Due to the deregulation act of 1978, the airline markets opened up for more choices, better pricing, more schedules to choose from. Competition became more evident. However, the down side to this change is fuller flights, tighter security and baggage concerns.
From the airline industry side, many small carriers were unable to keep up to the constant changes and many carriers found themselves in bankruptcy and mergers. Several large carriers were also forced into mergers in order to continue with the every changing demands of the public. Where this deregulation has been the best for the industry is still being debated.
Government spending for airline travel is reported to be $3.4 billion in 2006. And as Corporations became more watchful of the pricing changes, the GSA developed a program call City-Pair Program to assist with developing a fair market share for companies. This program began in 1980 and began with 11 city-partners and has grown to over 5000 cities. The program helps to save between 50-70% off unrestricted coach seats. This allows for a more profitable use of government funds for travelers, even though this only represents about 2% of government travel.
The program does allow for better lower rates, available flights for government travelers and the airlines have a more predictable and stable market volume. This program has proven to save millions of taxpayers’ dollars.
Benefits of the program as no advance purchases required, no minimum or maximum stay required, tickets are fully refundable, last seat availability; no blackout periods, prices are in effect for one full year; no penalties or fees for re-booking, capacity fares availability; contract business fares as well.
The City Pair Program is mandatory for the majority of government TDY travelers and is only available with the use of a government issued charge card and may require the use of a GTR form (Government Transportation Request.) The program does have three official contract fare codes – YCA (contract award) for designated unrestricted coach class contract for the government contract carriers – _CF Fare – a three letter code used to identify capacity-controlled coach – _CF Fare – a three letter code used to identify capacity-controlled government contract business class fares.
The program allows for non-mandatory users to request contract city pair tickets on an optional basis. However, contract carriers are not required to furnish any requested service to non-mandatory users including US Congress member, employees of the Judicial Branch of the government, US Postal service employees, US Foreign Service Officers, DOD recruits traveling from military entrance processing stations and groups of 10 or more passengers traveling on the same day, same flight for the same mission requiring group integrity and are identified as a group by the travel management system.
Certain exceptions are noted for the mandatory use of the CPP program:
- Unnecessary delays that might cause for overnight expenses
- Flight schedules are inconsistent
- A non-contract carrier might offer a lower rate providing lower cost to the government worker.
- Should rail service offer a comparable rate and is consistent with the mission schedule.
- Smoking is permitted on the contract flight
The exception code must be included in the traveler’s PNR to be able to justify the use of the non-contract fare.
A variety of taxes will be included in the ticketing price. However, international flights will be excluded of taxes and are paid as separate line items. Due to increased fuel costs to the airlines, additional fuel surcharges have been allowed by the airlines to help with recouping some of their costs. Should a traveler need to seek a refund for their ticket, they would apply through TMC/CYO or the electronic traveling system. It will be placed back on the original form of payment. A traveler may also experience additional fees for baggage, food and beverage costs; this is a means to help the airlines with their struggling continued costs of providing service.
Airlines wanting to be part of the CRAF program must participate in the Civil Reserve Air Fleet or they need to receive a Certificate of CRAF Technical Ineligibility. Carriers must maintain a minimum commitment of 30% of its CRAF capable passenger fleet and 15% of its CRAF capable cargo fleet in order to participate in this program. Carriers must have a response time of 24 – 48 hours after assignment of the mission.
CRAF has three main segments: International, national and aero-medical evacuation and is most visible with troops were being deployed to the Middle East and the recognizable US airlines were noted by the news media.
Under the Fly America Act, the basic rule supports the use of US Owned and operated airlines. Exceptions to this act fall under the Open Skies Agreements that allow federal employees to use foreign airlines under special circumstances. The United States currently has agreements with the European Union, Switzerland, Australia and currently pending with Japan. The City Pair contract fares still take precedence over flights under the Open Skies Agreements. However, flights funded by the Department of Defense must follow the Fly America Act.
Using code share agreements airlines have formed alliances with other domestic and international carriers in order to cover destinations not covered by with the expanded markets. The GDS technology facilitates code share partners’ sale of each others seats on specific routes, similar to their own airline. This provides a wider choice for the traveler and access to new markets. Travelers will be advised if there is a segment of their trip that to another carrier. Check-in is with the airline actually flying the segment and luggage issues are the responsibility of the destination carrier.
In 1981 frequent flyer mileage programs began by American Airlines, followed by United and then followed by other major carriers. Creating loyalty programs initiated partnerships with the hotel industry and rental car companies. Redeeming points by frequent travelers allowed travelers to upgrade, redeem trips, purchase goods and services with certain vendors. Through the redemption programs, travelers can be identified in categories denoting the frequency of their flying and a tiered status. A minimum of 25, 000 miles must be earned in a given year to qualify for elite status. Elite status is then further sub-divided into additional categories.
Government travelers are allowed to keep frequent flyer benefits earned if earned through official travel and can be used for future travel, upgrades or for personal use. This decision was made when repeated efforts were made to capture the benefits were unsuccessful.
Due to the pricing variations, travelers have become frustrated with the various pricing options on the same flight, except for the government travelers paying one of three contract fares. The airline seat is considered perishable – as soon as the aircraft door closes any empty seats become lost revenue to the airline.
The GDS computer systems allow for travel industry suppliers, airlines hotels and rental car companies to analyze travel patterns so as to maximize travel demands and maximize revenue. Fares are tracked based on what the passenger pays (in cents) per mile. In 1978 passengers paid approximately .19 cents a mile, by 1997 is had fallen to .14 cents per mile and in the second quarter of 2006, the average was .13.4 centers per mile. The constant fluctuating represents a dynamic business in and of itself.
