UK: BUSINESS TRAVEL - RIGHTS OF PASSAGE.

UK: BUSINESS TRAVEL - RIGHTS OF PASSAGE. - If you're a lawyer, an accountant or any other similarly high-priced professional, you may well get to fly first class. In other sectors, however, punters are grateful not to be demoted to cattle class.

by David Churchill.
Last Updated: 31 Aug 2010

If you're a lawyer, an accountant or any other similarly high-priced professional, you may well get to fly first class. In other sectors, however, punters are grateful not to be demoted to cattle class.

When Eurotherm chief executive Claes Hultman surprisingly resigned from his job earlier this year, citing differences with his board of directors, his colleagues may well have given a sigh of relief. Not because they particularly disagreed with Hultman's strategy for running the business (after all, Eurotherm's share price had soared by over 50% in the year prior to his departure), but because he pursued a more parsimonious travel policy than they probably preferred.

'We are employed to create shareholder value, not to spend other people's money, so we watch expenses very closely,' Hultman remarked before his resignation. He spurned the corporate status symbol of flying first or business class across the North Atlantic, and was happy to fly at the back of the plane at a fraction of the premium cabin fares. Unfortunately for Eurotherm executives hoping for a change of policy, Hultman was reinstated a few weeks later after a boardroom coup.

Hultman's hair-shirt approach to business travel was not far out of line with how corporate Britain is behaving in the mid-'90s. 'Companies are still being pretty cautious about their spending on business travel,' points out Brent Stevens, vice-president for travel management consulting with American Express. 'They are prepared to spend more since the recession but they want more for their money now; it's not simply a question of "now the good times are back, we can all start flying first class again".'

In fact, relatively few business travellers are in a position to fly first class: less than one in every 10 first-class seats is filled with full fare-paying passengers, according to business travel agents. The rest are upgrades, those people the airline determines are either VIPs or, more significantly, CIPs - that is, commercially important people.

It's the battle to win CIPs which has fuelled the bitter feud between British Airways (BA) and Richard Branson's Virgin Atlantic airline for much of the '90s; poaching such travellers with the offer of first-class seats is standard practice.

BA probably does better in terms of first-class passengers stumping up for their ticket than most other airlines; its first-class cabin, relaunched earlier this year with flat sleeper seats individually positioned to give maximum privacy, is proving very popular. Its typical first-class passenger is a man (almost exclusively), likely to be in his late 40s or early 50s, working in finance or the law. 'There is an overwhelming preponderance of financial people flying at the front of the plane,' says Nick Hurrell, director of business development at Hogg Robinson business travel agency.

'When you are doing deals worth millions of pounds, adding on a few first-class fares does not seem to matter so much, especially when the client is paying.' The same applies to lawyers, accountants and other high-priced professionals who believe that their time, status and wellbeing in the air justify paying up to 10 times the price of a discount economy fare.

At the other end of the scale are the small to medium-sized companies in manufacturing and services whose travel budgets do not permit their executives such lavishness.

Deciding who gets to fly in what cabin is a nightmare for most companies.

Three-quarters of European firms, according to a survey from American Express, now exercise some form of control over air travel. And long-haul first-class flights have increasingly been targeted: in 1987, some 48% of companies surveyed by Amex allowed their directors to fly first class, while nearly a decade later this figure is down to just 19%. Sony Music, for example, operates a system whereby directors get to fly business class while other employees travel in economy, something which motivational experts not surprisingly say can lower morale. Global policy dictates that only Sony Music senior vice-presidents and above use first class, or Concorde.

The computer company, Honeywell, also has a policy of determining class of flight based on an employee's grade, with a request that everybody should seek 'the lowest applicable fare'. On some routes this has paid off: average fares paid by staff shuttling to and from Brussels over a 15-month period were within £30 of the lowest possible return fare. Yet on the London to Frankfurt route, average fares were closer to the top end of the scale than the bottom, causing some hard questions to be asked of the travelling staff.

Perhaps because of its relative novelty, many companies' travel policies do not yet cover the Eurostar service to Paris or Brussels and many employees get away with buying first-class train tickets although they would be denied this opportunity on an aircraft over the same route.

Analysing travel spending, especially on airline fares which account for the bulk of the £20 billion or so spent each year by British companies on business travel and related costs, is increasingly seen as the key to more effective travel management. And pre-trip reporting of planned travel by executives is a very important element of this.

Ronald McCrum, the director responsible for travel management at City insurance broker Bain Hogg, part of the Inchcape Group, says that 'recently a manager found that a broker planned to visit at some considerable expense an overseas client who had already received a visit from another broker two weeks earlier. So the manager decided that a second trip was unlikely to be any more productive than the first.'

