Getting With the Program - Carlson Wagonlit Travel

Insights into Effective Travel ManagementIssue 3January 2008Global EditionGetting With the Program:How Companies CanImprove Travel Policyand Compliance| 7Priorities for Mobility| 17Open Skies:Opening Up Opportunities| 27Lower Costs, Higher Value:Asia-Pacific Travel ManagersWelcome “New World” Airlines| 33Ten Business Travel Trends for 2010| 41

Insights into Effective Travel ManagementIssue 3January 2008Global EditionEditor-in-ChiefChristophe RenardManaging EditorsKim DerderianKate MosesEditorial Advisors/ContributorsGuillaume BizetShannon CoughlinDale EastlundStefan FallertHubert JolyHervé Joseph-AntoinePascal JungferDave KilduffIsabelle KochMike KoettingMichael MannixNicolas PierretPeggy TemkinBerthold TrenkelNicholas VournakisFloyd WidenerArt DirectorAshley IttooProductionNicolas AlquiéCéline GuertonEmailcwtvision@carlsonwagonlit.comWebwww.cwtvision.comwww.carlsonwagonlit.comPhotos/ArtworkAll photos and artwork by CWT except:Page 6 - © istockphoto.comPage 24 - © stock.xchngPages 28, 40, 52 and 53 - © fotoliaPages 57 and 59 - Getty ImagesCWT Vision - Global Edition is published by the CWT Travel Management Institute31 rue du Colonel Avia75904 Paris Cedex 15FrancePrinted on PEFC-certified paper produced from sustainably managed forestsCopyright © 2007-2008 CWT

2 ContentsEDITORIAL5 Looking AheadHubert Joly, President and CEOINSIGHTS7 Getting With the Program: How Companies CanImprove Travel Policy and ComplianceThe latest in-depth research by the CWT Travel ManagementInstitute reveals considerable scope for companies to improvetheir travel policy and traveler compliance. Doing so will helpthem realize double-digit savingsPascal Jungfer, Vice President, CWT Solutions Group GlobalChristophe Renard, Senior Director, CWT Travel Management Institute17 Priorities for MobilityIn an exclusive meeting with CWT clients, Jacques Barrot, VicePresident of the European Commission and Commissioner forTransport, highlighted the Commission’s priorities as they relateto air and rail travel.27 Open Skies: Opening Up OpportunitiesWhat changes will the EU-U.S. “Open Skies” agreement bringto airlines and what benefits can travel managers expect?Dale Eastlund, Director CWT Air Solutions, North America33 Lower Costs, Higher Value: Asia-Pacific Travel ManagersWelcome “New World” AirlinesBudget carriers are steadily gaining ground within corporatetravel programs in Asia Pacific thanks to their efforts to tailorservice to business travel.Michael Mannix, Vice President CWT Solutions Group Asia PacificNicolas Pierret, Director, Global Accounts Asia Pacific, CWT

CWTvIsIon Issue 3 - January 2008341 Ten Business Travel Trends for 2010How is the business travel industry likely to evolve over the nextfew years? A CWT survey of global clients and suppliers identified10 major trends.Mike Koetting, Executive Vice President,Global Supplier Management, CWTFloyd Widener, Vice President Sales, Europe, Middle East and Africa, CWTSMART SOLUTIONS46 “If People Are Aware of Price Differences, They Care”Birgit Schenscher, Global Purchasing Director, Services, at Henkel,explains how her company saved nearly US$6 million(€4 million) in one year by updating the travel policy andreinforcing compliance.INTERVIEW50 Ground Transportation: Worth Another LookDave Kilduff, Managing Director of the new ground transportationpractice within the CWT Solutions Group, explains howcompanies can benefit from revisiting their strategy in this area,which is often a low priority for travel managers.IN BRIEF54 Snapshot: Top methods for reducing travel costs56 Soundbite: Mary Peters, U.S. Secretary of Transportation,on airport congestion57 Industry News Highlights: New developments inregulation, airlines, hotels, ground transportation,technology and sustainable travel59 News from CWT: Corporate update60 Indicators: Evolution of air ticket prices

2008

CWTvIsIon Issue 3 - January 2008Looking AheadThis issue of CWT Vision looks at some of the trends inbusiness travel that our clients and suppliers are focusing onas they look at 2008 and beyond. We at CWT are committedto continuing to address these developments and helping ourclients derive greater value from their travel program in anevolving market.The business travel management industry has significantlyevolved in the last few years. Business travel has grownconsiderably—it now represents US$300 billion worldwide—driven primarily byglobalization and economic growth. The multiplicity of distribution channels (from globaldistribution systems to suppliers’ own Websites), coupled with complex pricing models,has made managing business travel challenging. The most advanced companies haveresponded by consolidating their travel programs, using technology to drive efficienciesand performance, and outsourcing travel management services. And yet the demandsare increasing, in terms of service, savings, security and now sustainable development.In this context, effectively managing business travel has evolved into a professionalservices activity that delivers measurable value.As the article “Effective Travel Management 2010” indicates, our industry will not standstill. Greater segmentation of services will appear. Companies will look for additionalsavings through several means: demand management, consolidation, outsourcing, awell-defined travel policy, increased compliance and incorporating meetings and eventsinto the travel program. Service will be increasingly centered on enhancing the traveler’sexperience from the planning stage through post-trip expense reporting. Security willalso be stepped up as duty of care toward employees becomes not only a moralobligation but a legal one. New emphasis on sustainable development and corporatesocial responsibility will also become a permanent concern.Dialogue and cooperation among industry players are essential to moving the businessof business travel forward. As the journey continues, we look forward to hearing fromand working with you.On behalf of everyone at Carlson Wagonlit Travel, I would like to wish you a happy newyear, filled with great accomplishments.Hubert JolyPresident and CEO

CWTvIsIon Issue 3 - January 2008INSIGHTS7 Getting With the Program:How Companies Can Improve Travel Policy and Compliance17 Priorities for Mobility27 Open Skies: Opening Up Opportunities33 Lower Costs, Higher Values:Asia Pacific Travel Managers Welcome “New World” Carriers41 Ten Business Travel Trends for 2010Getting With the Program:How Companies Can ImproveTravel Policy and ComplianceThe latest in-depth research by the CWT Travel Management Institutereveals considerable scope for companies to improve their travel policy andtraveler compliance. Doing so will help them realize double-digit savings.Pascal JungferVice PresidentCWT Solutions Group GlobalChristophe RenardSenior DirectorCWT Travel Management InstituteA corporate travel policy is the basic tool of travel management and sharpening that toolcan have a major impact on how well the travel program performs, particularly in termsof savings. It is little wonder that travel managers are increasingly revising their policyand in particular, integrating key travel rules such as advance purchase of airfare. Butprecisely which policy items present the greatest savings opportunities? And how cancompanies maximize traveler compliance to realize those savings?These are among the questions the CWT Travel Management Institute asked in its latestin-depth research, which focuses on travel policy and traveler compliance. Five key findingsare detailed in a booklet which will be published this quarter and are summarized in thisarticle.Key finding 1: By optimizing travel policy and traveler compliance, companies canrealistically save on average 20 percent of total travel spendCWT calculated this savings potential by comparing the average market performance ofclients with best practices observed on five main policy items. (See the sidebar on Page15 for a summary of the methodology.) A typical spend ratio of 70 percent air and 30percent hotel was used.

8 How Companies Can Improve Travel Policy and ComplianceThe results show that rules pertaining to travel class/category and preferred suppliers,which are typically the main focus of cost-saving efforts, are not the only source ofsignificant savings. In fact, savings opportunities are spread over four key travel rules(advance air booking, restricted airfares, preferred suppliers and class/category of travel),as well as preferred booking channels. These savings come from a well designed travelpolicy that addresses these items and from increased traveler compliance, as shown inthe chart below.Companies can reduce total spend by 20 percent on average by improving performanceon five main policy items% of total air and hotel spend20153.9%2.5%5.1% 1.4%17.9%2.8%2.4%0.4%20.7%12.3%2.6%9.9%105.0% 2.5%55.7%3.5%2.5%2.5%8.0%8.4%02.2%AdvancebookingOverlap -2%RestrictedfaresPrefferedsuppliersClass/categoryof travelTotaltravel rulesBookingchannelTotalCompliance impact: 60% of total savingsPolicy impact: 40% of total savingsSource: CWT Travel Management InstituteNote: Advance booking is generally required for restricted fares, explaining the overlap in savings potential between the two policy items.Key finding 2: Four key travel rules provide significant savings opportunitiesAnalysis of CWT client transactions provides insights into the importance of each of thefour key travel rules:Advance air booking. Booking two or three weeks in advance enables travelers toaccess significantly lower fares. Discounts can exceed 50 percent of the ticket price(as shown in the example below), especially on highly competitive routes or ineconomy class. In some extremely regulated markets such as India and China,however, there is no price advantage to booking in advance.

CWTvIsIon Issue 3 - January 2008The earlier travelers book, the lower the fareAverage price (€)London-Madrid, UK point of sale-58%30 20 10 0Days booked in advanceSource: CWT Travel Management InstituteBased on data from 2,311 CWT client transactions (January-March 2007)Restricted airfares. A company’s use of restricted airfares usually brings savings, asthe upfront discounts generally outweigh the cost of changes or cancellations madeby travelers. (These typically represent 20-40 percent of all air bookings). As a result,companies can save on average 24 percent of the price of fully flexible tickets.Preferred suppliers. Companies that require travelers to use preferred supplierscan save an estimated 16 percent on hotel rates and 18 percent on airfares. Thesesavings come from lower upfront prices and better back-end rebates, the latterbased on a company’s ability to deliver the volume agreed upon with suppliers. 1 Forthis reason, it can be more cost-effective to require travelers to systematically use apreferred airline rather than take a “best buy” approach (i.e., choosing the lowestavailable fare on the day, regardless of the airline).Travel class/category. In setting travel policy, companies aim to find the rightbalance between traveler comfort—in terms of seating classes or hotel categories—and savings. Some changes in the authorized comfort level can have a significantimpact on savings: depending on a company’s travel pattern, these can reach 30percent of air spend and 20 percent of hotel spend.Key finding 3: Companies need to focus on both policy and compliance to achievetheir full savings potentialCWT estimates that 40 percent of potential savings can be realized throughimprovements to policy and 60 percent through increased compliance. To that end,companies still have considerable room to improve the content and wording of theirtravel policy and an even longer way to go to raise compliance among travelers. This40/60 ratio applies to each of the four key travel rules, while the savings potentiallinked to the use of preferred booking channels mainly comes from improvedcompliance (discussed in key finding 4).1This is explained in detail in the CWT research booklet Global Horizons: Consolidating a Travel Program (2007)

10 How Companies Can Improve Travel Policy and ComplianceCurrently, travel policies vary widely in terms of coverage (the key travel rules which areincluded) and precision (how clear and detailed instructions are for travelers):Advance booking for airfares: well covered but not precise enough. Companiesgenerally recommend advance booking in their air travel policy but rarely specify aclear timeline.Restricted fares: too often forgotten. Only 4 percent of policies require travelersto use restricted fares, compared with 59 percent that recommend their use and 37percent that do not mention them at all.Preferred suppliers: well covered and precise. Ninety percent of companies referto preferred airlines and 89 percent mention preferred hotels. But there isconsiderable room for improvement. For example, only 29 percent of companiesrequire travelers to always use preferred airlines, which appears to be the beststrategy for savings.Travel class/category: well covered and precise. Ninety-nine percent of policieshave class rules for air travel, mainly based on flight duration, but fine-tuning theserules can often bring further savings. For hotel bookings, the category is implicit inthe choice of preferred properties, but policies often omit guidelines on what to dowhen properties are unavailable.In addition to better defining their travel policy, companies have significant scope forimproving compliance with the key rules, except class of air travel, which travelersgenerally respect. In fact, at least 45 percent of the transactions analyzed by CWT breakone or more of the rules.Non-compliance is a problem across the traveler population, although the majority ofcases are linked to a small minority of frequent travelers. (In one company studied, 25percent of all travelers—frequent travelers—make 60 percent of all late bookings.)Although travel managers generally believe that personal preference is the main reasonfor non-compliance (i.e., travelers want to exploit a frequent flyer program or have thefreedom to choose their hotel), the travelers themselves say that practicality and pricingcome first, as shown in the chart below. This implies a problem of perception for bothparties and/or a poor fit between travelers’ needs and the travel policy, whichcompanies should investigate further.