Travel agents are accredited agents of the airlines (ARC) and must follow an exacting process for issuing tickets and payment for the airline tickets. ARC is an airline-owned company serving the travel industry in the United States, Puerto Rico and the US virgin Islands. ARC assures the airline of accurate payment and report of sales activity. ARC provides the following services:
- Ticketing distribution, report and settlement of services for over 145 air and rail carriers, utilizing more than 20,000 ARC agency locations and travel departments.
- ARC began in 1964 as part of the Area Settlement Plan, a clearing house operation (ASP). With the deregulation, ASP separated from ATA and incorporated in 1984 as Airlines Reporting Corporation.
- With more information becoming available to the travel industry, ARC added business intelligence, data warehousing and analytic
- After 40 years of experience, ARC today continues to develop opportunities for its participants and partners to profit from secure, efficient management and delivery of travel information
- ARC is located in Arlington, Virginia, with three operational centers nationwide, housing approximately 450 travel professionals
- ARC exceeds $70billion in annual processing volume and unequaled data depositories and is considered the information hub of the travel industry.
As there are approximately 93,000 federal government travelers staying in hotels each night with an annual spending of nearly $2 billion, many hotels have responded to this market be setting lodging rates at or below per diem.
The government traveler is categorized into three types of properties:
- Transient properties for the temporary duty traveler
- Extended stay facilities for those needing lodging in one location for more than 30 days
- Corporate housing for permanent change of station travelers
Given the large market that government travelers represent, hotel managements frequently offer travelers a variety of incentives, breakfast, cocktails with appetizers, airport shuttles, and transportation to transit points or local destinations.
As a rule, travelers are requested to stay at hotels that are at or below the locality per diem approved “fire safe” by the FEMA and included on the FEMA master list. FTR state that the travelers have the right to select when they stay as long as it’s within policy. The per diem rates which include lodging meals and incidental expenses are reviewed annually at which time adjustments are made which are reviewed and adjusted by three separate entities. FEMA approved hotels provide a form to be used by reporting hotels to insure that the property has the required smoke alarms sprinkler systems, evacuation directions and other fire safe procedures in place.
FedRooms is a program initiated by GSA to outsource a government wide hotel program to a contractor. Hotels in this program are FEMA and ADA compliant, must have a least two star rating with Mobil Travel Guide and/or AAA rating, must accept government credit cards or other forms of payment at or below per diem rates. FedRooms may have rates different from government rates and may include different amenities. FedRooms do not include commissions to travel agencies, and are often left up to the hotels for commission policies.
Booking hotel accommodations though ETS/DTS or TMC/CTO provided the government with data that may otherwise be lost and not provide adequate information for rate negotiations and/or actual usage. If a trip is cancelled, the hotel cancellation would be automatic if the original reservation is mad through TMC/CTO or ETS/DTS. However, if the reservation is made directly with the hotel, the cancellation must be made by the traveler or a “no show” penalties may be assessed by the hotel.
The Emergency Lodging program was set up to provide temporary lodging accommodations in support of emergencies and/or disasters. This program is also available for Continuity of Operations Program for planning accommodations at identified and negotiated properties in geographic areas. The corporate housing lodging program was designed for lodging needs of 30 days or more. This program provides housing for extended training assignments, work assignment and temporary or permanent employee relocation in housing facilities that include apartment buildings and condominiums and are furnished with home items.
The management of all necessary arrangements for conferences, seminars and trade shows are assigned to individuals, departments or contractors. Event marketing services may include site location research, reservation of facilities for a trade show, event and/or exhibit booths. With the variety of hotel rating systems, hotels are assigned a value to the overall condition, location and amenities for that property. Major chains have certain requirements and levels of service that if not maintained can be dropped if they do not keep certain standards. Categories that are considered would be identification of the hotel, hotel basics, rooms and support features.
Hotel chains are mostly comprised of franchises or owned by individuals. However, they have a branding and widespread marketing and management support, centralized reservation systems, employee benefit packages. Utilizing data systems to analyze occupancy rates, seasonal fluctuation, market variations, accurate pricing, helps with stability and profitability of the property. These systems can help with projecting staffing from the front desk to restaurant to shuttle needs.
Individual properties usually have a GM in charge of all operations with employees to service sales, marketing, catering, conferences, housekeeping, finance and maintenance. On going training is usually encouraged to insure optimum service.
The American Hotel and Lodging Association maintains statistical information generic to the lodging industry and the AHLA publishes the information annually. Using this information allows the hotel chains and individual properties to analyze data to set pricing to different categories. Government rates are at or below per diem. Standard rates are set for the general public. Discounts to rates can be applied from AAA, AARP, negotiated rates for organizations, weekend or seasonal rates. Using this information, hotels can and will designate certain number so rooms to certain rates. As the rate category is filled, the rooms held for other categories might be released to accommodate fluctuations in stay patterns. The last room available on a property will often be a negotiated rate, guaranteeing the organization that a room at the category rate is booked.
Some hotels do pay a commission to the TMC/CTO or online vendor booking the reservation which is earned if the traveler uses the room; commission standard is 10%. However, government rates are often non-commissionable, but hotels are3 permitted to change this practice. Reporting hotel bookings has been a challenge of the travel management systems. Reservations booked outside of the systems cannot be tracked except by the charge card companies. To reconcile the differences between booked and actual hotel data, the contracts fro charge cards and business intelligence will include reporting requirements to capture the actual lodging usage information. Automated vouchers are an additional reporting source. Hotels participating in the FedRooms program are required to submit monthly reports. Hotels participating in the Emergency Lodging program are tracked by the contractor and room usage is reported to GSA on a quarterly basis.
By: Brandy Webber