We broke the news on December 1 but it’s still sinking in. After hearing no mention of it on investor calls, we tried to contact the loquacious JPMorgan Chase analyst Jamie Baker to talk about it. We didn’t get a hold of him. This week, Baker told AA, “It feels as if you are taking a different approach toward sales, towards corporate, and it’s not something I fully understand.” We’ll bold it here for anyone who has yet to catch on: American Airlines is turning its back on the corporate market.
What seems to have snapped some to attention is the airline’s staff reductions in corporate sales and travel agency account management, an associated result of a new strategy on which we also elaborated here, here and here.
Skift first published the news of the reductions on March 6. Airline-focused CrankyFlyer this week wrote that the “healthy tension” that an airline wants between the people on its sales team and in its revenue management department at AA “is now gone and the numbers have won a complete and total victory.” Also this week, Travel Weekly reported on TMCs noticing a reduction in customer service.
Here’s how AA CEO Robert Isom explained it to Baker on Tuesday during a JPMorgan investors conference: “We are dedicating our resources to places where we can create the tightest relationship.”
Regular readers of The Company Dime already knew big parts of this story, but we’re not pointing out all this just to pat ourselves on the back. It’s a potentially seismic change for managed travel.
According to Tripbam CEO Steve Reynolds, in a report issued this week, “Air and hotel suppliers want to roll back historical discounts and rethink commitments to business transient. I’m not sure I can blame them. Volumes are down. Corporate footprints have changed. Leisure rates and demand are way up. There’s been turnover … Air and hotel executives are willing to bet that, discount or no, they’ll still get corporate business because travel managers can’t get travelers to book with preferred suppliers. 2023 is going to be a testing ground for that theory.”
Do most of us have our heads in the sand about artificial intelligence? That’s what
TripActions Navan might have us believe. If they’re right, and a TMC can be a TMC without travel agents, could their reported $9 billion valuation makes sense after all? An article last week in The Information included some unverified financial figures and an unequivocal quote from a presentation to investors: “Chatbot replaces agents.” According to the article, TripActions’ revenue was “roughly” $300 million last year. It cited “people familiar” with the figure. If accurate, that would have put TripActions in the neighborhood of Corporate Travel Management and Internova on Travel Weekly‘s annual Power List, perhaps larger than Direct Travel. The article also said one-third of Navan’s revenue growth was from Reed & Mackay, a traditional U.K.-based TMC which it acquired in May 2021. Reed & Mackay’s client base may not be too keen on experimenting with chatbots. The article said Navan had a significant debt bill and was burning through a lot of cash.
The coverage of Navan last week didn’t get into airline distribution like our most recent story on the company but it did further the dialogue on company culture from a prior one. It’s a firm that, according to The Information, is heavy on employee churn and C-level F-bombs. The original article by The Information is behind a paywall; a commentary by founder Jessica Lessin put the leadership style into context.
Expensify CEO David Barrett also drops lots of F-bombs — including more than half a dozen within about 15 minutes during the JMP Securities Technology conference last week. Barrett elaborated on the “bottom-up” enterprise sales approach for his $169 million expense, invoicing and payment software firm (an approach that Navan also now employs).
Some Barrett highlights:
• “An individual employee will download the app for free without being asked, without asking for permission, and they’ll just start using it inside the company. The vast majority of our customers have never used anything before. Our competition is email and Excel. Then we turn their expense report into a highly targeted marketing message to their boss, a boss who does not give a shit about this because they’re just too busy. The vast majority of our SMB customers don’t have a procurement officer. There’s no sales process. They’re just like, ‘I’m trying to survive here. An employee came to me and instead of using the expense report template, they just submitted this expense report through Expensify which is free and I’m like, “Whatever.” ‘ So individual employees pull us into the organization. And then at the top, now we’re talking to a decision maker who was not looking for expense reports, is not clicking ads, not taking sales calls … they don’t exist in the addressable market for anyone else.”
• “Our focus is on long-term growth and long-term positioning. It’s a bit morbid but I love the economic collapse because it is wiping out all the fake competition. Our only competition are companies that are just hemorrhaging money at scale. You can’t make that up by doubling scale. They’re not real businesses. And so we’re like, ‘Fuck, thank God, they can’t just keep raising money for free and spending it in unlimited quantities.’ So it may be a bit dicey in the short term but long term I think we’re the only ones who survive.”
• “The problem with venture capitalists is they’re not investing in real businesses. It’s all trend pattern matching. When I first started pitching the company, I said, ‘I think I can make a cash cow of a business.’ And VCs would be like, ‘Why would you do that?’ And I’d be like, ‘Money, I guess?’ And they’d say, ‘Profit is just missed opportunity.’ That’s a direct quote, and not just from one VC, from all of them.”
• “The sum of our entire industry over 30 years has acquired 0.1 percent of the global opportunity. The sum of all the competition’s customers is maybe 300,000 businesses, but there are 300 million in the world. How has everyone utterly failed to [get] even a tiny fraction of the opportunity? It’s because their business model sucks. The enterprise business model is called that because it only goes after the enterprise. The enterprise fucking sucks. It’s basically where everyone goes, the margins are eroded to shit, there’s like no opportunity up there. The Fortune 1000 is, I don’t know, roughly 1,000 companies. And it will always be 1,000 companies. It’s the same 1,000 companies for everyone. We’re going after the Fortune 300 million, if you will, and no one is even in it. So everyone else is fighting over the shitty end of the pool and we’re swimming in the deep end and soaking up the rest of the market, which by the way has insanely high margins because there’s no price erosion from competition. It won’t happen fast but no one else is even trying.”