CWTvIsIon Issue 3 - January 200811Travelers rate practicality and pricing before personal preference as reasons for noncompliancewith travel rulesImportance of reasons behindchoice of non-preferred airlineImportance of reasons behindchoice of non-preferred hotelTravelers'viewTravel managers'viewTravelers'viewTravel managers'viewHighPracticalityPersonalpreferencePracticalityPersonalpreferenceMediumBetterpricingBetterpricingBetterpricingPracticalityLowPersonalpreferencePracticalityPersonalpreferenceBetterpricingSource: CWT Travel Management Institute - Based on a survey of travel managers (50 responses) and travelers (4,879 responses) in 2007.Note: Personal preference includes use of frequent flyer card, comfort and overall preference. Practicality includes proximity ofhotel to business destination, scheduling and flights availability.Key finding 4: Companies can maximize benefits by requiring travelers to bookthrough the travel management companyResearch shows that booking through the travel management company offers tangiblebenefits in terms of savings, service and security.Savings. Prices obtained by booking through the TMC are significantly lower thanthose obtained through Web intermediaries. A 20 percent difference in hotel rateswas observed in the CWT study, while a 15 percent difference in average air ticketprices was found by corporate travel consultancy Topaz International in a pricebenchmark published in 2007. 2 In addition, TMC agents can help companiesmaximize savings by promoting traveler compliance at the point of sale. For example,CWT reported 6-12 percent more compliance with preferred airlines and 15 percentmore compliance with preferred hotels for travelers using the TMC instead of otherchannels. Online booking can further enhance savings, as explained in the CWTresearch booklet Toward Excellence in Online Booking.Service and security. Travel managers recognize the service and security benefitsbrought by booking through the TMC. The majority of those surveyed by CWT statethat using alternative channels causes travelers to waste their own time and makestracking less effective in the event of an emergency.2Topaz International publishes regular comparative studies of corporate travel airfares booked by TMCs and those available onpublic Websites and airlines’ own Websites.

12 How Companies Can Improve Travel Policy and ComplianceIt follows that most policies require travelers to book through the TMC (87 percent forair travel and 79 percent for hotels). Few companies, however, mandate the use oftheir online booking tool, with only 26 percent and 2 percent of those that haveimplemented a tool doing so for air and hotels respectively.Traveler compliance with regard to authorized booking channels can be improved upon,especially among occasional travelers and a small proportion of frequent travelers.Alternative channels are currently in use for 2-20 percent of air transactions and 23-66percent of hotel transactions, depending on the company.Like non-compliance with travel rules, booking channel non-compliance is usuallyexplained by travel managers as a question of personal preference, whereas travelersmore often cite price, booking convenience or suitability of the offering.Key finding : A four-step approach can help companies improve policy andcomplianceThe CWT analysis of best practices among clients suggests that a four-step approach canbe the most effective for improving policy and compliance. This is a process ofcontinuous improvement, as shown in the chart below.A four-step approach to improving travel policy and complianceOptimize travelpolicy designMonitorcomplianceand takecorrectiveaction4132Carry outeffectivecommunicationsand trainingImplementa booking process thatpromotes complianceSource: CWT Travel Management Institute

CWTvIsIon Issue 3 - January 200813Step 1: Optimize travel policy design.Each company needs to adapt its policy tothe needs of its travelers, business andcorporate culture. But it should also base itsdecisions on a solid understanding of howpolicy items affect savings, as well as arealistic appreciation of traveler compliance,as explained above. Once defined, thepolicy should be worded in clear, conciseand practical terms to avoid anymisunderstanding, particularly regardingmandates.Step 2: Carry out effective communicationsand training. The CWT research indicatestravelers are insufficiently aware of theircompany’s travel policy. Ensuring that allemployees are well-informed and aware ofthe latest changes is a challenge, particularlyas travel policies affect a large and diversepopulation and are subject to regular revision.Companies can rise to this challenge bycommunicating through top management,ensuring the policy document is easilyaccessible (e.g., via the corporate intranet)and conducting compulsory training for alltravelers.Step 3: Implement a booking process that promotes compliance. The bookingprocess plays a key role in promoting compliance. TMC agents should be instructedto inform the traveler if his or her request breaks a travel rule or be authorized torefuse the request. In addition, online booking tools can be set up to clearly identifyvalid options and prevent bookings that do not meet authorized criteria. To dealeffectively with exceptions, companies can fine-tune their pre-trip approval and posttripcontrol procedures.Step 4: Monitor compliance and take corrective action. Travel managers arealmost unanimous that reporting is valuable for managing compliance. Among themost useful indicators are: overall air booking compliance, compliance with each ofthe key travel rules, lists of non-compliant travelers, missed savings opportunitiesthrough non-compliance and online adoption. Based on this information, companiesmay decide to focus on changing traveler behavior and/or updating the travelprogram.

14 How Companies Can Improve Travel Policy and ComplianceTravel managers are confident that compliance can be improved: according to the CWTsurvey, they already report progress compared to three years ago and have the goal offurther raising compliance over the next three years, as shown in the chart below.Estimated levels of compliance with travel rules% Compliance100908070605046667851938877 7559718386 857676676192 9481 82695440393020100AdvancebookingOnlinebookingTravelclassLowestfarePreferredsuppliersCity capconstraintPreferredhotelsClassrulesGeneral Air Hotel Rail3 years agoTodayIn 3 yearsSource: CWT Travel Management Institute - Based on a survey of travel managers (2007)Travel managers are clearly motivated to identify the major policy and compliance issuesthat affect their travel program, understand industry best practices and effectively adaptthem to meet their company’s needs. They may find that a little change can go a longway. For more information on how CWT experts can help your company optimizetravel policy and traveler compliance, please contact your CWT sales or programmanager or email: tmi@carlsonwagonlit.fr. The full report will soon be availableon www.carlsonwagonlit.com.

CWTvIsIon Issue 3 - January 20081Actionable insightsThe CWT Travel Management Institute designed its latest research to provide an indepthunderstanding of policy and compliance issues, with actionable insights intohow companies can best address them.The research has two main features:A range of research techniques: CWT conducted benchmarks of corporatetravel policies and hotel pricing per booking channel, surveys of travel managersand travelers, analyses of client transactions and credit card transaction data,and case studies.A broad sample: the study involved 87 companies in Europe, North Americaand Asia Pacific with diverse profiles in terms of industry and travel spend.This is the latest in a series of in-depth studies into the eight key levers that CWThas identified for effective travel management. 33The eight levers to effective travel management are: provide the right services and assistance to travelers, and optimize transactionprocessing; tackle hotel spend in a disciplined and professional manner; continue to drive air and ground transportation savings;increase policy compliance and optimize demand management; further consolidate travel programs; address security needs andcorporate social responsibility; integrate meetings and events into the travel program to control and optimize the related spend; anddevelop executive dashboards and actionable performance measures.

CWTvIsIon Issue 3 - January 20081Priorities for MobilityIn an exclusive meeting with CWT clients, Jacques Barrot, Vice President of theEuropean Commission and Commissioner for Transport, highlighted theCommission’s priorities as they relate to air and rail travel.Jacques Barrot, Vice President of the European Commission and Commissioner forTransport, was a keynote speaker at the CWT global client seminar last September.Addressing an audience of more than 80 clients, suppliers and CWT professionals, Mr.Barrot underlined the need for politicians to hear the concerns of business travelprofessionals and invited travel managers to participate in an open, ongoing dialoguewith the Commission.Before answering questions from the audience (see Pages 22-25), Mr. Barrot providedan overview of European transport policy and the Commission’s priorities for mobility.Boost competition in aviation“Europe has successfully created a single aviation market by restricting any governmentaid that distorts competition. If a state subsidizes an airline for a certain time, we candemand the reimbursement of this subsidy as a sanction in order to promote faircompetition. We have come a long way, because all airlines used to be national carriers.Through measures taken in 1992 and in 1997 [see the chart below], we created asingle aviation market, which has led the way to competitive, solid airlines. We still haveproblems, however, with certain member states and certain legacy carriers, whom Ihave to remind of the European “one time, last time” policy on state aid.EU aviation policy: key milestonesPre-19871987-1992199720042008Protected, fragmented national markets, with legacy carriers only andbilateral agreements governing international routesStart of liberalization: three successive packages of measures covering aircarrier licensing, market access and faresFull cabotage: EU carriers can operate domestic routes in EU countries outsidetheir home baseSingle European Sky: initiative to improve the structure of air traffic control inthe EUTransatlantic Open Skies (Phase One): any EU carrier can fly to any U.S. cityand vice versaSource: CWT Travel Management InstituteBased on information from the EU Directorate-General Energy and Transport/Air Transport Directorate

18 Priorities for MobilityWe have also developed cooperation with our neighbors. Today, we have agreementswith Morocco, the Balkan States, soon Ukraine and of course the United States, withwhich we signed an Open Skies agreement this year. I hope to sign a similar agreementwith Canada. The negotiations with the United States were difficult and lasted morethan five years. It was important for us that the United States accept we no longer havenational airlines but European airlines. Consequently, any European airline can connectany American city to any European city. We used to have a system of bilateralagreements, but we will now have a single agreement that covers the whole of theEuropean Union. This will enable us to significantly boost transatlantic traffic. In addition,a few member states that had no bilateral agreement with the United States will nowbe able to fly to U.S. cities. Just as the single aviation market has enabled low-costcarriers to emerge, this liberalization of the transatlantic skies will pave the way for newentrants. You should find greater opportunities over the next few years.”The 2 member states of the European UnionSwedenFinlandEstoniaUnited KingdomDenmarkLatviaLithuaniaIrelandPortugalSpainNetherlandsPolandGermanyBelgiumCzech RepublicLuxembourg SlovakiaAustriaHungaryFrance Slovenia RomaniaItalyBulgariaGreeceMaltaCyprus

