For airlines, the corporate travel segment is a critical engine of value. Business travelers tend to fly in premium cabins, book more flexible tickets, and buy closer to departure—which all translate to higher yields. Despite making up only about 12 percent of air traffic before the COVID-19 pandemic, corporate trips accounted for about half of the airline sector’s profitability in the United States.
However, the pandemic wiped out the majority of business trips in 2020 and 2021. While opinions vary on the speed of recovery, the consensus is that business travel will rebound more slowly than trips taken for leisure or to visit friends and relatives. Many expect that a portion of corporate travel may never return, making competition in this highly profitable segment even more intense.
Naturally, airline executives are eager to accelerate the recovery of the business travel segment. But before slashing prices or offering steep corporate discounts, decision makers should be aware of five pitfalls in business travel sales models, lest they lose even more value for their airlines. In fact, it may be time to put away the old playbook, since many carriers’ corporate sales operations were suboptimal even before the pandemic.
This article poses five questions airline executives can ask themselves to avoid missteps. If an executive answers “yes” or “I don’t know” to one or more of them, they may want to reconsider their approach to corporate travel sales. It’s not too late for course correction; there are steps decision makers can take to optimize airlines’ sales strategies.
Do your corporate deals dilute value for your airline?
Despite its importance to profitability, corporate sales at many airlines is a “black box,” managed more as an art than a science. Commercial executives often don’t have the data and insights to know if, say, a particular corporate arrangement with a customer truly adds to the bottom line or is priced too high or too low. We’ve observed commercial executives offer extensive corporate deals with discounts on fares that are already competitively priced, eroding the airline’s margins.
A better way: Create a data-driven cockpit that provides visibility
What’s needed, and what top-performing B2B sales organizations have, is a data-driven cockpit, drawing from internal and external data sources to provide the necessary visibility for commercial staff to make the right decisions and to track the impact of chosen actions.
It starts with developing a comprehensive data repository that consists of the components of different deals and corporate arrangements, as well as the airline’s market share vis-à-vis its competitors. It includes data on volume and revenue by account, by travel pattern, by point of sale, by commercial structure offered, by origin and destination, and by time. The data could be analyzed to measure the airline’s performance against other competitors as well as the general market.
There are a number of data sources available commercially that enable users to track performance. The commercial team could use that data to ensure that the structure of the corporate agreements they sign generates incremental value, where revenues generated from the deal would be greater than the discounts given. Data analysis could also help executives identify potential growth areas and opportunities to increase the airline’s market share.
Just as important, having a data-driven cockpit makes it easier to assess the overall effectiveness of corporate deals and agreements. Did a tweak made to the discount structure truly expand an airline’s market share, or was growth due to other factors? Where can an airline reduce discounts, preserve most of its share, and sell the freed-up seats to higher-value customers?
A data-driven cockpit will likely have the answers.
Are you overrelying on discounts?
We’re all familiar with the basic economic principle that underlies all discounts: when price falls, demand rises. Most airlines have a discount structure that their sales staff can reference to incentivize ticket purchases.
But there are dangers in relying mostly on discounts to drive up sales. First, some carriers apply the same discount uniformly to all customers with only minimal variations based on factors such as the size of the corporate account. But in a segment as competitive as corporate travel, the indiscriminate application of discounts can shave already thin margins. Second, discounts are no guarantee of brand loyalty. Customer commitments to discounted plans are often vague. Even when a concrete agreement is made, enforcement is often lacking. Thus, airlines assume material risk when they offer discounts—if the customer fails to buy the requisite volume of tickets, the eventual revenue flow would be diluted.
A better way: Tailor discounts and benefits according to each corporate account’s travel patterns
While discounts can be a powerful way to sell flights, other elements in the travel journey—such as lounge access, priority boarding, and elite status—may also factor into a corporate customer’s purchase decision. Airlines may protect their margins by tailoring the right mix of both discounts and other perks for each corporate client according to their specific travel needs and patterns.
Airlines may protect their margins by tailoring the right mix of both discounts and other perks for each corporate client according to their specific travel needs and patterns.
Consider two common client profiles: the first is a small corporate client with a tight travel budget and whose employees tend to travel in high volumes on a small number of flight routes. Such companies generally value discounts more than other soft benefits and priority services. An airline could potentially benefit more, then, by offering steeper discounts to this type of company, rather than to a larger corporate customer, especially if the former is able to steer more business travel traffic to a less popular route. When offering discounts, the carrier could require these corporate clients to buy from the carrier a stipulated percentage of their total air travel budget or share of wallet. That way, the carrier could continually track clients’ buying patterns and encourage them to honor their purchase commitments if they fall behind.
Next, consider a large company that prioritizes factors such as premium offerings over ticket price. In such cases, the airlines may rely less on discounts and cheap fares, choosing instead to offer other perks such as seat upgrades, lounge access, and priority service. Service-sector companies whose employees travel frequently to meet clients often prize priority service when rebookings have to be made because of delays or cancellations.
Delivering on the right mix of discounts and other benefits will require multiple departments to invest in the infrastructure needed to support these value-added services in a coordinated way, as we explain when addressing the fifth pitfall.
Do your sales representatives spend most of their time creating their own market and customer insight reports?
Even the best corporate packages fall short if customers are unaware of them. In our experience, direct customer engagement is woefully low at many airlines, with sales staff frequently spending more than half their working hours away from their customers. Instead, many sales executives spend much of their time stuck in a quagmire of user-unfriendly data, trying to extract useful insights instead of interacting directly with customers. This imbalance often stems from inadequate investment in the airline’s technology stack and a lack of centralized support for customer-facing sales staff.
