Budget Blues?
Business Traveller Africa|February 2017

We’ve all felt it – the pinch of rising prices, the escalated cost of living and the resultant belt tightening. But it’s not just the consumer sitting at home – the majority of corporates have for some time been looking to cut their costs, particularly in the wake of the 2008 global financial crisis. Travel is one of the first areas looked at, as Kate Kennedy discovered.

The corporate world may have re-looked its travel policies and video conferencing operators may be licking their lips, but a decreased travel budget doesn’t spell the end of the need to travel, particularly in the corporate world. We’ve all just had to become that much smarter and selective about the process, and travel policies have had to change to reflect a ‘new normal’.

That starts with the actual physical travel process, where budget airlines have clearly come into their own in the past decade.

“Low-cost carriers have taken the world by storm, accounting for more than a quarter of all airline bookings,” says Paul de Villiers, Vice-President of Amadeus Africa. “Twenty years ago corporate travellers would fly in business class on full-service carriers – no questions asked. They would be pampered during the flight with exceptional service, a glass of champagne, a delicious meal and ample legroom. It would have been inconceivable for them to consider paying extra for drinks, luggage or to pre-select their seats. The distinction between economy and business, between LCC and full-service carriers was clearcut and very visible. But, today the world has shifted, the lines have blurred and it is perfectly normal for a corporate traveller to fly on a low-cost carrier.”

Travel management companies are at the coal face of the corporate booking process and are well-placed to comment on trends. But Michelle Jolley, Corporate Marketing Manager of Flight Centre Travel Group in Johannesburg says it’s not as simple as just searching for the cheapest fare.

“When we compare a best fare of day with an advance purchase of more than 21 days, with no auxiliary inclusions, such as onboard meals and checked baggage and stricter penalties, the savings could be in excess of R900 ($65) on a return ticket from Johannesburg to Cape Town,” she says. “However, many of our corporate customers still prefer to travel on the legacy domestic carriers, due to scheduling, more frequencies and fewer time changes.”

Point well made and understood, but perhaps there’s a need to delve a little deeper into just who exactly this corporate traveller is?

Kirby Gordon, Head of Sales and Distribution at Safair Operations, which operates the South Africa low-cost carrier Flysafair, identifies two types of business traveller – the traditional and the commuter. The traditional business traveller takes day or overnight trips to conduct business in another city. The commuter works in one city, but lives in another, spending the week in Johannesburg and the weekend in George, for example.

“They are business travellers in one sense, but leisure in another, as they pay for these trips themselves,” says Gordon. “We suspect that a number of these passengers fly with full service airlines for business and low-cost when they commute.” 

Corporates are, more and more, reserving business or full service air travel for long-haul flights, when the luxury of extra legroom, full-flat seats and the room to work on a laptop are more important. Domestic and many regional flying times are short enough that the space and facilities offered by LCCs are comfortable, but it’s becoming more and more difficult to justify the price of a business class seat for a two-hour flight between Cape Town and Johannesburg in such tough economic times.

As a result, this has become a competitive space and South Africa is a good example, with three – Mango, Kulula and FlySafair – reputable low-cost carriers all fighting for market share.

“By the number of new LCCs with a specific focus on business travel, it’s safe to say that this is a global trend,” says Luane Lavery, Brand Communications Manager for British Airways (operated by Comair) and its lowcost sister airline kulula.com.

This sentiment is shared by almost all of the LCCs in the African airspace.

“African business owners and their employees are aware of budget constraints and understand the need to get the best valuefor-money out of their budgets,” says Nico Bezuidenhout, CEO of Tanzanian-based LCC fastjet, which also flies into South Africa. “They are choosing travel options that move away from high cost, frills and full-service offerings.”

Hein Kaiser, spokesperson for Mango, has noted a clear upward curve in the use of LLCs for business travel in the last five years.

“I believe that this is as much a testament to the product, service and value proposition of LCCs in this market as it is about price,” he says.

Kaiser touches on an important point, as it’s clear that lowcost airlines have had to adapt their product to meet the needs of the business traveller.

“2016 was a tricky year economically for most and travel was an area with capacity for corporates to save money,” says Gordon. “We noted a large increase of corporate travel on our aircraft, which definitely picked up after we introduced our Standard Fare, which allows customers to make two flight changes without penalties.”

Since almost a third of corporate travellers change their return flights, according to Gordon, it’s easy to see why the airline has attracted more corporate business.

Flexibility is an important element of business travel. Meetings will occasionally run late or be rescheduled completely, and the ability to roll with these punches can make or break a deal. Those low-cost carriers that traditionally didn’t offer that flexibility craved by the business travel community found themselves losing out, so it’s no surprise to see the major players in the space now developing offerings that are more suited to their corporate travel constituency.

CUSTOMER SATISFACTION

“As consumer expectations grow, LCCs will have to place more focus on what customers want other than a cheap seat,” says Vanya Lessing, CEO of Sure Travel. “In domestic markets, full-service airlines are looking at differentiation, with a particular focus on the business traveller, to compete with LCCs.”

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