CWTvIsIon Issue 3 - January 20081Improve air traffic control to manage growth“Of course, this leads to another problem, which is ensuring that the skies are managedto allow for growth in air traffic. We have a problem in Europe, as air traffic is largely stillmanaged within national boundaries. We have been working toward a Single EuropeanSky with more efficient cooperation among air traffic controllers. This will enable us tosignificantly improve air traffic management, especially since we are preparing a highlysophisticated system called SESAR (Single European Sky ATM Research), which willcompletely modernize air traffic control over the next 10 years.”Make air traffic safer“We now have a European Aviation Safety Agency which harmonizes safety rules, andI have created the black list of airlines that are deemed unsafe and banned from theEuropean Union. This list is updated every three months. I think it has been successfulin preventing numerous accidents because airlines are so afraid of being on the list, theytake the necessary safety measures. And it is not just a question of airlines but of states,and in particular, some states that do not have sufficiently competent authorities. Inthose cases, we provide technical assistance. I would like to add that some othercountries have now adopted the same system as we have in Europe. I think we havemade significant progress in making air traffic safer.We sometimes have security regulations that travelers find difficult to put up with, inparticular the recent rules banning liquids in hand baggage. Experts from all 27 memberstates were adamant that it is best to take this precaution after the discovery in the U.K.of plans to attack airliners crossing the Atlantic, so I am maintaining it. At the same time,I hope that over the next two years, we will have machines to detect explosives inbottles.We also have the problem of duty-free bottles, which can be confiscated whenpassengers take a connecting flight. To solve this, we are developing a network ofairports in different countries that meet our standards so that travelers will not have torelinquish their duty-free purchases. But I have to admit, it is difficult. In addition, thanksto the Open Skies agreement, Washington and Brussels will now consult each otherbefore taking any new safety measures.”Help tackle global warming“You can all sense that the fight against global warming is becoming everybody’sbusiness. Aviation is often unfairly held to blame. Some believe a solution lies in taxingkerosene, but in Europe, we prefer to use an Emissions Trading Scheme. 1 This willencourage airlines to buy increasingly energy-efficient, less polluting aircraft. Theproblem is that the United States and some other countries are strongly opposed to thesystem. Nevertheless, the European Union believes that the right way for aviation to1Aviation will be included in Europe’s Emissions Trading Scheme as of 2011. The scheme sets annual CO 2 emission allowancesfor industries and allows companies to buy or sell surplus credits.

20 Priorities for Mobilitycontribute to the fight against global warming is to integrate aviation into the EmissionsTrading Scheme. Doing so will undoubtedly produce some extra costs for air transport,but it will also provide an incentive for airlines to move toward more energy-efficientaircraft. We should not let air traffic be accused of being one of the main causes ofclimate change. I support ‘sustainable mobility’: mobility is an opportunity and weshould not limit it, but we must be careful to address major environmental issues.”Reinforce passenger rights and fair access to transport“Europe has created passenger rights. We now have rules to ensure that if overbookingis excessive, passengers have a right to compensation. There are also rules to helppassengers when flights are cancelled or delayed. Of course, the problem is ensuringthat airlines respect these rights. I have received too many letters from passengers whohave not received a response from airlines to their complaints. Each member stateshould normally investigate complaints—there is a special body in each of the 27 statesto do this. We are now working with these bodies and the airlines to ensure the rulesare properly enforced. Nevertheless, I believe we have made progress by creatingpassenger rights. We have included rights for disabled passengers as well, which Iconsider very important. From now on, no airline or airport may deny boarding to adisabled person.”Create a single European market for rail and boost competition“We also need a single European market for rail. We started by denationalizing the railnetwork, which was not only national but, quite frankly, nationalistic. In fact, there areeven a number of different rail gauges across the EU,how could you possibly expect to have high-speed linksin Europe? Today, we are in the process of creating asingle European rail market. How? First of all, bybuilding new lines, especially for high-speed rail. Wehave chosen 30 corridors in which to build the linksthat will enable people to travel more easily and quicklyin Europe. We are also hoping to free up conventional railway lines to allow them to beused for freight. Unfortunately, we are still faced with a rail system that even has troubleimagining integrated ticketing across member states. So it is up to us to encourage therail companies to make progress. There is already some progress with the Railteamalliance, 2 which is starting to offer seamless service to travelers. At the same time, weare obliged to standardize control and signaling systems for trains, which are verycomplex. Today, the Thalys high-speed train between Paris and Cologne needs sevendifferent pieces of equipment to interpret signals and control speed. You can see wehave a lot of work to do.2Seven European operators of high-speed trains in Austria, Belgium, France, Germany, the Netherlands, Switzerland and the U.K.launched Railteam last summer. The goal of Railteam, which is styled like an airline alliance, is to make international high-speed railtravel easier, faster and more seamless, providing a true alternative to intra-European air travel.

CWTvIsIon Issue 3 - January 200821I have some good news: I have obtained from the European Parliament and Council adefinitive approval of the “Third Rail Package.” This includes the opening up of thepassenger rail market to all international competition in Europe in 2010, which isimportant, as it will gradually enable real competition. This will take longer than in theaviation sector for obvious reasons but it will happen. We have also standardized rulesfor train driving so that drivers will all have the same training, and we have created railpassenger rights. Of course, we now have to apply these rules, but it is a first and verysignificant victory. I am aware that it is still difficult to get a single ticket for travel betweenEuropean cities. We also need to teach rail and air operators to combine their tickets.In fact, there will be a whole series of issues but I think we are on the right track.”EU rail policy: key milestones1996Definition of interoperability standards2001-2003(First Rail Package)Partial liberalization of international rail freight transportRequirement for each state to set up a national regulatory bodyCreation of a European Railway Agency2004-2007(Second Rail Package)Full liberalization of international freight transportLiberalization of national freight transport (cabotage)Introduction of EU rail safety standards and licensesUpdated legislation on technical interoperabilityIntroduction of rail passenger rights2009-2010(Third Rail Package)Introduction of a European license for train driversFull liberalization of international passenger service marketRules to improve freight qualitySource: CWT Travel Management Institute

22 Priorities for Mobility“The more people travel, the morewe can reconcile interests”Jacques Barrot, Vice President of the European Commission and Commissionerfor Transport, answers questions from travel managers and CWT professionals.Question: Is there any way to segment business travelers through the securityprocess to make it more efficient for them?Jacques Barrot: I have seen a few interesting attempts where airports have created aVIP service for business people to avoid long lines. The problem is to convince airportsto create systems that will enable all business travelers to save time. Airports have to dealwith a significant increase in traffic so they tend to think mainly in terms of how tomanage aircraft capacity, but they should also think in terms of quality of service. I amgoing to try to work toward this with a few airports.Question: Companies have no direct access to the European Commission, unlikeairlines and travel agencies. What can be done to ensure that companies areconsulted on important issues?Jacques Barrot: You are right: the voice of companies that use transport is not heardenough in the Commission and we need to improve on that. Please write to me topoint out any situation that seems to harm the interests of companies with businesstravelers. You really should not hesitate. We are there to supervise what is happeningand it is much less problematic for us than for member states. Since the EuropeanCommission is independent, we can arbitrate without having to consider partisan politics.I have sworn to serve the European general interest and that means fair competition.

CWTvIsIon Issue 3 - January 200823Question: You have talked about eliminating state subsidies in the EU. What doyou think about Chapter 11 and how it helps American carriers?Jacques Barrot: This was one of the problems we had with signing the Open Skiesagreement: the fact that, in some cases, American authorities have lent significant helpto companies. In fact, Chapter 11 has helped prevent some American companies frombeing liquidated. Within the Open Skies agreement, we have agreed that Europe wouldbe rigorous on public subsidies and that the United States would make a similar effort.There is one point that we did not settle in the first phase of the Open Skies agreementand that is ownership. We would like there to be more freedom to invest, so thatEuropeans can buy American companies and vice versa. The U.S. Congress refused,with support from the trade unions. The unions were afraid European buyouts wouldlead to the closure of certain routes and job cuts. I think this is a short-term view and,in reality, everyone would benefit if investments were liberalized on both sides of theAtlantic.Question: Based on the experience of emissions trading in other regions andother industries, how can Europe avoid the drawbacks?Jacques Barrot: There are real drawbacks to emissions trading schemes but theadvantages outweigh them considerably. This said, it all depends on quotas. If you fixrelatively limited quotas, there is a much smaller risk of negative effects. We are leaningtoward limited quotas to avoid too much trading and provide airlines with an incentiveto buy cleaner aircraft. We also have a major research program across the aviationindustry and we have seen real progress. In just a few years, emissions from kerosenehave dropped by 30 percent thanks to lighter planes and better engines. In addition,we have a program with the U.S. Federal Aviation Administration to develop pilotingand landing techniques that are much more energy-efficient. We have also seenconsiderable progress here. It is in our interest to act because, as you will see,environmental issues will become increasingly urgent. Aviation needs to accept a certainamount of discipline and airlines have understood this. It is the price to pay so thatpeople can continue to fly without a guilty conscience.Question: Do you think it will be necessary to limit the number of airlines enteringthe market to help stabilize the industry, balancing competition with survivability?Jacques Barrot: We need to leave the market open. We need new airlines, given thegrowth forecasts for worldwide traffic. But we need to be very strict not just about thequality of planes and the quality of pilots but about airline management. Air transportis too important and has too much impact for us to authorize badly run airlines. In otherwords, we need to let airlines enter a booming market but we need to firmly endorsesafety requirements. The European Aviation Safety Agency needs to be unbendingabout safety and we need competent administrations to monitor it. We have seen howimportant this is in new, fast-growing member states. Competition is necessary but weneed to be fully attentive to quality and we are obliged to regulate.

24 Priorities for MobilityQuestion: Could you provide an update on regulation regarding global distributionsystems (GDSs) in Europe? Can the situation change if European airlines maintaina stake in Amadeus?Jacques Barrot: We are reviewing our guidelines on the relations between airlines andGDSs. The current rules are quite complex. We do not want to get rid of the rules butwe do want to make them more operational so we can ensure they are applied. Thequestion is whether we need to cut the ownership link between airlines and GDSs.That is a real issue and we need to weigh how difficult that would be. I propose that,in my conversations with the presidents of companies that hold major stakes in GDSs,and in one GDS in particular, I see whether they could withdraw in order to provide faircompetition among the GDSs. For me, this is an extension of everything we are doingto promote fair competition.Question: What power do you have to limit the growing number of air taxes?Jacques Barrot: We are making a proposal that will bring greater transparency for airportcharges—airports and airlines need to talk on a clear and transparent basis. We have toldthem that if they cannot manage this, we will require them to call in a mediator. Underour proposal, each member state will have to have a mediator to reach an agreementbetween airlines and airports. This is only part of the story, however, as there is anotherdebate continuing over payment for security measures. We have a major problem withmember states because the European Parliament wants clear rules on who pays forsecurity: the state, the airline, the airport or the traveler? There is real conflict betweenmember states, who say that Europe should not interfere with their business, and theEuropean Parliament, which wants the state to take on more of the cost. We will finda solution, but it is complex because each member state has its own way of managingsecurity. Finally, all the different taxes should be clearly indicated on each ticket. 11At the end of November, the European Union agreed to oblige companies to include all taxes and charges in advertised air ticketprices to customers. The European Parliament is expected to approve theses measures.

