Struggling Airlines Try Portals For Business Travelers

Direct sales channel saves money but faces tough Web-based competition

Tony Kontzer, Contributor

November 23, 2005

3 Min Read

Major airlines want to establish a more-direct relationship with business travelers at midsize companies, and they're willing to spend the money to make that happen.

AMR Corp.'s American Airlines is putting the finishing touches on a booking portal that lets small and midsize companies access negotiated discounts from American, as well as from hotels and car-rental companies, while also offering published fares for other airlines. The portal will employ a rules engine for enforcing company travel policies and will integrate travel-expense data into back-end travel-management and financial systems. American is right behind United Airlines Inc., which launched a similar portal last month.

The other major carriers have plans, too. US Airways Inc. says it will integrate its inventory into the corporate portal launched last year by America West Airlines before the two airlines merge, though no time line has been set. And Continental, Delta, and Northwest are in negotiations with a third-party vendor to develop a combined portal that would substantially lower the costs for all three carriers.

Direct online sales are critical to an industry that's lost billions. Travel agency bookings cost airlines upwards of $10 per ticket, compared with fees less than half that for sales through airline-built agency portals or mere pennies through corporate booking portals like the one American is rolling out.

Portals give airlines a business sales channel they can use to build loyalty with smaller companies that haven't invested in travel-management IT and services. They also might keep those customers from turning to travel agencies and help airlines avoid the fees they pay the big distribution systems that agencies use to book flights.

Travelers Benefit

Business-travel managers get a cheaper option for managing travel expenses, enforcing travel policies, and accessing real-time data on travel spending. Travelers, meanwhile, get a self-service tool that lets them conform to company policy without having to do a lot of comparison shopping.

American and United both turned to Cendant Corp. for the technology to power their portals. In each case, Cendant built custom applications that run on its Linux-based architecture and leverage capabilities in the software it acquired when it bought Orbitz last year, such as the ability to assemble inventory from different reservation systems into travel packages. The airlines design the system's front-end functionality, including travel-management and reporting capabilities.

American's decision to build its portal was spurred by customers of its old portal, which offered only American fares and didn't include negotiated fares or travel-management tools. "The current users came to us and said, 'You must refresh your technology,'" says David Cush, VP of passenger sales.

Not everyone is convinced that portals are the way to go. JupiterResearch analyst Diane Clarkson thinks companies ready to make the leap to managed travel would prefer to do so with an online travel agency such as Expedia Travel or Travelocity, or through traditional travel-management companies such as American Express or Carlson Wagonlit Travel. Before airlines commit to investing in travel portals, they should be sure companies will mandate their use, she says. "You don't want to go to the time and expense of building it unless you're sure that people are going to use it."

Travel-management companies see airline-built portals as a threat--and a poorly executed one at that. Portals such as those being rolled out at American and United are an improvement over the airlines' consumer Web sites, but they can't match a travel-management companies' breadth of travel-content and management tools, says Mike Qualantone, VP of global distribution strategy for American Express Business Travel. Portals, he says, are part of airlines' strategy "to limit shopping, reduce costs, and control the traveler."

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