A better way: Equip sales staff with what they need to drive effective customer interactions
Most carriers know that the art of cultivating client relationships is best rooted in data-driven analyses, yet very few of them empower their sales team with the tools they need to drive truly data-driven conversations. These leading airlines have a dedicated central team responsible for the analysis and insights, which are then communicated to the sales teams.
This process starts with the central team categorizing accounts based on the value each account brings to the airline—ideally with help from the aforementioned data repository—and then providing the segmentation to the sales staff through a “single source of truth.” Accounts could be prioritized based on the Quality of Service Index gap (the difference between the actual market share achieved and the “fair” or expected share based on the network quality) and expected volume. The team also equips customer-facing sales staff with standard performance analyses for their regular customer check-ins and prepares them with data on the most promising opportunities.
In our experience, this system frees up commercial executives to spend between 60 and 75 percent of their time doing what they do best—customer interaction.
Are star employees looking elsewhere for better growth and career opportunities?
Sales staff are core to corporate sales success, yet we’ve noticed that many airlines follow a generic approach to their staff. Generalists are hired, their accounts span segments (leisure, online travel agencies [OTAs], travel management companies [TMCs], corporates), compensation is not performance-based, and incentives are poorly designed or nonexistent. Training programs are not tailored to cultivate the specific skills that corporate sales staff need, and regular feedback and strengths-based evaluation sessions are often not set up in a structured way.
The risks of neglecting talent retention are higher now than before the pandemic. Nearly a quarter of the employers in a recent McKinsey survey reported that they have more low-performing employees now than a year ago. Voluntary attrition is rising, and about 40 percent of employees are planning to leave their current jobs within the next three to six months. Employers that don’t give their top-performing sales staff compelling reasons to stay will likely see them leave.
A better way: Treat your sales staff as customers too
Wise employers understand that employees who feel a sense of belonging and feel valued are not only less likely to leave but also more invested in growing within the company. Compassionate employers are keenly aware that the pandemic has placed undue strain on their employees and proactively address these challenges and provide support where they can.
High-performing companies understand what type of skills correlate with superior sales performance and use this insight to build their sales force. They know the importance of a separate group of corporate specialists who understand the training needs of their sales team and cultivate the needed capabilities further through specific training programs. The relationship between senior, more experienced leaders and relatively junior staff is mentor-like, with ample on-the-job coaching and frequent feedback. Compensation is tied to performance assessments based on clear metrics that track incremental share without dilution. Staff get regular updates on how they’re tracking and are clear (and ideally, excited) about their career paths within the airline.
Do you treat corporate travel as a pure sales play?
While simplistic, it’s not wrong to say that many airlines view corporate sales as an activity best pursued exclusively by experienced sales professionals scattered across key markets. Such carriers’ organizational structures tend to be siloed, with different functions across the corporate value chain—such as network, customer experience, revenue management, marketing, distribution, and sales—operating independently with minimal consultation and coordination from across the company.
The corporate sales function is very often further siloed, exacerbating the situation for many carriers. Corporate sales usually happen through three channels: TMCs, direct channels (on the airline’s main booking path or a corporate small and medium-size enterprise portal), and indirect channels like OTAs and offline agents. Airlines often have separate teams dealing with each channel: one team manages direct corporate accounts booked via TMCs, one deals with TMCs and noncontracted corporates, while another sales team works with OTAs and other agents. The direct channel is managed by an e-commerce team that usually resides in a different department.
Without alignment from all the departments, trade-offs are bound to arise when any single unit chooses to implement a new initiative. This includes optimization efforts— such as revenue management, network management, or customer experience—undertaken by nonsales units. Sales, while an important function, is the last link in the end-to-end corporate value chain and is often adversely affected by decisions made by other units.
One example of a lack of alignment between departments is when an airline’s distribution team implemented surcharges on bookings made through global distribution services (GDS), which are typically used by OTAs and corporate clients. The distribution team made the move in an effort to send leisure travelers to the airline’s platform. But it put the airline at risk of lost revenue from cost-sensitive corporate customers.
Another example is when one airline’s customer experience unit decided to strictly enforce its one-cabin-bag allowance and charge €60 for each additional piece of baggage. While this was in line with the department’s goal of maximizing ancillary fees, it probably dampened total revenues.
A better way: Break down the silos and coordinate the airline’s value proposition across all departments
To be effective, someone (or a group) within the airline has to own the corporate value proposition across silos. This effort starts with developing a clear understanding of each department’s goals and making any trade-offs clear. Many high-performing airlines create an independent group that coordinates across silos, ensuring that team initiatives and goals don’t conflict (exhibit).
Feedback loops among these departments could ensure that corporate agreements are optimized and are beneficial for nonsales teams too. Frequently the sales team has detailed insights into the travel needs of their corporate clients, as well as honest feedback from them on the airline’s service and product quality. Yet these insights are not often used to develop the airline’s network, product, pricing, and loyalty program. Deeper integration across all departments that tend to operate in silos will facilitate the information flow necessary to improve the airline’s holistic performance.
Corporate sales have been, and will continue to be, critical to airline profitability. However, the function is far from optimized at many carriers. By avoiding the pitfalls mentioned here and by making changes now, airlines can set themselves up to capture more of this critical segment.