CWTvIsIon Issue 3 - January 20082Question: Are you working on increasing service from Europe to China?Jacques Barrot: I have asked the member states for a mandate to start negotiationswith China, not to arrive at exactly the same model as the Open Skies agreement withthe United States but at least to liberalize routes between Europe and China. We shouldreach an agreement but we are not there yet. The rapid development of this marketrequires liberalization and greater competition so we are pursuing it. I also have somehopes for the Indian market because the Indian minister is very concerned aboutliberalizing air traffic. But we are having difficulties with China. Some member statesthat I will not name are very happy with their existing bilateral relations with Chinabecause it prevents new entrants. It is a real problem and I am not sure I have verystrong support from all the airlines. All the same, I hope that, from the Chinese side aswell, the desire to create more numerous, competitive relations will take the upperhand and we will sign an agreement one day. At a time when growth in China and Asiaare exploding, it is paradoxical to be a bit limited in terms of mobility.A final word…Jacques Barrot: In closing, I would like to say: please do not hesitate to contact me. Iinsist. I am a politician and I am here to advance mobility in Europe and worldwide.Because mobility is the symbol of freedom. It is the means for exchange andconsequently a great virtue. It would be paradoxical if, as globalization accelerates, goodscirculate easily but not people. So please do not hesitate to tell me if you noticediscrepancies that could undermine free movement. And thank you for everything youare doing, because the more people travel, the more we can reconcile our interests. Inever forget that if I have a European vocation, it is because I consider Europe to bethe testing ground for mutual understanding. We cannot build our future if we do notunderstand each other, and we cannot understand each other if we do not meet. Thatis why you are doing the most noble of jobs and so am I. To contact Jacques Barrot, please write to:Mr. Jacques BarrotVice President of the EuropeanCommission and Commissioner for TransportRue de la Loi/Wetstraat 2001049 BrusselsBelgium

CWTvIsIon Issue 3 - January 20082Open Skies:Opening Up OpportunitiesWhat changes will the EU-U.S. “Open Skies” agreement bring to airlines andwhat benefits can travel managers expect?Dale EastlundDirectorCWT Air Solutions, North America“A good start” is how many experts have described the EU-U.S. Open Skies agreement, dueto come into effect at the end of March. Although it falls short of full liberalization, the dealopens up significant opportunities for airlines on both sides of the Atlantic. A morecompetitive marketplace—at least in the short- to medium-term—will undoubtedly producebenefits for customers.What the EU-U.S. Open Skies deal will changeImplementation will take place in two phases. The first marks the end of highly restrictivebilateral agreements between individual EU nations and the United States. Previousregulation limited traffic rights on international routes and at airports, providing an unfaircompetitive advantage to some airlines. Notably, American Airlines, British Airways,United Airlines and Virgin Atlantic have held a comfortable oligopoly on Europe’s busiestand most profitable transatlantic route, London Heathrow to New York JFK. Removingsuch barriers already represents a major step forward.What will happen in the second phase is less clear. Negotiations must start before theend of May this year and conclude before the end of November 2010. Europe has,however, reserved the right to withdraw from the agreement. This may happen if theUnited States does not provide “cabotage” rights to EU carriers (discussed below) or ifother contentious issues are not resolved.Main changes in Phase 1 (starting March 30, 2008):All EU and U.S. airlines will have the right to fly transatlantic routes to andfrom the airports of their choice without restrictions on capacity, frequencies andtypes of aircraft. Airlines may propose transatlantic services that originate and/orterminate outside the open aviation area as long as they include a stop-over in thehome region (EU or U.S.). The deal also provides for unlimited code-sharingbetween EU, U.S. and third-country airlines.

CWTvIsIon Issue 3 - January 20082Benefits for travel managers and corporate travelersIndustry leaders have almost unanimously welcomed the agreement, recognizing thebenefits it will bring for customers, as well as for the economy as a whole. EuropeanCommission Vice President and Transport Commissioner Jacques Barrot predicts thattransatlantic passenger numbers will increase by 26 million, with 80,000 new jobs andbillions of euros in economic benefits within five years. For travel managers, a numberof concrete improvements are likely:A wider choice of routes and schedules. In theory, the Open Skies agreement willincrease the number of transatlantic routes available to customers, in terms of citypairs and airports. In particular, direct flights to secondary cities may increase.Likewise, frequency of service may rise. In practice, this will depend on carriers’ability to secure the relevant runway slots, which are already scarce at many airportssuch as London Heathrow and Gatwick, Paris Orly, Frankfurt, Dusseldorf and MilanLinate.Alliance members are likely to share some of their existing slots, while other airlineswill attempt to acquire new take-off and landing slots at a high price—up to €15million (US$20 million) per pair by some estimates. Already, numerous carriers andairline alliances have announced plans to launch new services or expressed interestin doing so. (See the table on Pages 30-31.)New opportunities for negotiations with preferred providers. As carriers reshuffletheir networks, companies may be able to reconsider airlines or alliances previouslyexcluded from negotiations for failing to offer a key destination or airport like LondonHeathrow. In the future, they should have a wider choice of European airlines to fittheir traffic pattern—currently U.S. airlines dominate the major transatlantic routes.Lower fares. As the regulatory barriers to market entry go down, the number ofplayers competing on key routes is expected to rise. In the short- to medium-term,competition will increase from traditional airlines expanding or reorganizing theirservices, as well as new niche players offering business-only or low-cost services.Although transatlantic fares are already low for many routes and classes (e.g., LHR-JFK in economy), evolving market conditions could still see fares drop, especially inbusiness class—some analysts predict savings of 5-10 percent. In the longer term,however, accelerating consolidation and increased cooperation among alliancemembers could lead to less competition on some routes and therefore higherprices.Improved service. More intense competition is likely to encourage airlines to furtherimprove service for business travelers. This may lead to faster check-in procedures,enhanced airport lounge comfort and better on-board features such as fullyhorizontal flat beds. As airports continue to struggle with overcapacity, however,congestion and delays are unlikely to improve significantly in the foreseeable future.

30 Open Skies: Opening up OpportunitiesOpportunities on the horizonA bumpy ride may be ahead for airlines as the industry reshuffles with new services,new players, consolidation and ultimately a shake-out of weaker competitors—fromspecific routes or from the market altogether. Some experts predict that just half thenumber of international airlines will survive in Europe and the United States.In addition, the route to full liberalization is by no means clear: phase two negotiationsbetween the two sides are likely to be tough. Yet there are high hopes that the currentOpen Skies framework will lead to a fully competitive global market, as well as bringdeeper transatlantic cooperation on other key issues impacting aviation.Until then, companies should keep an eye on alternate carriers and evolving fares onkey routes. Although the full impact of Open Skies on the travel program may not befelt for some years to come, new opportunities are bound to appear on the horizon forthose carefully watching. New services coming up…The following are a selection of announcements made by airlines since theEU-U.S. Open Skies agreement was signed.Airline/AllianceAer LingusAir FranceandDelta Air LinesBritish AirwaysContinentalAirlinesPlansNew long-haul services from Dublin to San Francisco, Orlandoand Washington Dulles.Formal joint venture to share costs and revenues on flights betweenEurope and America, including Canada and Mexico.In the first phase, beginning April, the two carriers’ combined 19 flightsare expected to increase their current seats by 45%.New Delta service from London Heathrow using Air France slots.New non-stop flights from New York JFK to Lyon, JFK to Paris Orlyand Salt Lake City to Paris CDG.Reorganization of flights from London Gatwick and Heathrow,as the airline moves into the new LHR Terminal 5 (e.g., flights toDallas and Algiers will depart from Heathrow, while flights to Warsawwill shift to Gatwick).More frequent flights between London and New York, Seattle,Washington and Orlando.New non-stop service to the U.S. from key European destinationsoutside the U.K., starting with flights to New York from two or threecities.New twice-daily direct services from London Heathrow to New YorkNewark and Houston George Bush Intercontinental.

CWTvIsIon Issue 3 - January 200831Delta Air LinesNonstop services between Edinburgh and New York JFK startingMay 1, as part of a major route expansion (20% more available seatmiles) from the airline’s U.S. East Coast hub.Eos AirlinesNew services between London Stanstead and New York Newarkstarting in spring 2008, and between Paris (airport not yet announced)and New York JFK starting next autumn.KLMNew daily direct services from Amsterdam Schiphol to Dallas FortWorth starting March 30.Ryanaironeworld partnersBritish Airwaysand AmericanAirlinesSkyTeam partnersAir France, Alitalia,CSA Czech Airlines,Delta Air Lines,KLM andNorthwest AirlinesStar Alliancepartners bmi andUnited AirlinesA new transatlantic airline serving five or six U.S. cities, includingBaltimore and Providence, starting in 2010.No plans to file for anti-trust immunity, according to British Airways,given the expected concessions required for a successful application(including giving up Heathrow slots).New or expanded services on 24 transatlantic routes, if anti-trustimmunity is granted by the United States.Code-sharing on transatlantic services, pending U.S. authorization(bmi does not plan to operate its own transatlantic flights fromHeathrow, where it already owns slots, in order to focus on expansionin other markets).United AirlinesNew daily flight between Denver and London Heathrow startingMarch 30.US AirwaysNew service between Philadelphia and London Heathrow startingMarch 29.Virgin AtlanticPotential investments of up to £100m (US$135 million) to add dailyflights to New York from several European cities, includingAmsterdam, Frankfurt, Milan, Paris and Zurich. The carrier is alsoseeking permission to code-share with U.S. airlines.Source: CWT Travel Management Institute, based on airline announcements

CWTvIsIon Issue 3 - January 200833Lower Costs, Higher Value:Asia-Pacific Travel ManagersWelcome “New World” AirlinesBudget carriers are steadily gaining ground within corporate travel programsin Asia Pacific thanks to their efforts to tailor service to business travelers.Michael MannixVice PresidentCWT Solutions Group Asia PacificNicolas PierretDirector, Global AccountsAsia Pacific, CWTAs the global aviation market evolves, many budget carriers are adding services that maketheir flights more attractive to business customers, particularly on mid- and long-haul routes.In addition, a growing number of low-cost airlines are launching business-class fares andcorporate deals. The shift toward higher value offerings has been particularly marked in AsiaPacific, where low-cost carriers command an impressive, growing share of the travel marketin some countries.This article looks at the success of low-cost carriers in the region and answers thefollowing questions:How has the low-cost model been adapted to attract business customers?How can travel managers make the most of budget carriers in their travel program?How much can companies save by shifting market share to low-cost carriers?What impact are new entrants having on the market as a whole?According to CWT data, budget carriers already represent 20 percent of client airtransactions in Asia Pacific. This mirrors strong growth in the region’s low-cost marketoverall, which accounts for more than half of all new capacity. Global transportinformation company OAG reports that budget airlines accounted for 12 percent ofavailable seats on all intra-Asian flights in 2007, up from less than 1 percent in 2001.Looking ahead, the Center for Asia Pacific Aviation predicts that low-cost carriers willrepresent 20 percent of seats by 2010 and 25 percent by 2025.

