Negotiating Airline Contracts for Corporate Customers February 4, 2011 New Orleans CBTG Richard Esman Kevin O'Malley

*** Parameters ***  Typically 25 Respondents for each question  Multiple responses to same question

1.What level of air volume are you seeing airlines willing to consider putting an airline contract in place for a customer? Less than $500K 12 % Less than $500K 12 % $500K - $750K 60 % $500K - $750K 60 % $750K – 1M 12 % $750K – 1M 12 % $1M – and above 16 % $1M – and above 16 %

2.What are you seeing in the levels of discounts being offered? Discounts are lower 36% Discounts are lower 36% Discounts are relatively the same 56% Discounts are relatively the same 56% Discounts are increasing 8% Discounts are increasing 8%

3.How successful are you in getting other amenities such as club passes, memberships, nominations, upgrades etc… negotiated into the contract? Very little to no success at all 24 % Very little to no success at all 24 % Some success 52% Some success 52% Very Successful 24 % Very Successful 24 %

4.How important are the amenities in question 3 to your customer? Not Important 20% Not Important 20% Somewhat Important 48 % Somewhat Important 48 % Very Important 32 % Very Important 32 %

5.Would your customers accept a lower discount in return for an increase in amenities listed in question # 3 ? Yes 4 % Yes 4 % No 58% No 58% Yes, if the discount was minimally impacted 38% Yes, if the discount was minimally impacted 38%

6.How successful are you in negotiating movement on the market share and contractual goals set for the contract. Not successful at all 20 % Not successful at all 20 % Somewhat successful 56 % Somewhat successful 56 % Very Successful 24% Very Successful 24%

7. * When a customer has an airline contract that is not in compliance, what action(s) is (are) the airline(s) taking? * * Multiple answers * Lowering discounts 38 % Lowering discounts 38 % Pulling contracts 54 % Pulling contracts 54 % No change 21 % No change 21 % Lowering goals 12 % Lowering goals 12 %

8.When there is contract language that your customer does not agree with in a contract, how successful are you in getting that language removed? Not successful at all 36 % Not successful at all 36 % Somewhat successful 64 % Somewhat successful 64 % Very successful 0 % Very successful 0 %

9.How successful are you in getting increased discounts for specific “ carve out” markets that are important to your customer ? Not successful at all 21 % Not successful at all 21 % Somewhat successful 79 % Somewhat successful 79 % Very successful 0 % Very successful 0 %

10.Are you seeing any airline contracts with guaranteed fares vs. normal discounting ? None at all 56 % None at all 56 % Very few 36 % Very few 36 % Some 8 % Some 8 % A lot 0 % A lot 0 %

11.* What is the most important amenity to your customers in an airline contract ? * * Multiple answers * Upgrades 44 % Upgrades 44 % Nominations 28 % Nominations 28 % Waiver / Favor fund 20 % Waiver / Favor fund 20 % Club passes / memberships 8 % Club passes / memberships 8 % Other 8 % Other 8 %

12.* What is the typical term of your customer’s airline contracts ? * * Multiple answers * One year 60 % One year 60 % Two years 40 % Two years 40 % Three years 4 % Three years 4 %

13.Are you seeing customers moving towards airlines small business programs vs. a standard airline discount contract? None 8 % None 8 % Very few 12 % Very few 12 % Some 68 % Some 68 % A lot 12 % A lot 12 %

14. * Who negotiates your customer’s airlines contracts * * Multiple answers * TMC 72 % TMC 72 % Consultant 0 % Consultant 0 % Travel manager 44 % Travel manager 44 % Finance / Procurement 44 % Finance / Procurement 44 % Other 12 % Other 12 %

15.* What point of sale commission programs are you successful in negotiating for your TMC ? * * Multiple answers * International 80 % International 80 % Domestic 8 % Domestic 8 % Specific international markets 44 % Specific international markets 44 % Specific domestic markets 36 % Specific domestic markets 36 %

16.How successful are you in negotiating amenities (soft dollars, upgrades, marketing funds, bonuses) into your airline TMC accounts ? Not successful at all 8 % Not successful at all 8 % Limited success 72 % Limited success 72 % Very successful 20 % Very successful 20 %

17.How successful are you in negotiating and getting changes made to the financial terms and goals of your TMC airline contracts ? Not successful at all 16 % Not successful at all 16 % Limited success 80 % Limited success 80 % Very successful 4 % Very successful 4 %

Additional thought and comments Additional thought and comments “ Each airline varies greatly in this regard. We have most success with Delta. “ Each airline varies greatly in this regard. We have most success with Delta. Worst place is a tie between AA ( universally intransigent) and UA. Worst place is a tie between AA ( universally intransigent) and UA. UA in particular has been aggressively pulling upfront contracts while at the same time pushing the Prepay Pass Plus Program which we are having more and more success selling. “ UA in particular has been aggressively pulling upfront contracts while at the same time pushing the Prepay Pass Plus Program which we are having more and more success selling. “

Additional thought and comments “ We have been finding that we are much more successful in negotiating better amenities for clients with United Pass Plus vs. their traditional CSA contracts. They are not so concerned with market share. “ “ We have been finding that we are much more successful in negotiating better amenities for clients with United Pass Plus vs. their traditional CSA contracts. They are not so concerned with market share. “

Additional thought and comments “ Our clients are mainly corporations or small businesses with under 2 mil in travel vol. Quite a few are small companies with higher volumes of international business / first class. While some companies have domestic and international carrier contracts, they are small and not very attractive. We would prefer not to promote the United or Continental corporate contracts to our clients…due to the loss of commission to the agency…but we do offer. “ “ Our clients are mainly corporations or small businesses with under 2 mil in travel vol. Quite a few are small companies with higher volumes of international business / first class. While some companies have domestic and international carrier contracts, they are small and not very attractive. We would prefer not to promote the United or Continental corporate contracts to our clients…due to the loss of commission to the agency…but we do offer. “

Additional thought and comments “ Regarding question 7 “ “ Regarding question 7 “  When a customer has an airline contract that is not in compliance, what action(s) is (are) the airline(s) taking? “ We have seen airlines pull or reduce Elite status nominations if the account is under- performing. “

Additional thought and comments “ Most answers are based on customers being able to mandate use of preferred carriers. “

Additional thought and comments “ Volume still drives these negotiations and is not equal between companies and of course market lift still plays a role. “