UK: TIGHTEN YOUR BELT BEFORE TAKE OFF - TRAVEL MANAGEMENT SERVICE. - Travel experts and air taxis are benefitting from a heightened awareness of time and money.

by Malcolm Brown.
Last Updated: 31 Aug 2010

Travel experts and air taxis are benefitting from a heightened awareness of time and money.

In the bad old days, says Bill Kirkwood, sales and marketing director of Thomas Cook's travel management division, big clients with a lot of muscle used to expect a regular cheque from their travel management company. The management company's income came from the commission it got on things like airline and hotel bookings. The big corporations thought they ought to get a slice of that. They, after all, were providing the bookings in the first place.

Today things are quite different. Kirkwood has been persuading corporations to pay Thomas Cook a management fee and a percentage of any savings the client makes because of the way that Cook's has organised its travel arrangements. In return, he passes over all the commission to the client. It makes a lot of sense on both sides. The client gets an extra discount. The travel management company gets a real incentive to cut the client's costs. 'We're incentivised to do the job that they want us to do, to reduce their costs.'

The new arrangement underscores the difference between a travel agent and a travel management company. The agent is simply an intermediary selling a range of products on commission. The travel management company is a specialist organisation whose main aim is to cut the corporate client's travel bills as much as possible.

An increasing number of big companies are turning to specialist travel management companies. Kirkwood thinks that in the last two or three years the really large corporations, such as British Telecom, BP and IBM, have become significantly better at handling travel.

'Two things have brought this about. First, their experience during the Gulf War. Many companies, because of threats of terrorism and so on, cut back substantially on their travel. After the war they realised that they had saved a lot of money and they never returned to the levels of expenditure they had reached before 74e the war because business continued regardless.' The second factor was the deepening of the recession: 'People saw that there was a need to address costs and one of the costs that was easiest to address was travel.'

Since the Gulf War there has been an enormous amount of downgrading. Companies have instructed employees who used to travel first class to travel club and those who used to travel club to go economy. People have also cut back on the number of journeys they take.

Travel companies like Kirkwood's are not just looking for good deals for their clients, they also police the execution of the client's travel policy. A key job is to track down money that is leaking away because the client's employees are not following policy guidelines.

Cook's 'Quantum' system extracts information from Midas, the database at the company's Peterborough headquarters, and puts it on a disk which is sent to the client every month. The disk contains details of all flights purchased from the company. 'A travel manager can choose from 12 standard pre-set reports offering information as varied as savings lost through late bookings and who was responsible,' says Neale Vickery, head of travel management information systems.

Cook's puts account managers in charge of its big clients. They act as the company's 'conscience' says Kirkwood. 'They will point out to the company when people are breaking policy and when savings aren't being taken. One organisation that we manage turned down savings of £23,000 just on their air bill during the month of January. One of the reasons is that they don't enforce their travel policy. So what we do is we provide them with the names of the offenders. Then they can go back to the offenders and say, "Why did you do this?"' You can only police a policy, of course, if one exists. American Express (Amex), which reckons that British companies spend more than £18 billion a year on travel and expenses, also calculates that nearly half of companies have no formal policy. In a survey of business travel and expense management last year Amex found that, while 80% of companies had an appointed travel agent, only 52% had a written travel policy document and only 43% had a travel coordinator.

Eric Brannan, vice president and general manager of UK travel at Amex, thinks the situation is improving. Three or four years ago people paid lip service to having travel policies. 'That's changed fairly substantially,' says Brannan, 'one reason being the increase in mainly American-owned companies where the American parent wants to pull together what they call a global deal. Having pulled together their travel spend throughout the continental United States, which they've been doing over the last five to 10 years, they're now exporting that.'

Brannan agrees with Kirkwood that the recession has enormously increased the awareness of UK companies about travel costs. 'Perhaps even in the past they were aware of it, but there was a complacency in some companies or a reluctance to challenge the travellers. Very often the travellers would be senior people who would say, "I'm away from home, I'm travelling at weekends, I insist on a certain standard when I travel, so I'll stay in a four-star hotel and travel first class." But with the recession those companies have had to say, "Hang on. We can't afford to be polite about this any more. You're not going to travel first class, you're going to travel club, or even economy. We'll chose the hotels in which you stay and we'll choose the airlines you travel with because with the help of our travel management supplier we've begun to understand that if we consolidate our purchasing through given airlines and given hotels we're going to get savings."'

Flying taxis for executives.

There is a saying in the aviation business: if you want to make a small fortune start with a large one. There is some truth in that, says David Savile, operations director of Air London International, the Crawley-based broker for executive aircraft.

Air London puts together businessmen who need air transport with aircraft owners who charter out their aeroplanes on a day-to-day basis. Most owners have only one aircraft, bought for their own use. They charter it out to keep down their own flying costs, says Savile, but because there are lots of them the market is very competitive. The owner may cover his costs but usually not much more.