4%3%2% 2%1%2%34 Lower Costs, Higher Value: “New World” AirlinesGrowth in low-cost airlines worldwide as a percentage of available passenger seatsAll flightsworldwide30%Flights within a regionFlights to other regions27%26%24%20%17%18%14%12%10%6%20072006EuropeNorthAmericaCentral &SouthAmericaAsiaPacificCentral &SouthAmericaNorthAmericaAsiaPacificEuropeSource: CWT Travel Management Institute - Based on figures published by OAG Back Aviation Solutions, September 2007

CWTvIsIon Issue 3 - January 20083Asia-Pacific carriers were among the first to move low-cost services up-market, creatinga hybrid “low fares + services” approach or in some cases, a “low fares + full service”model that competes head-on with legacy carriers. Notably, Australia’s Virgin Bluecoined the term “new world carrier” to make the distinction between its full-serviceoffering and the “no frills” product of carriers such as AirAsia. Other carriers that fallinto this “new world” category include Virgin Blue’s sister operations Pacific Blue(Australia and New Zealand) and Polynesian Blue (Pacific Islands), as well as JetstarAirlines (Australia and Singapore), Kingfisher Airlines (India) and Oasis Hong Kong.Typically, the hybrid approach breaks away from the original low-cost model byintegrating most, if not all, of the following features:In-flight service quality is close to that of traditional airlines, with meals andentertainment bundled into the fare. Carriers also propose business class or“premium” cabins with designated seating.Primary airports are used, with priority check-in and special lounges for businesstravelers. (This said, the use of secondary airports is not always a disadvantage, asthey can be less congested and in some cases more conveniently located for thetraveler.)Interlining and codeshare agreements on international segments offer travelersseamless connecting flights, as well as a larger choice of destinations and schedules.Although only a handful of low-cost carriers (e.g., Jetstar and Virgin Blue) codeshareat present, the practice is likely to become more common, especially if low-costcarriers join alliances.Reservations via global distribution systems (GDSs) are possible, instead ofthrough airline Websites only. This is a key service for companies, who can accessflight information efficiently, reserve flights, receive invoices for payment at a laterdate, refer to traveler profiles and better track travelers.Corporate deals can be negotiated, with special payment options andcomprehensive reward programs available. For example, Virgin Blue offersvolume-based pricing, combined with a range of “soft” benefits for companies.Another example is Qantas enabling companies to include traffic with its subsidiaryJetstar in overall market share targets.(See the sidebar on Page 39 for specific examples of corporate offerings.)At the same time, low-cost fares can be 25-40 percent lower than comparable fullserviceeconomy fares, especially when they are booked in advance.

36 Lower Costs, Higher Value: “New World” AirlinesNot surprisingly, these higher-value packages are attractive to corporate travelers. In fact,a number of travel programs now grant “preferred supplier” status to new world carriers.In India notably, corporate deals with new world carriers and other low-cost carriershave become commonplace. Kingfisher has attracted nearly one-third of the businesstravel market only 18 months after adopting the new world model, according to CWTestimations. In Australia, CWT estimates that new world budget carriers now attractmore than 15 percent of the business travel market.Markets such as Hong Kong or Singapore have been slower to introduce low-cost, fullserviceflights, due to the importance of international routes for business travel and thehigher barriers to entry on these routes for low-cost competitors. While a plethora ofleisure-oriented carriers are in service in these markets, only a few airlines offersignificant business deals.The trend is nevertheless toward upgraded service that better caters to corporate needs,even if die-hard “no frills” carriers are adding features such as seat selection, meals andin-flight entertainment as optional extras. Notably, AirAsia, one of the region’s leadinglow-cost carriers, recently announced that it will introduce a choice of economy andlarger “XL” seats on its new Airbus A330s.

CWTvIsIon Issue 3 - January 20083How can travel managers make the most of these low-cost carriers in their travelprogram?Carefully compare providers. Apart from the choice of routes and schedules, lowcostcarriers can vary widely in terms of the amenities and level of service they offer.It can be a good idea to start small with one or two carriers that fit the company’sneeds. Ideally, those carriers should provide their inventory to a GDS. If not, a travelmanagement company like CWT can provide a Webfare booking interface on acase-by-case basis.Consider moving to a “best buy” policy on routes where price competition isstrong between preferred providers. In Australia and India, the fact that air supplyoutweighs demand makes spot buying a logical, cost-effective approach. In fact, itaccounts for 60 percent of companies’ domestic transactions in Australia.Recommend advance booking and communicate on the potential savings.Studies show that significant savings are possible even if travelers exchange a largeproportion of tickets. Contrary to popular belief, low-cost fares can be more flexiblethan full-service economy as they are often exchangeable and do not carryrestrictions such as a compulsory Saturday-night stay.If no hard mandate is in place, consider providing incentives for employees touse low-cost airlines. For example, with each trip, the traveler could enter a prizedrawing sponsored by the airline. Combined with communications on the financialbenefits for the company, incentives can help boost compliance with travel policy.Exploit potential synergies with an online booking campaign as part of thecompany’s drive to better manage costs.Impressive savings potentialCWT clients who are willing to shift market share in Asia Pacific to low-cost carriers haveidentified impressive savings potential.In Australia, for example, a leading international energy company identified 10 percentsavings (US$100,000 on total national air spend of US$1 million) by switching 30percent of traffic to a low-cost carrier. This involved a best-buy approach on routes whichwould not require any compromise in terms of flight frequency.In India, an international consulting company calculated that it could save 5 percent onair spend by moving some volume to low-cost alternatives and consolidating travel withpreferred airlines. The company had evaluated its domestic air spend at US$8.2 million,having seen its payroll multiply by 100 over the previous three years. As a number oflocal contracts with airlines were expiring, the organization reviewed its strategy both ata national and regional level, including an in-depth analysis of the Indian airline marketand different market share scenarios. This indicated savings of US$400,000.

38 Lower Costs, Higher Value: “New World” AirlinesBenefits for all playersEven companies that do not source low-cost carriers can benefit from the way in whichthese new players have shaken up the market. In reaction to aggressive low fares,traditional airlines have generally kept prices stable, avoiding the major price hikesobserved in other industries across the region. Many legacy airlines are also relaxingrestrictions on economy fares in order to maintain business. In addition, carriers likeQantas (owner of Jetstar) are upgrading their services by offering their own premiumeconomy class, with features such as dedicated check-in and flat beds.More competition in the market is clearly a cause for celebration among buyers, whocan use the possibility of reallocating market share as a major lever in negotiations. Inaddition, companies may benefit from the influence low-cost carriers are having ontraveler perceptions. By providing an acceptable alternative to travel with traditionalairlines, budget airlines might be making full-service economy seem a high-priced luxury,which becomes more attractive to travelers who are used to using business class. Thismay help travel managers who are trying to convert travelers from business class toeconomy with legacy preferred partners—often the single largest source of savings ina travel program.As the market continues to evolve, corporate-friendly budget carriers in Asia Pacific arepresenting growing opportunities for travel managers—indeed, a whole new world ofopportunities for companies willing to give them a try.

CWTvIsIon Issue 3 - January 20083Examples of “new world” features for corporate customersAirlineHomecountry/regionNetworkKey featuresJetstar AirwaysAustraliaand Singapore33 destinationsin Asia Pacific“StarClass”“At the price of other airlines’ standardeconomy fares”Premium cabin with meals, amenitiesand in-flight entertainment(including video on demand)Priority check-in and lounge accesswhere available30 kg allowance for checked baggageLoyalty points for Qantas frequentflyersKingfisher AirlinesIndia34 cities in India,including 13by business class“Kingfisher First”“Redefining business”Volume discounts“King Club” frequent flyer program,in alliance with Air France-KLMFirst class seats with in-flight mealsand entertainmentPersonal valet for first class customersMeet and Assist airport services for VIPsOasis Hong KongHong KongHong Kong toLondon andVancouver“Business Oasis”“Best Business Class Carrier”at the 2007 World Low-Cost AirlineAwards (September 2007)In-flight meals and entertainmentSleeper seats with 50-60 inch(127-152 cm) pitchOasis Virgin Blue,Pacific Blue andPolynesian Blue(Soon to includenew carrierV-Australia forlong-haulinternational flights)Australia,New Zealandand Samoa30 destinationsin Australia,New Zealand,the Cook Islands,Fiji, Samoa,Tonga andVanuatu“Corporate Plus” flexible faresOption to book and hold faresfor 48 hoursFully refundable tickets (fee: AUS$30)Cancellation or flight changes allowedup to 24 hours after the scheduleddeparturePriority check-in and lounge accessfor Australian domestic flights32 kg allowance for checked baggageSource: CWT Travel Management InstituteBased on carrier Websites, October 2007

CWTvIsIon Issue 3 - January 200841Ten Business Travel Trendsfor 2010How is the business travel industry likely to evolve over the next few years?A CWT survey of global clients and suppliers identified 10 major trends.Mike KoettingExecutive Vice PresidentGlobal Supplier Management, CWTFloyd WidenerVice President Sales, Europe,Middle East and Africa, CWTThe next few years promise significant change in the business travel industry, accordingto CWT clients and suppliers who participated in a qualitative survey on “effective travelmanagement in 2010.” Presented at the 2007 CWT global client seminar lastSeptember, the findings provoked some lively discussion among participants fromacross the industry. This article provides an overview of the 10 major trends identifiedin the survey.1. Companies will increasingly focus on managing demand and minimizing travelNo one argues that face-to-face meetings will remain essential to business andespecially client relationships. As one participant put it: “Look into my eyes, not myfiles.” Nonetheless, companies will increasingly examine how they can get the bestreturn on investment from travel and eliminate any unnecessary trips. Travelmanagers will seek creative solutions and will increasingly look to technology for newways to keep people connected wherever they are. Videoconferencing in particular willplay a more important role as technology continues to improve. The latest “halo rooms,”which enable meetings around a virtual conference room, have already proved popularat some companies. In addition, the use of laptop Web cameras may replace sometravel, especially for internal meetings or training, allowing organizers to reach out to alarger audience than might be feasible at face-to-face events. One global company, forexample, recently switched an annual marketing conference to a digital format, reaching25,000 participants instead of 1,000.

