More than two decades ago, the airline industry launched a revolution in the travel agency profession by leveraging the Internet to book passengers directly and cutting travel agent commissions.
But while agent and airline relations have suffered as a result, in this latest round of distribution evolution, carriers and agencies can still profitably partner to each other’s mutual benefit, said Paul A. Jacobson, Delta Air Lines' chief financial officer & executive vice president.
Speaking at a recent Bank of America Merrill Lynch investors conference, Jacobson said that “our distribution channels are all important to us” and that agencies still “have an important role to play.”
“We want premium share, we want [agents] incented to help upgrade experiences as well and making sure that those incentives align,” Jacobson said, in answers to questions from Andrew G. Didora, a Bank of America Merrill Lynch airline analyst.
Didora first asked Jacobson about how Delta is becoming “smarter” in selling tickets, and where the airline industry is going as it enters an era of new opportunities “to sell more direct to customers.” He described Delta as “uniquely positioned” to go direct, “given that you have access to such large spending data with your credit card customers.”
“Clearly, the more direct relationship that we have with the customer, the better we can use the data, and there are some things that we can do to help serve” customers better, Jacobson said. “But the agencies have a role in that, too, and we partner well with them across the board.”
“So, while the relationship is different than it has been in the past, I wouldn't say that it's less important. In fact, in the space around corporate, it's sometimes more critical to make sure you're maintaining those relationships with the agencies.”
Travel agency insights into their customers can also drive value for Delta
Later on, when Jacobson was asked about the insights Delta has received from travel agents, he noted how “we host them a couple of times a year and we've got great relationships where we're looking for insight, not just from our agencies, but also from our corporate customers to tell us how we can better relate to them, make it easier to sell the product, make it easier to select and chose Delta in everything they do, so they can help guide our investments in the future.”
In a follow-up question, Didora asked, “What is the biggest thing that, say, an agency or a corporate has come back to you with in terms of, 'This would make it easier on us' or 'This is what we'd like to see Delta do?'”
Jacobson replied: “A lot of it has been around technology. Certainly, this is after the table stakes of reliability and customer service, but it's how do you report that technology and what can you do to help make their life more efficient and easier, so getting the visibility of being able to track corporate customers at the individual level and assisting the travel managers and assisting the agencies just makes their life easier. That's been a big focus of ours over the last several years, and that relationship is good. They've always got a lot of good ideas and we're always listening.”
Delta is predicting a strong summer
In answers to other questions, Jacobson predicted a record summer. “When we look at the economy today and we look at corporate traffic, demand is strong. And it's just a matter of making sure that the yields get to where they have been,” he said.
Part of the higher demand for travel is that the entire industry has improved its operations, Jacobson said.
“I think the more that we do together to improve the quality of product and the consistency of service, the healthier it is for the industry. I mean, at the end of the day, reliability can be demand-simulative, meaning that there are people that will take trips – more trips if they know that at the end of the day, they've got a reliable alternative and not one that's been fraught with some of the volatility that we've seen in the past,” he said.
“The industry and our competitors have done a great job with that. My hats are off to them because it's not always easy. We know that from the investment that we've made as well, but again we're going to continue to focus on that customer and delivering them that service.”
Jacobson also answered questions about profitability as the year progresses, if the cost of fuel continues to rise.
“This is a short-term phenomenon that we've seen and, while it's been pretty steep, it's only been around for now, less than two months from where we saw that kind of level set against our plan. So, I think we have to see. We've got some time before we have to make those decisions and we just need to watch the revenue and the fuel environment and see how it reacts before we make those decisions heading into the winter and into 2019.”