'He doesn't make a profit out of putting it out to charter,' says Savile. 'You might cover your costs but you aren't going to get what you get in the Bradford and Bingley.' Which, of course, is good news for air taxi customers since it keeps charter rates down. In fact, in spite of the recession, a growing number of businessmen are using air taxis. There are no statistics covering the whole industry, but Air London reckons its executive aircraft business is continuing to grow at 10 to 15% a year. That is less rapid than before the recession, when it was 30 to 35%, but it is still positive growth.

The pattern seems to be that the number of clients is growing but any individual client is probably 77e trimming back a bit on usage. 'In the past we've been fortunate enough to have both - an expanding market and expanding use per customer as well,' says Savile. 'Now we're getting more clients but less individual use.' The sales pitch of the air taxi brokers is simple: if an executive is a big earner for his company then it is worth paying a premium to cut his travelling time to a minimum and let him deploy his money-earning talents to the maximum. In other words, time wasted on travel is money lost.

Savile demonstrates the thesis with the example of an executive who has to attend a two-hour meeting with a client at his office in Limoges in France. There is no direct flight from London so the businessman travelling on scheduled services would have to travel from Heathrow to Charles de Gaulle airport in Paris, transfer from Charles de Gaulle to Orly airport and then on to Limoges. Assuming he left his London office at 10.30am it would actually take until 6.30pm to get to Limoges using scheduled services. Even if the business meeting took place at 9am the next morning, it would still be 8.50pm that evening before the businessman was back at home in London.

he total time to accomplish the two-hour meeting would be more than 34 hours. Travelling by private aircraft from, say, Biggin Hill the executive could do the same round trip in eight hours, says Savile. The cost of such a trip would depend on the type of aircraft used - around £1,900 for a six-seater light air taxi or £2,300 for a six-seater executive jetprop.

Captain Douglas White, managing director of GEC subsidiary Magec Aviation, which is the UK's biggest air taxi operator, says that even mainline destinations such as Paris can be difficult for senior businessmen who have to stick to very tight schedules when travelling.

'We had a Paris run recently where the man had to be in his office in north London at nine in the morning. He had to have lunch with a French government minister, have an hour's meeting with the head of a French departement and had to do a presentation in London at 7.30pm that evening.' The other great benefit of executive aircraft is their flexibility. Executives can map out complex routes through a series of cities which might be nightmarish if they tried to do it on scheduled flights.

'We had an EC organisation recently which needed to visit financial institutions in five cities in two days,' says White. 'It would be very, very difficult to do that using scheduled services.' An important factor in that flexibility, of course, is that private aircraft are not tied to the large, congested international airports but can use smaller airfields which are often closer to where the clients need to be. There are reckoned to be about 10 small airports for every large one in Europe.

The main focus of attention for air taxis has, until recently, been western Europe, but the former Soviet Union, now the Commonwealth of Independent States, has grown dramatically in importance in the last two or three years.

In the old days the traveller had to fly in to one of the gateways, such as Moscow, on a scheduled flight and hope somehow to make an internal connection to distant parts he wanted to visit. Not any more. Charter aircraft can now fly direct to places like Novosibirsk and Baku, says Savile. 'The opening of those airfields and the freedom to go directly to them has made a huge difference. It's a huge advantage for the customer to have his own aircraft to go there rather trying to struggle to do this via Moscow through a scheduled service.'

Around the UK by train, road and plane.

Sometimes the options involved in getting around the UK from London (an arbitrary starting-point), perhaps, but there are an awful lot of businesmen there are rather difficult to get to grips with.

Take the South West. You can get from London to Plymouth by rail in three hours (though that is the fastest train and most take three-and-a-half hours) or else you can fly from Heathrow.

Flying seems like a good option until you realise that the time it takes from city centre to city centre - as opposed to just flying time - will be roughly two-and-a-half hours and the planes are much less frequent than the trains. Driving to the South West is only for the committed motorist who actually enjoys spending four or more hours on motorways and other roads.

The sensible choice between London and the Midlands is between road and rail. There are frequent fast trains (London to Birmingham is about one-and-a-half hours to Edinburgh). According to the guide to UK travel, Getting about Britain, it will take around two-and-three-quarter hours from the centre of Edinburgh if you fly via Heathrow, and three-and-a-quarter if you go via Gatwick - and, of course, British Airways' service is a shuttle service.

But bear in mind that things are not always what they seem. If you have an urgent meeting in Edinburgh or have to be back in London for a dinner appointment it is as well to remember that air traffic control may delay your take-off or (at London) your landing. Stacking (flying in a holding pattern until your aircraft has clearance to land) is commonplace over the South East during peak hours.

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