42 Ten Business Travel trends for 2010Key to the success of such solutions will be close collaboration with IT teams.Organizations will expect the travel management company to provide support, fromhelping to promote travel alternatives among employees to managing resources andbookings (e.g., videoconferencing facilities).2. The war for talent may lead to less restrictive travel policies, offset by toughercompliance measuresTravel policies could become less restrictive as companies step up efforts to attract andretain talent. More focus will be placed on employees’ work-life balance and drivingproductivity, and less on achieving savings at the expense of traveler comfort and wellbeing.Business class will be increasingly authorized, based on travel time rather thanthe employee’s title, and in turn, the number of room nights per trip may be shorter (theidea being that travelers will have less need to “recover” after flights. At the same time,travel managers are likely to take a tougher stance on compliance, enlisting the supportof top executives to better enforce travel policies. Regular, accurate data will continueto play a key role in shaping policy and reinforcing compliance. (See the article onPages 7-15.)3. Companies will step up efforts to manage travel-related risksEnsuring the safety of travelers will remain a universal priority for travel managers,particularly for travel to high-risk destinations. Worldwide, companies will be increasinglyconscious of their duty of care to employees, as the recent Corporate Manslaughterand Corporate Homicide legislation 1 in the United Kingdom influences best practicesin travel risk management. Business travel professionals will want to identify servicesthat can enhance traveler safety. For example, should specific travelers have priorityaccess to emergency service centers? What about real-time information to enable alltravelers to better manage their trip? An ongoing challenge will be to educate travelersabout the importance of booking through their managed travel program andcommunicating any changes in their itinerary. Many travel managers still need toconvince travelers of the importance of accurate, real-time tracking.4. Policies will be greener and travelers more environmentally awareCompanies will be increasingly aware of the need to address environmental issues.They will be under pressure, not just from governments and shareholders but fromcivic-minded employees. On the one hand, travel managers can make an impact byeducating travelers about the environmental impact of different travel solutions.(Currently, few travelers and travel managers know their carbon footprint, but this willchange.) They can also work with environmentally friendly suppliers to manage carbon1The U.K government is tightening laws on corporate duty of care to employees. Its Corporate Manslaughter and Corporate HomicideBill was passed by Parliament in 2007 and is awaiting Royal Assent before becoming law. Under the bill, an organization may be foundguilty and liable of corporate manslaughter if senior management is found guilty of playing a role in the decision, management ororganization of the activity that causes an individual’s death in the U.K.

CWTvIsIon Issue 3 - January 200843emissions. On the other hand, clients will expect suppliers to be a driving force infinding “green” solutions. Ultimately, companies will aim to balance environmentalconcerns with financial imperatives, taking a holistic, sustainable approach to travel.. Technology will continue to improve the traveler experienceKey concepts will include self-service, plug and play, one-stop shop and mobile. Inshort, companies will continue to seek technology that is more user-friendly and ofvalue to employees throughout the travel process, from the decision to travel to posttripexpense reporting. At the booking stage, more travelers will use online tools ascompanies better integrate them into their travel program. In transit, travelers willincreasingly benefit from self-service check-in, confirmation of connecting flights sent totheir mobile devices and automatic re-accommodation services in the event of a flightcancellation. In addition, Wi-Fi connectivity will become standard in aircraft, high-speedtrains, rental cars and hotels. Although technology will play an increasing role in thetraveler experience as more features become automated and integrated globally,companies will continue to seek a balance with “high-touch” human service.6. Suppliers will continue to seek lower distribution costsPrice pressure will not ease for suppliers, particularly legacy carriers facing increasingcompetition from new entrants. Airlines will continue to target cost cuts in distribution,reducing commissions and in some cases pulling out of global distribution systems(GDSs). This is particularly likely among dominant carriers in deregulated markets,following the example of Air Canada and Brazil’s TAM. Meanwhile, airlines that docontinue to participate in GDSs will increasingly impose “opt-in” fees on GDS userswho wish to access their full inventory. According to plans shared on and off the recordby airlines, most markets around the world will introduce opt-in fees, imitating theUnited States, Canada, Australia, the United Kingdom and Brazil. In Europe, for example,the opt-in model could easily become widespread if the GDS market is fully deregulatedand/or changes are made to the ownership of Amadeus. Finally, airlines—and possiblyhotels—will seek to reduce credit card fees, offering discounts for companies willing touse lower-cost debit cards or new forms of payment.

44 Ten Business Travel trends for 2010. Dynamic hotel pricing will take offRevenue or yield management is likely to evolve further in the hotel industry withdynamic pricing becoming increasingly common. As in the airline industry, dynamichotel pricing fluctuates with supply and demand, theoretically offering the best availablerates to customers. In practice, corporate buyers are not convinced they always get thebest deal, as prices may sometimes be higher than negotiated rates. Dynamic pricingcan, however, offer savings by simplifying the request for proposal process andongoing program management. One global company that has tested the systemreported that it broke even on prices at the majority of its hotels in the United Statesand achieved considerable soft-dollar benefits: “We can negotiate in two hours insteadof participating in constant discussions over six months.”8. Multiple forces will impact the competitive landscapeMany respondents underlined that the single largest force in the airline market will bethe EU-U.S. Open Skies agreement. (See the article on Pages 27-31.) In addition toderegulation, the new fuel-efficient Airbus A380 and Boeing 8 aircraft will impactcompetition on international routes by shaving approximately 15 percent off costs perseat. On domestic routes, budget carriers will continue to apply downward pressureon fares and drive growth. As a result, airline competition will inevitably increase in theshort-term and decrease in the medium-term, with weaker players being acquired orsqueezed out of the market. Nevertheless, acquired brands will not necessarilydisappear. In the hotel market, supply will remain short in key cities for the foreseeablefuture, despite the addition of new properties. In ground transportation, seasonalprice fluctuations are likely to be accentuated and rates will rise, reflecting the higher costof new vehicles.. Suppliers will increasingly segment services and apply selective discountsCustomer relationship management will become more sophisticated as suppliersincreasingly segment the market, seeking new ways to improve the customerexperience and pursue higher margins. Airlines will focus increasingly on their offeringfor elite travelers, especially on long-haul international routes. Another trend will showcarriers customizing their deals to different industry sectors, aiming to retain marketshare with those that are reducing their air spend (e.g., the pharmaceutical industry).Train companies, on the other hand, will step up their efforts to improve comfort forbusiness travelers, for example through dedicated on-board working spaces. At thesame time, suppliers in all areas may apply tougher market share requirements, whichcould provide fresh impetus for companies to consolidate their travel program regionallyor globally for greater aggregated volume. In the car and hotel industries, companieswill target different segments of business travelers through differentiated brands whiletrying to build loyalty among individual customers by way of tailored services. Here, thekey trend will be suppliers enabling travelers to enjoy their personal lifestyle whereverthey are, blurring the line between business and leisure.

CWTvIsIon Issue 3 - January 2008410. Cooperation among industry players will be keyClients and suppliers alike pointed out the need for honest dialogue in order to movethe industry forward. Clients are eager to understand suppliers’ constraints in order tohave more realistic expectations, while suppliers are unanimous about wanting travelmanagers to provide critical input and feedback. They stress that companies should notbe afraid to voice their demands and aim high. In addition, suppliers underline thevalue that travel management companies can provide by identifying the issues thatmatter and driving constructive dialogue among all parties. As one supplier pointed out:“Everyone has to win in this game.” CWT Vision will continue to report on these issuesthat concern us all.

46 Smart Solution: Program Compliance“If People Are Aware of PriceDifferences, They Care”Birgit Schenscher, Global Purchasing Director, Services, at Henkel, explainshow her company saved nearly US$6 million (€4 million) in one year byupdating the travel policy and reinforcing compliance.Henkel, a world-leading brands and technology company,has achieved impressive savings since reviewing its travelpolicy in 2006. Just one month after communicating newglobal guidelines, the average ticket price had decreasedby approximately 3 percent and one year later thecompany had saved nearly US$6 million (€4 million) or8 percent of air spend and 6 percent of overall travelspend. Yet the expert who led the changes, BirgitSchenscher, remains matter-of-fact: “If people are awareof price differences, they care. You have to show the opportunities and then show theachievements.”In this interview, Ms. Schenscher explains how Henkel has instituted policyimprovements and reinforced compliance worldwide.CWT Vision: What objectives did you set for your new policy?Birgit Schenscher: Already in 2005, we noticed a sharp increase in average ticketprices, mainly for air. In first quarter 2006, our travel program failed to make savings forthe first time. We wanted to reverse this trend. With the help of CWT, we analyzed ourdata (spend and booking behavior) and identified opportunities for savings based ontravel policy and compliance. We then went to the executive board with a very clearproposal, detailing four major changes to the travel policy which would enable us tosave 5 percent of total travel spend. Our aim was to implement the changes withinfour months worldwide and that is what we did.CWT Vision: What were the main changes?Birgit Schenscher: The four main changes we made to our travel policy were:1) Restricted fares: for flights under four hours in Europe (six in the United States andthree and a half in Asia), we required travelers to book the lowest applicable, logicalfare, even if tickets were non-refundable.2) Online booking: we required travelers to book exclusively through our onlinebooking tool for point-to-point destinations. Here, visual guilt played a big role: no onewould choose a more expensive flight if cheaper options were displayed on thescreen. CWT agents supported us by refusing telephone reservations when necessary.

CWTvIsIon Issue 3 - January 200843) Advance booking: we appealed to employees to book early, at least two weeks inadvance if possible. You cannot be in complete control of compliance here, as meetingssometimes pop up at the last minute. But it does help simply to communicate howmuch people can save by ordering a ticket nine or 16 days in advance.4) Hotel compliance: we knew we could get better rates by leveraging room nightvolume. We therefore required travelers to use our online tool to book exclusivelyat hotels with which Henkel or CWT has a contract.CWT Vision: What processes did you implement to introduce the new policy?Birgit Schenscher: First of all, our updated policy document clearly set out therequirements, including the need to obtain written pre-trip approval by seniormanagement for flights diverging from the corporate standard. We also explained thatwe would be tracking missed savings, in effect measuring the financial impact of noncompliance.We then organized central, “top-down” communications on the policy changes(notably an email from the management board) while working with local purchasingteams and CWT experts to highlight savings opportunities in each country (e.g., potentialsavings through preferred suppliers on a specific route). We also invested heavily intraining employees to use the online booking tool correctly.CWT Vision: What results have you achieved in terms of savings and compliance?Birgit Schenscher: Globally, we have reduced air spend by 8 percent and overall travelspend by 6 percent, saving the company nearly US$6 million (€4 million). To tracksavings, we have mainly measured changes in the average ticket price per route, class oftravel and country. Germany has achieved the highest savings, representing a 10 percentreduction in average ticket price after one year, and the United States has recorded similarresults. More generally, all Henkel countries have reduced their average ticket price.In terms of compliance, we have also noted progress. For example, the advance bookingratio has improved in most countries, from an average of 28 percent worldwide to morethan 40 percent in countries like Germany (see the chart on Page 49). As anotherexample, compliance with the hotel program has risen from an average of 55 percent to66 percent worldwide. In addition, our online booking index rose from an average of 30percent to 80 percent in major countries.CWT Vision: What have been the main challenges?Birgit Schenscher: One of the main challenges initially was raising awareness of ourupdated, global travel policy and then convincing people of the benefits. Before 2006,many employees were not fully aware of global policy content and our clear bookingguidelines. Then all of a sudden, travel was on the agenda of each country’s executivecommittee and that meant that we were under a lot of pressure to deliver savings. Theupside was that country-level management could support us locally on initiatives thatwere not always popular (e.g., enforcing restricted fares).

