

Getting their stuff together?
Last fall, Boult predicted that in 2017 air fares would be flat, but that “airlines would get their stuff together and be able to manage their business.” Six months later, it hasn’t quite turned out that way. “Quite frankly, they are attacking each other, going after each other in a big way.”

Even major hubs like Houston, Chicago, Boston, New York, Los Angeles and Dallas are up for grabs. “Some of those hubs, those big markets, that you’d think they would own, that they would have discipline in? Not so much. They’re wide open.

“The Big Three have become vulnerable to the piranhas. So Southwest continues to grow, Spirit continues to grow, Frontier continues to grow, and they’re expanding into key markets.”

Of course, the assault on the legacy air carriers isn’t merely domestic in its origins.

“The Vikings are coming––not the river cruise guys, but Norwegian Air and the Icelandics, Wow.” They may be serving lesser airports––“beautiful sexy airports like Stewart Airport in New York,” Boult said, tongue planted firmly in cheek––“but it’s $99 to Europe! You’ve got to go!” Put together with “brand new beautiful 787s,” and “it’s really hurting a lot of people.”

The same is happening on the Pacific front, he noted. “From the East, people like Air Asia are coming into the left coast.”

LCCs are here to stay
Competition from low-cost carriers is forcing big league carriers like British Airways, Air France-KLM and Lufthansa to respond in kind, Boult noted.

British Airways’ parent company IAG is poised to start flying a new low-cost brand called Level out of Barcelona in June. Air France-KLM plans to launch a low-cost carrier this coming winter, adding long-haul service in summer 2018, and Lufthansa’s low-cost Eurowings is looking to expand.

“They don’t know what else to do, because these guys [low-cost carriers] are well-funded, and they are going to stick around. This is a trend, and it’s not changing any time soon.”

On top of all that, the industry finds itself facing one more wild card this year––the laptop ban on some international flights. That’s the year’s big news, Boult said, and the ban “has really slowed down Emirates and lots of the other Gulf carriers coming into the marketplace.”

Other forces shaping business travel in 2017
Boult also outlined other developments in business travel so far this year, including in the travel management space:

  • The April merger of Direct Travel and Vision Canada, doesn’t amount to the “major consolidation” in travel management that Boult has predicted for 2017, but it is significant and it won’t be the year’s only such transaction, he said.
  • Direct Travel itself will continue to buy agencies and consolidate. “They are going to be larger, and they’re tough formidable competitors.”
  • American Express Global Business Travel recently announced its intention to go after business travel’s mid-market, putting itself squarely in Travel Leaders’ path. It’s not the first time American Express has signaled its intention to pursue the mid-market, Boult noted, “so, we’re not quite sure what that means, but they’re there.”

Among other developments he cited:

  • China has moved past the U.S. to become the No. 1 spender in business travel.
  • New entrants in business travel are all about mobile first and messaging first, Boult said, pointing to ETA, Lola, Pana, Upside, Claire, HelloGbye, TripActions. “Some of these ideas are pretty cool.”
  • More established entrants––Rocketrip, Freebird, Tripbam, Yapta––have been moving toward corporate customers. Now they’re beginning to move toward travel agencies. “They actually value our role in distribution, and we’re working with them trying to figure out how we do business together.”
  • Uber, Lyft and Airbnb occupy an increasingly large space in business travel. “They’re slowly infiltrating––in some cases not slowly.”
  • Hotel room rates and occupancy rates which have been flat, are inching upwards, albeit slowly. That said, “it’s not been a fantastic year for [hotels] so far.”
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