Also in expense management news, people despise expense reporting, still. Sixty percent of more than 1,000 people who took at least one business trip in the prior 12 months said completing and turning in expenses was their least favorite part of business travel. Two in five would rather suffer an hour-long flight delay. That’s according to a December survey sponsored by American Express.
More from Barrett: “Expense management is a strangely emotional thing. You wouldn’t think it is; it sounds like the dullest thing ever, but the way our customers value it … they say, ‘Because of Expensify, I can spend four more hours with my kids every weekend.’ That’s the value prop.”
Amex is working with Microsoft to streamline the process. When an Amex card is swiped, prompts on mobile devices direct users to photograph the receipt. An AI engine reviews the transaction and categorizes it as needing approval, review or rejection. “The information is then passed to an expense management system, along with receipt details, to auto-generate reports and help managers and auditors in their decision making,” the companies announced. Microsoft plans to pilot the process internally this year. “The solution will be made available to other American Express corporate clients over time, with the ability to integrate into other expense management tools,” they said.
The head of Flight Centre’s France operation is out as the company resolved a dispute with Air France-KLM over alleged opaque pricing practices, at least according to a few French-language publications. The airline in December said it revoked FCM France’s ticketing authority due to “irregularities … on the pricing of tickets.” More recent press reports included a statement from FCM regarding a commitment to transparency — including separating the airline’s fares from the agency’s service fees — and the replacement of its CEO in France.
The companies’ press departments weren’t answering questions for us, and since we don’t speak French, we ran the articles through Google’s translator. According to the publications, FCM France had launched an audit and investigations. TourMag said Air France-KLM “accused FCM Travel France of taking a margin on the ‘corporate’ prices (i.e., negotiated directly with the customer) of the plane tickets, without the corporate customer being clearly informed of the service charges invoiced by the agency.”
In an article discussing how information about “this pitiful affair” came from sources and then flowed from Air France to the market, Deplacements Pros (according to Google) wrote, “This communicational dichotomy is another oddity that is added to a soap opera where the ridiculous plays the incomprehensible.”
A ridiculous, incomprehensible soap opera in corporate travel?
“The travel ecosystem will not be ready to support and service AA’s NDC strategy from April 1,” American Express Global Business Travel told clients in a February letter. There were a lot more words in the letter but they didn’t say much that readers of The Company Dime would not know, especially if they caught this piece on Amex GBT’s MMP. A client told us BCD Travel a couple weeks ago made a commitment that its agents would access AA’s “NDC content” via the Sabre agent desktop for offline bookings, thanks to support from Sabre expected to be in place by April 1. BCD was still in testing at the time; BCD press officials did not offer additional info. A CWT client letter quoted on Tuesday by The Beat mentioned alternatives for clients including SAP Concur’s TripLink and Select Access. CWT said it would also offer offline access to Sabre, with offline fees.
Reaction: Readers can expect more Op Ed columns in the coming months after Jeff Klee, Bryan Holmes and Martin Warner broke us out of a lull. Part of the “problem” is that our new Edit Board has helped us take the program up a couple notches — and that means quality over quantity. Meanwhile, we thank Brandon Strauss, Paul Tilstone, Mike MacNair, Steve Reynolds, Grant Caplan, Richard Clowes, Margaret Birse, John Harvey, Maria Chevalier, Scott Gillespie and others for your recent comments.
Around The Web
• We’ve been reading a lot about AI. A lot is surprising, a lot is unnerving and a lot is unknown. This podcast and transcript published this week by Harvard Business Review is particularly useful.
• Here’s a good refresher with a self-evident headline from Harvard Business Review: “Getting Employee Buy-In For Organizational Change.”
• One of our favorite newsletter writers is Philip Bump from The Washington Post. He makes it fun to learn about charts in his How To Read This Chart newsletter. Our readers will appreciate the content of a recent missive on air travel fears.
Here’s a page where we pull in business travel news feeds from around the web.
Hat-Tips And Heads-Ups
Congrats to new job-getters Jill Brady, Jack Lever and Carol McDowell-Schrager!
Risk management sage Bruce McIndoe replaced Will Pinnell on GBTA’s board of directors. Pinnell resigned from that post and his job as BCD Travel’s VP for global sales and solutions engineering. In an email, Pinnell wrote that he was facing health concerns. Best wishes for a speedy recovery, Will! As per GBTA’s bylaws, the board president (currently Denise Truso) appoints a member to fill such a vacancy. McIndoe had run for an Allied spot on the board in 2020 and 2021. He will serve out the rest of Pinnell’s term, which ends in summer 2024.
London-based Gray Dawes Travel hired U.S. travel management company veterans Michel Botbol and Carolann Martini. We first met that duo way back in the first decade of the millennium when they were leaders at Ultramar Travel Management — later acquired by Travel and Transport, later acquired by Corporate Travel Management. They’re now working on a U.S. acquisition. Gray Dawes, which in January announced its multinational expansion via an acquisition in Australia, has more than 250 employees globally.
Timothy O’Neil-Dunne already got this one: “Just see what a nice little 11-year court battle can do.” Too easy! What else? Email us.