48 Smart Solution: Program ComplianceGetting full support on a local level was also challenging because of our corporateculture. Henkel grew from many acquisitions, which have sometimes led to differentinterpretations of corporate guidelines. When we wanted to replace local travelmanagement companies with one provider (CWT), people started to argue. It is verydifficult to make the organization understand that having local providers may providesome advantages but, for the most part, handicaps overall efficiency and limits savingsopportunities. Our global procurement network is very supportive but in the widercorporate culture, we still have a lot of national hurdles to overcome.CWT Vision: What about the keys to success?Birgit Schenscher: Transparency, transparency! A strong analysis of cost drivers andbooking behavior is the baseline for everything. You need to break this down intosimple, trackable measurements and show people the opportunities. This has beenvery important for convincing the countries.You also need to report on results and show progress, like the fact that just one monthafter communicating travel policy, we achieved lower fares. In addition to average ticketprice, which is very convincing, we track online booking compliance rates and severalother key performance indicators monthly. This confirms we have made the rightchanges and enables us to fine-tune if necessary.In addition, dialogue with local experts in each country, both from Henkel and fromCWT, has played a key role. You need well-trained people in each country, as well aspurchasers with the right arguments, to challenge the local markets. You also need aglobal travel management company that is ready to align itself with local conditions—the travel market is global but there are still local differences.CWT Vision: What are your next priorities?Birgit Schenscher: We are pushing advance booking again via “one-year-later”communications. We’re thanking the entire Henkel travel community for helping usachieve our targets and we’re reminding them that we can still improve.Our second priority is to further improve the hotel program. Prices are increasingtremendously, so this is an important challenge. We are intending to push onlinebooking for hotels, as we have done with air, using the visual guilt factor. We also wantto improve the way hotels are displayed on the online booking tool so that we steerpeople toward our preferred properties.In addition, we will be keeping an eye on our performance compared to peers. CWThas created an index of average fares paid by clients on our main city pairs and this hasbeen a useful benchmark. In 2006, our average ticket price in countries such asGermany or France was higher than the index, so it was clear we needed to make somechanges. Now it is slightly lower than the average.Finally, we will be aiming to keep one step ahead of market developments. Again, wehave to recognize that even if all markets are alike in the main trends, local carriers andconditions can be very different. CWT provides us with the diagnostics and we usethem to target specific action.

CWTvIsIon Issue 3 - January 20084Communicating country-based facts to convince employees that the policybrings savingsThe following chart was sent to employees in Germany in September 2007, aspart of a locally adapted global email campaign one year after the new travelpolicy was introduced. The email thanked employees for their efforts over thepast year, explained how advance booking brings savings and urged employeesto continue consistently applying the travel guidelines.Average ticket price for Henkel Germany480€ 473€-50%294€276€232€-39%179€354€239€-3days-3/8days-9/15days-16/+days-3days-3/8days-9/15days-16/+daysDomestic flightsEuropean flightsSource: Henkel 2007 - Based on January-June 2007 dataHenkel at a glanceWorld-leading brands and technologies in three mainsectors: laundry and home care; cosmetics/toiletries; andconsumer and craftsmen adhesivesChairman: Prof. Dr. Ulrich LehnerApproximately 2,000 employees in 25 countries, with corporateheadquarters in Düsseldorf, Germany2006 sales: €12.74 billion (US$18.67 billion)2006 operating profit: €1.298 million (US$1.902 million)Global travel spend: €66.8 million (US$97.89 million)Travel management structure:One leader steering a travel team consisting of six regional travel teammembers for Western Europe, Eastern Europe, North America, SouthAmerica, Asia Pacific and Middle East/North AfricaOne main travel management company, CWT, since 2002

0Ground Transportation: Worth Another LookGround Transportation:Worth Another LookDave Kilduff, Managing Director of the new ground transportation practicewithin the CWT Solutions Group, explains how companies can benefit fromrevisiting their strategy in this area, which is often a low priority for travelmanagers.Ground transportation—rental car, “black car” 1 , limousine,taxi and rail—generally receives less attention from travelmanagers than air and hotel spend. Consequently, mostorganizations do not fully exploit opportunities for savingsor reap other benefits in this area. To help travel managersexplore the opportunities more effectively, CWT SolutionsGroup created a specialist ground transportation team lastJuly. CWT Vision talked to Dave Kilduff, Managing Directorof the practice.CWT Vision: Why should companies focus more on ground transportation?Dave Kilduff: Ground transportation can account for as much as 10 percent of anorganization’s overall travel program costs in the United States and even more in areasof Europe and Asia Pacific, where rail is a significant mode of transportation. Groundtransportation trails behind air and hotel spend, however, and is naturally lower on travelmanagers’ list of priorities. Even when companies do address this area, they do notalways have the specialists in-house to get the best deals from suppliers.CWT Vision: Which resources do you need to get the most value out of groundtransportation?Dave Kilduff: The most important resource is expertise or specialists with relevantinformation on suppliers and competitive agreements in the market. A lot of companieshave accurate data on their overall travel volume, which is the basic starting point foroptimizing a travel policy, compliance and negotiations with suppliers. You needspecialized market knowledge, however, to analyze the data and work through differentmarket share scenarios most effectively. This also enables you to ask strategic questionsin your request for proposal (RFP) and negotiate the most competitive terms, rightdown to the fine print in the contract.1“Black Car” refers to chauffeur-driven town car transportation.

CWTvIsIon Issue 3 - January 20081A simple example in rental car might be ensuring that all suppliers responding to astrategic RFP provide rates that include a loss damage waiver and a collision damagewaiver on all rate types (i.e., the company is exempt from some or all costs incurredthrough loss or damage to a vehicle). Another detail that can make a big difference isrefueling rates—a lot of people do not know that these are negotiable. At CWT, we havemore than 25 years of experience in ground transportation sourcing and informationon tens of thousands of contracts. Suppliers know we have this expertise and thereforewe start negotiations on behalf of our clients from a strong position.CWT Vision: What kinds of companies are most likely to benefit from a closerlook at ground transportation?Dave Kilduff: Even companies with large, well managed travel programs can benefitfrom specialists reviewing their strategy. The only prerequisite is a minimum volume,to reach the threshold at which clients are eligible for corporate agreements and rateincentives. In the United States, for example, you need US$100,000 in annual volumeto get the most out of rental car negotiations.CWT Vision: What can companies gain?Dave Kilduff: The main benefit is cost avoidance and savings: not just better rates upfront,but the ability to stabilize prices and reap benefits over the duration of the contractto avoid major price hikes as the market evolves.The car rental market is particularly volatile. Worldwide, the cost of car rentalcontinues to grow in response to rising fuel prices and interest rates, higher pricesfor new vehicles and increases in local taxation in some countries like the UnitedStates.In the rail market, companies can significantly reduce spend on routes where railcompetes with air. 2 The opportunities to do so are increasing as the high-speed railoffering develops, particularly in Europe and Asia Pacific. In Europe, for example,the network will increase by 15 percent by 2010 and a new rail alliance, Railteam,promises to boost services for business customers.In the chauffeured black car, limousine and taxi markets, suppliers are alsodealing with rising fleet prices, as in the rental car industry. Companies may find itworthwhile to look more closely at limousine deals, which are typically overlookedin the program. Car rental giant Avis may begin to bundle black car, limousine andrental car together, following its acquisition of a major stake in Carey International,the world’s largest chauffered car company.An effectively managed ground transportation program can also provide “soft” benefits.In car rental, for example, frequent renters may be offered extra features like timesaving,pre-printed contracts, meet and greet services, and upgrades.2Please see Issue 2 of CWT Vision (September 2007) for a discussion of the benefits of high-speed rail.

2Ground Transportation: Worth Another LookCWT Vision: Do you have any concrete examples of savings made by companies?Dave Kilduff: The first client to sign with our ground transportation practice, amultinational energy company, was spending US$11 million on car rental and wantedto limit price increases to 3 percent. We did better: after analyzing the data andconducting tough negotiations, we reached a multiyear deal across 70 countries,representing a substantial decrease in rates. We also identified ways to avoid costs.Thanks to these measures, the company looks set to save US$3 million.In addition, we can quote numerous examples of CWT clients who have addressedground transportation within their overall program. For example, by switching some airvolume to rail, one CWT client recently shaved US$2 million from its US$18 millionannual program in under eight months.

CWTvIsIon Issue 3 - January 20083CWT Vision: How do you see 2008 unfolding for clients?Dave Kilduff: In 2008, costs will continue to rise for ground transportation companies,although the market will remain highly competitive. Environmental concerns will takeon greater importance and suppliers will be under pressure to “green” their offering. Thiswill be true especially in the United States, which is lagging behind Europe. Rail and roadsolutions will be increasingly sought out as an attractive alternative to air, as airportcongestion and delays continue to plague travelers. I believe ground transportation willgrab travel managers’ attention more and more as they realize the potential to createvalue.

4In BriefIn Brief54 Snapshot56 Soundbite57 Industry News Highlights59 News from CWT60 IndicatorsSNAPSHOTTop Methods for ReducingTravel CostsTop 10 worldwideNorthAmericaEuropeAsia/LatinAmericaAdjust travel policies2 2 1Advance purchase of airlinetickets1 5 4Online booking system4 3 3Tracking and evaluatingtravel expenditures3 4 2Travel alternatives(e.g., videoconferences)1 5Limit employee travel5Electronic expense reportingPre-trip authorizationand approvalMove to lower-cost suppliersConsolidate suppliersSource: 2007 ACTE/ProMedia Executive Travel Survey

CWTvIsIon Issue 3 - January 2008Adjusting the travel policy ranks first overall among the methods used by companiesworldwide to reduce travel costs, according to the 2007 Association of Corporate TravelExecutives (ACTE)/ProMedia Executive Travel Survey.By region, the most popular methods are: adjusting travel policy (Asia and LatinAmerica), recommending or requiring advance purchasing for air tickets (North America)and using alternatives to travel such as videoconferences (Europe). Also mentioned, butnot in the overall top five, were electronic expense reporting, pre-trip authorization andapproval, moving to lower-cost travel suppliers and consolidating suppliers.Other key findings from the survey, which were presented at the ACTE Global EducationConference in Munich last October, include:Travel budgets increased by more than 8 percent on average in 2007, driven mainlyby increases in supplier costs and the number of trips.Online booking provides cost savings for more than 80 percent of respondents and“significant” savings for 34 percent in North America, 27 percent in Asia/LatinAmerica, and 26 percent in Europe.Failing to receive timely, accurate data from their suppliers is a concern for 72percent of respondents.Controlling overall travel spend is the greatest challenge for respondents, followedby policy compliance and developing global programs.This fifth annual survey was conducted in August 2007 by an independent marketresearch company and sponsored by ACTE, ProMedia, GetThere, Sabre Travel Networkand Travelocity Business. The survey generated 305 qualified responses from seniorexecutives, procurement managers and corporate travel managers in companies basedin Asia, Europe, North America and Latin America.

