The recent announcement of the merger between United Airlines and Continental Airlines
, right on the heels of the marriage of Delta Air Lines and Northwest Airlines, sent a lot of folks scrambling to make sense of a new landscape of suppliers in the airline industry. One thing is for certain, competition will be reduced, which will eventually lead to higher consumer prices. But more importantly, the chasm between the behemoths and the rest of the industry just got significantly wider and what that means to corporate travel and meeting programs is anyone’s guess. Will that mean some shotgun weddings for stand-alones like American Airlines, US Air, Alaska, Southwest, etc.? Time will tell…
From the meetings industry perspective, the airlines used to have separate sales efforts around business travel and groups and meetings. When one of the first round of cutbacks took place (Who can count at this point?), a lot of airlines abdicated their separate strategies and combined groups and meetings into their transient agreements. In hindsight was that wise? It depends on who you speak with, but I would say that they sacrificed their long term strategies for the higher-yield groups and meeting business in favor of a short term cost-cutting gain. The jury is still out on this, but what’s interesting is that the airlines appear to be re-thinking their positions in the lucrative groups and meetings industry.
Witness Lufthansa, which just unveiled a new product for large-scale groups and incentives. And then there's Delta’s formal announcement after they acquired Northwest Airlines (my former employer) that they would reinstate a separate Groups and Meetings team to focus on this specific area of the industry. This doesn't surprise me because Northwest Airlines never eliminated their Groups and Meetings division, and they maintained a steady revenue stream from it.
Bottom line is this: Less competition invariably always means higher prices, but if the end result is financially stronger and more secure airline suppliers, then it may be worth the additional price increases and route integrity that less competition brings. It may even mean the end of or at least a reduction in the onslaught of additional fees and charges that the airlines are currently imposing because they need more revenue and can’t make it happen with pricing initiatives -- due to all the competition. The one thing I do know is this, change is constant and you can either adapt or go and stand your ground and get by-passed.
The stakes just got higher and more critical for companies lacking a SMMP, as the many numerous changes in the supplier base and industry will have a big effect on the bottom line for corporations worldwide. Can you really afford to continue to forgo visibility of spend, access to defensible data, consolidated processes, risk mitigation -- amidst the collective impact of an industry in transition?Kevin Iwamoto is vice president of enterprise strategy at StarCite. This post is syndicated from his blog, Strategic Meetings Management