The balance of power between travel buyers and airline suppliers hifted perceptibly toward the seller in 2010, and not only be- cause of rising demand. Central to growing airline strength has
been the consolidation of the supplier base through a wave of mergers
and joint ventures across the world.
No individual or airline is solely responsible for this trend. However,
when Wolfgang Mayrhuber retired on Dec. 31 after 40 years’ service—
the last seven as Lufthansa chairman and CEO—he could claim to have
been the king of international airline consolidation. Not only does Lufthansa own most or all of four other major European airlines (Swiss,
Austrian Airlines, British Midland and Brussels Airlines) plus its own
Lufthansa Italia start-up, it also is a dominant force in the world’s largest airline alliance, Star Alliance, and the Atlantic Plus-Plus transatlantic
joint venture, including United/Continental and Air Canada. Lufthansa, for example, is the airline that loads the
fares for Atlantic Plus-Plus.
Lufthansa increasingly is joint selling through all these forms of consolidation. In October 2010, officials told
BTN that two-thirds of its North Atlantic contracts were multi-airline deals; the carrier expects to hit 100 percent
by the end of 2011. Whether they like it or not—and many do not—buyers are finding it harder to mix and match
individual carriers in preference to these consolidated entities. One European travel manager participating in a
roundtable interview with BTN last October said, though not specifically about Lufthansa, that “the joint ven-
tures and mergers have one P&L, and that becomes a totally different discussion—and there you obviously don’t
have that much choice any more. It is ‘you use us or you don’t use us,’ and ‘you work with us or you don’t work
with us,’ so we will have less choice.”
Driven by executive vice president for sales and marketing Thierry Antinori, Lufthansa last year also demon-
strated enormous power in its home market by introducing controversial contracts requiring clients to repay any
upfront discounts if they failed to meet targets. German travel managers protested that the clauses were unfair
because Lufthansa was not offering last-seat availability in return, often making it impossible for corporate cus-
tomers to book tickets that would contribute to contract performance.
Even if Mayrhuber was not showered with retirement gifts by corporate clients, he certainly left shareholders well-satisfied. Strong, prudent management enabled Lufthansa to expand during the last decade as other
competitors struggled, and the core airline on an annualized basis remained profitable throughout the recent
recession. It also can be argued that one or two of its acquisitions would no longer exist if Mayrhuber had not
bailed them out. There may well be more purchases to come. Lufthansa continues to be the first name on the list
of potential buyers for European carriers; both SAS and LOT Polish Airlines are among those tipped to become
Lufthansa assets by the end of 2011.
The business travel industry in 2010 lauded and loathed President Barack Obama’s initiatives. Sensitized to the size and scope of the sector in 2009, Obama attempted to support the growth of travel and tourism as an economic stimulator. To industry accolades, Obama in late September announced a compre- hensive plan to renew and expand the nation’s rails, roads and runways. The six-year plan would rehab 150 miles of runways at U.S. airports where the long-delayed NextGen air traffic control systems finally would be im- plemented. The $50 billion plan also would rebuild 150,000 miles of roads and construct and maintain 4,000 miles of rail. Obama has to work with
Congress to fund the plan.
Earlier in the year, the president signed the hard-fought Travel Promotion Act that established the nonprofit
Corporation for Travel Promotion, a funding mechanism expected to provide $200 million to attract overseas
visitors to the United States and other resources to promote travel as a means to boost the economy.
Appointed by Commerce Secretary Gary Locke in September, the 11-member CTP board incorporated in
October, launched a website and hired a search firm to find its first executive director. On the first board are
executives from Amtrak, Sabre Holdings, United Airlines, hotel firms, a restaurant chain and tourism offices.
In a move hardly applauded outside the United States, the government in September began collecting a $10 fee
from foreign visitors who aren’t required to secure visas as part of the funding for the CTP. Officials said $22.5
million was collected as of early January as collections were at $350,000 a day. Thousands of dollars of in-kind
contributions also were reported.
To the industry’s dismay, the White House targeted a 13 percent reduction by 2020 in greenhouse gas pollu-
tion “from indirect sources, such as employee travel and commuting.” The National Business Travel Association
called the move “misguided,” and the U.S. Travel Association branded it “short-sighted.”
But the administration appeared to be intent on cutting travel costs as Obama’s fiscal advisory commission
in November recommended that lawmakers prohibit “each federal agency from spending more than 80 percent
of its fiscal 2010 travel budget” annually through 2015. “Despite our record deficits, government expenditures
for travel have grown by leaps and bounds,” from $9 billion in FY2001 to $14 billion in FY2006, according to
The National Commission on Fiscal Responsibility and Reform, which encouraged more teleconferencing use
to achieve a $400 million cut in travel expenditures by 2015. The commission also recommended a 10 percent
reduction in the federal workforce.
UNI TED S TATES OF AMERICA
MARY ANN MCNULTY
Cooperation among rivals is a rarity in the hy- percompetitive travel industry. It therefore was impressive to watch the Millennium Foundation for Innovative Finance for Health persuade all
three global distribution system providers—along
with several other travel industry players—to apply
resources for a global charitable initiative.
Conceived in 2007, the Massivegood program raises funds for health care in impoverished parts of the
world via “micro-contributions” (usually suggested
as $2 or €2) from travelers when they book air, hotel or car reservations online or through agents. The
program aims to provide up to $1 billion in
funding for Unitaid, a
World Health Organi-zation-hosted group.
Under the leadership
of managing director
Bernard Salomé, there
was plenty of development work to be coordinated by the Millennium Foundation
ahead of the March
launch at the United
Nations and the June 2010 launch of the corporate
Amadeus is credited as the foundation’s technology
partner, building the Massivegood donation engine
for agent-assisted global distribution system bookings
and corporate donation management tools. Sabre and
Travelport also joined the effort. Aligning the GDS
operators, Salomé told BTN, was “by far the best part”
of the development. “It was great,” he said, “because
they are normally quite stiff competitors and they de-
cided to join forces with us.”
Coordinating with the many other travel industry
players and navigating country-specific regulations
made the task all the more challenging, Salomé said.
But by March, all three global distribution system
operators began offering U.S. subscribers the option
to facilitate donations. In the corporate travel sector,
American Express Business Travel, BCD Travel and
Carlson Wagonlit Travel pledged their support, including promotion to and donation tracking for corporate clients, and coordination with online booking
tool providers. The companies also kicked in donations of their own.
Marathon Oil was the first company to contribute
a lump sum, donating $50,000, or $2 for each of its
25,000 business travel bookings completed in a typical
year. Other program supporters include Accor, Mondial Assistance and Sabre’s Travelocity, which includes
donation information in booking confirmation emails.
Globally, Massivegood by early January 2011 collected about $300,000, Salomé said. Moving forward,
he said the program would be implemented in a growing number of countries and relaunched soon in the
United States. He explained that a task force including
representatives from GDS operators and corporate
agencies intend to develop solutions “by February” to
boost participation and more effectively measure corporate travel’s contribution.
He also said that “there is a whole lot more that can
be done with the online travel agents and the airlines,”
and added that he expects the program to achieve the
$1 billion goal within the next three to five years.
After two years at the Millennium Foundation, Salomé at the end of 2010 announced plans to “move on
to other adventures.” Previously the foundation’s chief
corporate officer, Henk Mulder on Jan. 1 replaced Salomé as managing director.
MILLENIUM FOUNDATION FOR INNOVATIVE
FINANCE FOR HEALTH