6In BriefSOUNDBITE“Air travelers are cranky and have goodreason to be.”— Mary Peters, U.S. Secretaryof Transportation, last September, as PresidentGeorge Bush instructed aviation leaders toaddress the growing problem of congestion inU.S. airports.According to a government study 1 , more than 25 percent of all U.S. domesticnon-stop flights arrived late from January to August 2007, the highest level everrecorded. A total of 128 regularly scheduled flights arrived late (at least 15minutes after schedule) at least 80 percent of the time.The Federal Aviation Administration (FAA) responded immediately by askingU.S. and Canadian airlines to discuss voluntary reductions in their air schedules,starting at New York’s JFK, LaGuardia and Newark airports. (Any delays at theseairports, which handle a third of the nation’s air traffic, can cause a ripple effectacross the United States.) In addition, the FAA proposed congestion pricing asa way to encourage airlines to move some flights to off-peak slots.Several industry groups, including the Air Transport Association, condemned thesuggestions as “anti-consumer” since they limit choice. The International AirTransport Association also urged the U.S. government to avoid congestionpricing, which it says has never proven to be effective and “could invite disaster”by disrupting the interconnect schedules of international carriers.Meanwhile, a similar study of U.K. airports conducted by the Civil AviationAuthority indicated that 32 percent of scheduled flights were late from April toJune 2007, compared to 28 percent in the same quarter in 2006. Travelersmay be cranky for some time to come …1Air Travel Consumer Report, issued October 2007

CWTvIsIon Issue 3 - January 2008INDUSTRY NEWS HIGHLIGHTSRegulationIn November, theEuropean Commission (EC)revised its ComputerReservation System (CRS)Code of Conduct,introducing new rulesdesigned to boostcompetition in airlinedistribution whilesafeguarding against abusefrom dominant players (e.g.,biased screen display orselective provision ofcontent).The new regulation, whichnext goes before theEuropean Parliament,enables CRSs (globaldistribution systems or GDSs)and airlines to freelynegotiate fees and theinventory provided. At thesame time, specific rulesapply to parent carriers or“any carrier or rail-transportoperator which directly orindirectly, alone or jointly withothers, owns or effectivelycontrols a system vendor.”The Commission stated,however, that it no longerconsiders Air France-KLM,Lufthansa and Iberia asparent carriers, despite theirjoint ownership of 46.7percent of Europe’s largestCRS, Amadeus. Criticsimmediately expressed theirconcern at this legalloophole, claiming that it failsto protect the marketadequately from anticompetitivebehavior.In October, the UnitedKingdom and Singaporesigned a groundbreakingOpen Skies agreement thatremoves all restrictions on airtraffic between the twocountries, including flights toonward destinations. Airlineswill also be able to use bothcountries as hubs, meaningthat Singapore Airlines will bethe first non-EU, non-U.S.carrier to have access to theLondon-U.S. market. The dealcomes into effect on March30, 2008, the same day asthe EU-U.S. Open Skies deal.AirlinesIn an effort to attractmore business travelers,easyJet signed historicdistribution agreements withAmadeus and Galileo lastNovember. This marks thefirst time a major Europeanlow-cost carrier is providinginventory to globaldistribution systems. easyJetis applying a point-of-sale feeto airfares booked via a GDS,as it does for tickets soldoffline (by phone or atairports).The Airbus A380“superjumbo” made its firstcommercial flight in October,operated by SingaporeAirlines on its Singapore-Sydney route. The carrieroffers12 luxury double suitesat a 20 percent premium,thus reviving the “R” bookingclass that was last used forthe Concorde. The airline alsoexpects to operate the A380on Singapore-London routesstarting in February. Boeing,on the other hand,announced it will not startdelivering its 8“Dreamliner,” a directcompetitor of the A380, untilNovember or December2008, at least six monthslater than planned.The U.S. Department ofTransportation (DOT) hasauthorized Delta Air Linesand United Airlines tooperate new non-stopservices to China in 2008and 2009 respectively, madepossible by an Open Skiesagreement signed by the twocountries last July. The DOTalso issued tentativeauthorizations for AmericanAirlines, Continental Airlines,Northwest Airlines and USAirways. All-business-classcarrier MAXjet’s applicationwas refused.The DOT granted antitrustimmunity to several StarAlliance partners, includingUnited Airlines and BritishMidland Airways. Thedecision, which authorizesthe airlines to jointly plan andcoordinate services, will takeeffect with the EU-U.S. OpenSkies agreement on March30, 2008. Six SkyTeampartners were asked forfurther information regardingtheir antitrust application,submitted in June.

8In BriefNumerous airlinesunveiled plans for newtransatlantic services, tostart after March 30 whenthe EU-U.S. Open Skiesagreement comes into effect.Announcements were madeby Aer Lingus, Air France,British Airways, ContinentalAirlines, Delta Air Lines, EosAirlines, KLM, Ryanair andVirgin Atlantic. (See Pages30-31 for more details.)The majority of airlinesexpect to unbundle servicesand favor à la carte pricingin the future, according to asurvey conducted by the U.S.consulting firm IdeaWorks.Separate fees are likely forancillary services such asbooking through the airline’scall center (expected by 80percent of respondents,compared to the 52 percentwho currently charge forthis), onboard meals (58percent vs. 19 percent) andpre-assigned premium seats(53 percent vs. 29 percent).HotelsThe French governmentannounced plans to align itshotel standards withinternational practice,introducing common criteriafor each level ofaccommodation. Throughthe reform, a five-starcategory would replace “fourstarluxury” as the highestofficial rating.Ground transportationIn October, the U.S.Senate approved a bill toprovide US$11 billion infunds for Amtrak, America’sloss-making inter-city railprovider. The House ofRepresentatives is expectedto make a priority of theproposed legislation inJanuary 2008. The movecontrasts with previousopposition from the Bushadministration, which hasunderlined the company’sneed to make fundamentalchanges, includingeliminating unprofitable lines.Last fall, Avis BudgetGroup, a leading vehiclerental company, acquired 45percent of CareyInternational, the world’snumber one provider ofchauffered groundtransportation services. AvisBudget Group said the dealwould enable it to providethe most complete portfolioof local ground transportationservices anywhere.TechnologyThe International AirTransport Association (IATA)announced a new globalstandard for airport check-invia mobile phones.Passengers who register theirmobile number with theairline when booking willreceive a barcode that willserve as a boarding passwhen displayed on thescreen. This system shouldbe in use by all airlines by2010.Airports are embracingnew technology to tacklecongestion and improvesecurity, according to the4 th Airport IT Trends Surveycarried out by SITA, theglobal provider of airport ITand communication services,in conjunction with AirlineBusiness magazine andAirports Council International.The survey indicated thatwithin the next two to fiveyears, 81 percent ofairports/operators will haveintroduced self-service kiosks,70 percent remotepassenger check-in and 37percent self-servicepassenger boarding gates.This move toward selfservicefeatures correspondsto traveler demand forgreater control over the travelexperience, as indicated inthe Annual Corporate AirTravel Survey released byIATA in November. Fifty-fourpercent of respondentsworldwide said they wouldwelcome more self-serviceoptions both online and atthe departure gate.Sustainable travelSeveral companiesannounced new orexpanded carbon offsettingschemes, includingEnterprise Rent-A-Car, itsNational and Alamo brands,and Virgin Atlantic. The latteralso conducted trialsthroughout December on“starting grids” designed toreduce fuel burn and carbondioxide emissions. Startinggrids are parking bays thatenable aircraft to be towedcloser to the runway andstart their engines later(around 10 minutes beforetake-off).

CWTvIsIon Issue 3 - January 2008NEWS FROM CWTCWT and MasterCardWorldwide LaunchEnhanced Travel DataSolutionLast October, MasterCardWorldwide and CWTlaunched a global, cardbasedenhanced dataprogram to help corporatetravel buyers more effectivelymanage their travel program.CWT clients who pay withMasterCard commercialcards have access to morerobust data that integratesinformation from their travelprogram such as policy rules,itineraries and accountingcodes with actualexpenditures on a global,regional or country level.This combination enablestravel buyers to more easilyreconcile expenses chargedto their central travelaccounts, aggregate greateramounts of data for suppliernegotiations and better tracktravel policy compliance. Thesolution is currently availablein Australia, China, Singaporeand 13 European markets(Austria, Belgium, Denmark,France, Germany, Ireland,Italy, Luxembourg, theNetherlands, Spain, Sweden,Switzerland and the UnitedKingdom). Other countrieswill be added in the future.CWT Named Among“Green Achievers” inBusiness TravelCWT was among the winnersof the new Project ICARUSawards organized by theU.K.-based Institute of TravelManagement (ITM) torecognize environmentalachievements by suppliersfrom the business travelindustry. Announced lastOctober, the winners in eachcategory were: Apex Hotels(Hotels), Carbon Consulting(Technology), CarlsonWagonlit Travel (Agency),Radio Taxis (GroundTransportation), EasyJet (Air)and Virgin Trains (Rail).Suppliers were asked toexplain their products andservices, tell how theyhelped buyers reduce carbondioxide emissions, indicatewhat they were doinginternally to reduce theircarbon footprint and providecase study evidence.CWT presented its range ofcarbon managementsolutions, including a carboncalculator, post-trip carbonreporting and futureoffsetting services, as well asenvironmental initiativescarried out by employeesadhering to an in-house“green charter.” ITMexecutive director PaulTilstone commented: “Manysuppliers are just getting togrips with creating solutionsto address market needs,and all of the winners shouldbe commended for theiractions.”CWT Voted Best CorporateTravel Agency in AsiaPacificCWT was voted BestCorporate Travel Agency inAsia Pacific in the 18thannual TTG Travel Awards2007, organized by TTG AsiaMedia, publishers of theregion’s leading travel tradenewspapers and magazines.TTG readers, who includehoteliers, airline staff, carrental companies, GDScompanies and other travelprofessionals, voted for CWTbased on the followingcriteria: professionalism andexcellence in staff, bestvalue-added services forclients and the bestapplication of computertechnology for improvingefficiency and effectivenessin client services. CWT is thenumber one travelmanagement company inthe Asia-Pacific region, with3,100 employees and totalsales volume ofUS$2.7 billion in 2007.

60 In BriefINDICATORSEvolution of average air ticket pricesQ3 2007 compared with Q3 2006.Based on transaction data from CWT clients (%).EuropeDomestic Intraregional InterregionalFrance+3.7% -2.8%+2.4%Germany-1.2%-5.3%+5.5%Italy-4.5%-8.0%+1.7%Spain-9.5%-14.6%-1.7%U.K.-2.6%+0.6% +6.7%North AmericaDomestic Intraregional InterregionalCanadaU.S.-3.5% -4.8%-2.2%+7.0%+4.0% +11.2%Asia PacificDomestic Intraregional InterregionalAustralia+5.9% -0.3%+8.8%China-4.2%+10.7%+10.6%India-8.6%-6.0%+27.5%Latin AmericaDomestic Intraregional InterregionalBrazil-26.8% -21.7%-13.9%Argentina+14.2%-8.8% -3.0%Source: CWT Travel Management Institute