Stricter Air Travel Policies Can Save $30 Billion

Stricter policies requiring purchase of non-refundable tickets and the lowest logical fare for air travel could equate to an estimated $29.8 billion in total corporate savings, says a new study from the NBTA Foundation, the research arm of the National Business Travel Association, and Egencia, the corporate travel arm of Expedia, Inc. The new study, "Corporate Travel Policy: Benchmarking and Insight," evaluated travel management trends and policies across North American (and European organizations) and assessed travel policy effectiveness overall.

Based on best practices and insights from 689 North American travel buyers, the study takes a comprehensive look at policy mandates versus guidelines, consolidation, booking procedures, class of service, advance purchases, pre-trip approval, groups/meetings and emergencies, among other issues— all of which comprise variables that make travel difficult to standardize.

"Certain practices to dramatically reduce travel costs like driving travelers to non-refundable tickets are far from commonplace," said Christopher Peymirat, vice president of global marketing for Egencia. "Based on our research, companies could achieve significant annual savings using a lowest logical fare travel policy. For example, companies can save as much as 38 percent on air spend by encouraging travelers to be flexible, book within a two-hour window of original departure time and use a connection when possible."

For companies that do specify ticket type, it seems unclear how that requirement is enforced. Sixty-two percent of respondents said travel policy is more a guideline than a rule, and 67 percent said there are few or no consequences for policy violations. The study suggests that organizations could dramatically benefit from better enforcement.

A key recommendation from the study to help enforcement and realize savings is to consolidate all travel purchases through one or more designated Travel Management Companies.

The study found that non-refundable tickets represent a significant opportunity for savings. In fact, non-refundable tickets average 49 percent less expensive than refundable tickets on some U.S. domestic routes, and 56 percent less expensive on some international routes. Yet, nearly a third of companies (32 percent) don’t specify that travelers should purchase non-refundable tickets – doing so could have saved companies billions in 2009.

The premium charged by airlines to upgrade to first class in the U.S. and business class internationally averaged 223 percent, or $3,327 more than economy class on a selection of trips sampled between U.S. and international destinations. Limiting premium-class travel is an effective way to control costs, and many companies have put this into practice over the last two years.

Sixty-six percent of companies that have updated travel policy in the last two years have reduced premium-class air travel, and only 9 percent allow travelers to upgrade to first or business class on flights within North America.

Other key practices to net travel savings identified by the study include:

*    Defining a ‘Lowest Logical Fare’ (LLF) requiring travelers to use departure windows and accept reasonable connections
*    Using preferred suppliers, at least where they offer the lowest fares
*    Working aggressively to increase the average time before travel that airline tickets are purchased since advance bookings are generally less expensive




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