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December 2007

Airline Briefing City Pair Program. FY 2009 Solicitation. Airline Industry Desired Changes and Government Findings. December 2007. Discussion Topics – Considered Pre-Determination.

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December 2007

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  1. Airline Briefing City Pair Program FY 2009 Solicitation Airline Industry Desired Changes and Government Findings December 2007

  2. Discussion Topics – Considered Pre-Determination • Outline desired changes and action items identified at November 1, 2007 Airline Industry and Customer Forum • Present findings • Discuss and evaluate findings • Next Steps 2

  3. Background • November 1, 2007 Airline Industry Forum • Airlines represented: American, United, Delta, Northwest, AirTran, Mesa, and Midwest • Government represented: NSF, VA, HUD, GSA, SSA, DOI, NASA, State, Treasury, Coast Guard, NBC, EPA, DHS, DOE, PBGC, Ed, DOD, AMC, TRANSCOM • Discussed desired changes the airline industry would like made to the FY 2009 City Pair Program (CPP) solicitation and contract • Requested changes that align with commercial practices • Ticketing Time Limits (TTL) be applied to CPP tickets • Reduces spoilage • Implement Penalty Fees • For changes, cancellations or re-issuing of tickets

  4. Action Items to Evaluate • Ticketing Time Limits (TTL) • Evaluate the impact TTL would have on current booking and ticketing practices including financial impact • Develop a standard definition for TTL • Impact of Continuing Resolutions on Government’s ability to purchase tickets if TTL is implemented • Evaluate ticket refund/reimbursement cycle-timeline along with SmartPay card refund cycle-timeline and the impact on individually billed account card holders • Assess programming requirements for Defense Travel System and E-Gov Travel Service to accommodate TTL • Identify impacts of increased changes/cancellations to reservations and re-issued tickets i.e. travel agency fees • Assess overall cost impact • Implement Penalty Fees • Assess overall cost impact

  5. Ticketing Time Limit Findings

  6. 1. Evaluate the impact TTL would have on current booking and ticketing practices including financial impacts • Typical government practice: • Hold ticketing to retain flexibility and change w/o fee • Tickets are issued a mean of 4 days prior to departure • *86% are purchased 7 days or less prior to departure • 12% issued day of departure • 14% issued 1 day prior to departure • 9% issued 2 days prior to departure • 12% issued 3 days prior to departure • 19% issued 4 days prior to departure • 14% issued 5 days prior to departure • 4% issued 6 days prior to departure • 2% issued 7 days prior to departure 6

  7. 1. Evaluate the impact, continued • Behavior – Book _CA as far in advance as possible Day 7 Determination or opt for YCA with in 7 Days • Unable to forecast traveler response to TTL • It is expected the transaction costs would rise to cover costs of changes made to tickets after issuance • Explore the possibility of a TTL test at one or more Agencies • Assess traveler and financial impacts

  8. 2. Develop a standard definition for TTL • TTL – Airline goal to get seats back in inventory with time to resell • TTL - May be based either on a set amount of time before flight departure or a set amount of time after a reservation is made • Regardless of the type of time limit, reservations for flights in YCA or _CA may be made up to the time of flight departure subject to seat availability 8

  9. 2. Develop a standard definition for TTL, continued Reservations not ticketed 7 Days prior are automatically cancelled 9

  10. 3. Impact of Continuing Resolution on Government’s ability to purchase tickets if TTL is implemented • The Government’s use of Continuing Resolutions to fund its operations appears to have minimal impact on proposed TTL • The Government funds essential travel under a Continuing Resolution • A number of Agencies are funded differently • The last Government shut down occurred in 1995-96 intermittently for total of 18 business days 10

  11. 4. Evaluate ticket refund/reimbursement cycle-timeline along with SmartPay card refund cycle-timeline and impact on individually billed account card holders Background: • Airfare is booked through Defense Travel System, E-Gov Travel Service or travel agencies (CTOs, TMCs) • Domestic airfare paid for by the SmartPay card • SmartPay cards can be: • Centrally Billed Accounts (CBA) • Refunds are returned directly to the agency’s CBA • Individually Billed Accounts (IBA) • Individuals are responsible for on-time payment in full of their account • Ticket refunds are credited to the traveler’s IBA • Agencies receive incentives for timely payment of SmartPay accounts 11

  12. 4. Airline ticket refund/reimbursement cycle and timeline • Payment for cancelled ticket may be due to SmartPay before refund is processed • Travelers must pay their IBA in full, even if the refund for the cancelled ticket has not been credited

  13. 4. SmartPay billing and payment cycle • IBA holders have 21 days from billing date to pay account in full • Refund Process takes 17-18 Days Minimally Assuming CTO/TMC Process Weekly 13 Source: Smart Pay Contract

  14. 4. Scenario of Transactions and Contractor Actions regarding account Combined Refund and Billing / Payment Cycles

  15. 4. Corporate Practices • Model: Negotiated Air Programs Fare Buckets Discount percentages • Tier 1 F, B, Full coach XX% • Tier 2 B,H,M Range: Low XX% to X% • Tier 3 Lower bucket non-refundable Range: Low X% to none* • The more restrictive and lower in cost the fare – the smaller the percentage of corporate discount • Tickets purchased based on fare rules • Refund process • If using corporate card on a refundable ticket and trip is cancelled, traveler requests a charge suspension until refund is issued • Traveler has been provided an advance, must refund company and company takes on administrative job to track • Few corporations require the traveler to float the expense • For non refundable tickets company must manage the inventory – most common situation • Need information on refund process for BSP and Non-ARC airlines

  16. 5. Assess programming requirements for Defense Travel System and E-Gov Travel Service to accommodate TTL • Defense Travel System still evaluating the impact • CTO – May Require Contract Modification • DTS – System Change – Impact unknown at this time • E-Gov Travel Service - TTL will have minimal impact • CTO/TMC – minimal impact as TTL is loaded into Fare Rules for auto cancellation 16

  17. 6. Identify impacts of increased changes/cancellations to reservations and re-issued tickets i.e. travel agency fees (CTO/TMC) Data is not available to compute financial impact, estimates are: CTO/TMC fees CTO/TMC fees to issue a new ticket – average fee $27.36 (domestic) DTMO - $20.00 Full Service - $10.00 Self Service Voucher fees Average voucher cost is $12.63 (domestic) YCA_CA shift $157 average savings from YCA to _CA

  18. Implement Penalty Fee Findings

  19. 1. Assess overall cost impact of penalty fees - Notional • Penalties • Assume 4,000,000 round trip tickets are issued • Estimate for $50 and $100 per ticket penalty fee • Consider - No Show Fee vs Cancellation Fee 19

  20. Impact of TTL and Penalties CTO/TMC Fees Voucher fees YCA-CA shift Change and Cancellation Penalties Additional considerations: Administrative and traveler time costs – undetermined Delinquency impact on agencies and IBA holders 20

  21. Discuss findings • Next Steps

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