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Buyers try new ways to fly: airlines using tiered discounts, shunning reverse auctions.

Article Excerpt
Airlines, struggling through a prolonged downturn, and corporate travel buyers--tasked with cost-cutting mandates even as business travel volumes decline--are taking a fresh look at such unconventional contracting models as tiered discount programs, shared-risk arrangements and reverse auctions.

Though such ideas today are not necessarily attractive to both sides, they will gain more traction "when the dust settles and the cycle changes," according to Larry Restiano, director of the customer value program and consulting group for American Express supplier relations. "For customers with the right travel policy and an ability to drive share, and for airlines looking for more share than the marketplace might dictate, there are possibilities."

Tiered discounting programs, while conceptually not new, recently have gained more support, specifically from American Airlines and some of its corporate accounts. Delta Air Lines and US Airways also said they have been using tiered programs. Under a tiered scenario, an airline's corporate client agrees to deliver a certain volume or market-share in exchange for a point-of-sale discount, similar to traditional corporate discount programs. That percentage discount level then adjusts along a pre-set schedule, usually quarterly, depending on how far above or below the account performs against the baseline goal.

"It is...

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