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Lesley's Column

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28th November 2016

Don’t cut off your preferred suppliers

Many organisations now outsource the negotiation and management of their airline programmes to consultants or their TMCs, which has both pros and cons.

It saves the procurement or travel manager’s time and can be seen as allowing the travel specialists to do what they’re paid for.
It can work well, but there’s one area that’s now starting to concern us and that’s what I term ‘absolute outsourcing’. This is where all contact with the airline is through the third party, with airline access to the organisation’s key decision makers for updates and reviews also discouraged.
We have experience of two different types of client here. There are those who outsource but still allow access for reviews and strategy discussions, and those who keep the airlines at arm’s length.
When it comes to contract re-negotiation the end-results are very different. The companies that have maintained links with their airline partners – through regular reviews and open dialogue on how they are (or aren’t) reaching the agreed targets – are finding that the new deals they are offered are likely to be better than those who insist on a more distant relationship.
One of our clients had to reduce travel spend over the past year but communicated who their preferred supplier was to their travellers effectively and have actually grown market share. It has seen all its existing deals re-negotiated at existing (and in some cases, higher) rebates than before.
The opposite is true for another company who outsourced all contract management and relied on the third party to hold mid-term review meetings.
Their strategy of keeping airlines at arm’s length brought lower discounts despite increased volumes, simply because the airline didn’t feel that they had an ongoing relationship with the end client.
Outsourcing preferred airline programmes has good merits and, through a TMC or consultant’s market knowledge and expertise, deals are likely to be good.
However, it’s essential that contract obligations on review meetings, trend sharing and access to key decision makers is maintained.