McCrum, in charge of a travel budget of about £1.5 million and with over 2,500 staff scattered across 26 branch offices in the UK, has found that the best way to manage travel plans and spending is to use a computer-based system called StarLink developed by small-business travel specialists Hillgate Travel. Using an ordinary PC with e-mail, managers (or more usually their secretaries) can input travel requirements, including hotels and car hire, into a computer programme which automatically links into the travel industry's computerised reservations systems. Bookings are automatically made and confirmed by e-mail and the appropriate tickets delivered by Hillgate to Bain Hogg's offices in plenty of time before the trip. Management analysis of all travel is also made available on a weekly or monthly basis, enabling McCrum and other managers to identify any particular trends or cases where individuals may have broken the policy. 'There are usually very good reasons why the policy has to be breached,' McCrum adds. 'But if not, it makes the business traveller aware that travel is now being managed. Yet the very last thing we want to do is to stop anyone doing their job in the best way; after all, they're travelling to bring in the business. It is all a matter of their discretion.'

Many companies adopt a policy of sending executives economy class on short-haul European trips but allowing them to fly business class on long-haul routes of nine hours or more, points out Hogg Robinson's Hurrell.

But there is always a certain element of rules only being made to be broken by many managers who seek to justify a business-class ticket on whatever grounds they can. 'Usually, it's because they claim they have to work on the plane but mostly it's just to get more frequent flyer points,' says one embittered corporate travel manager.

Ah yes, those Air Miles or equivalent. According to the latest business travel lifestyle survey from Official Airlines Guides (OAG), in which 2,200 international travellers were quizzed, some nine out of every 10 executives are now members of at least one airline loyalty scheme. Among Americans in the survey, nearly half belonged to five or more schemes.

And three-quarters of all business travellers said they made sure that they redeemed their mileage points, usually for free flights or holidays.

Other research, undertaken by MORI on behalf of Carlson Wagonlit Travel, found that one in every five business travel bookers reported frequent flyer schemes leading to conflicts with travel policies as executives tried to get more miles with certain schemes. Two-thirds of the 100 decision-makers surveyed said they wanted frequency programmes to benefit companies rather than individuals, something most airlines resist strongly.

BA has recently added to the problem by insisting that for members of its Executive Club only full-fare tickets qualify for Air Miles. Full-fare tickets are particularly aimed at business travellers as they offer most flexibility to change flights if a meeting finishes early or overruns.

Basically, the more flexible the ticket, the more expensive it is. Hence BA justifies giving Air Miles only on full-fare tickets and has also recently changed its Executive Club scheme to make only full-fare tickets qualify for the coveted silver and gold tier membership status.

Airlines have also sought to influence corporate travel policies by wooing the business traveller with quality of service. The name of the game here is to get companies to pay for full-fare business-class seats since these are the highest yielding tickets (the airline industry's golden rule on profitability is that a full business-class cabin on a Boeing jumbo is worth more than a full economy section, mainly comprising discounted tickets or frequent flyer rewards, and a full first-class cabin combined).

The importance of business seats has caused all the major transatlantic carriers to revamp their business and first-class cabins over the last year. BA began by taking airline business-class seats a generation forward with its new, improved Club World, introduced earlier this year; this increased the seat pitch - the space between the back of one seat and the back of the seat in front - by 25% from 40in to 50in. Within months, American Airlines had announced plans to reconfigure its fleet, at a cost of some £263 million, so that it could also offer 50in seat pitch along with redesigned seats. United Airlines meanwhile has reconfigured the Boeing 767 aircraft it uses to cross the Atlantic to a 48in pitch, although its new Boeing 777 aircraft has a 49in pitch. 'There is not a lot of difference in an inch or two, once you have broken away from 40in,' says a United Airlines spokesman. Business-class travellers now have more space per individual than used to be available in an entire first-class cabin 15 years ago. Can the seats get bigger still?

The answer to that is probably yes, since the business-class seats of BA and its major US rivals still have some way to go to match the Upper Class seat pitch of 55in to 60in pioneered by Virgin Atlantic, the 55in pitch from Continental, or the 57in to 62in pitch from TWA. These latter carriers, however, are able to offer such large seat pitches for their business-class passengers only because they've rejected first-class cabins; their argument is that so few people will pay first-class prices, that it's more competitive to sell bigger business-class seats instead.

While seat size remains the key selling point for business class, the airlines are also competing vigorously on service levels. The current vogue is to offer a more relaxed meal, allowing executives to snack when they want rather than force a four-course meal on them when they're not hungry. But many travellers, especially the Brits, prefer the restaurant-style approach of eating at the same time.

Business travellers in the air, according to the OAG survey, can be something of an anti-social group. Most of those surveyed wanted to avoid sitting next to someone on the flight, often asking at check-in to be kept as far away from fellow passengers as possible, and sometimes switching seats to avoid a potentially obnoxious companion.

During the flight, the survey shows that most rated the choice of personal videos as their main concern, although in-flight phones and, to a lesser extent, fax facilities were increasingly seen as important. In the same way many travellers, especially younger executives, take a lap-top computer with them. 'There appears to be some truth in the ubiquitous image of the business traveller tapping away at a portable computer while the air steward tries to park the lunch tray,' concludes OAG. 'More than half those surveyed take a laptop away on business.'

Electronic shopping and interactive gambling opportunities were rated pretty low in the survey - which is probably just as well since most of the sophisticated in-flight shopping and gambling systems installed over the past year are still experiencing teething problems.

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