American Express's Bulk Purchase of Airline Seats Sets New Trend in Corporate Travel

Strategic Insights -

American Express is making a significant foray into the world of corporate travel by purchasing airline seats in bulk from Virgin Atlantic Airways and its partner, Continental Airlines. This move is expected to create new opportunities for corporate travelers, offering them discounted fares on a range of routes between the United States and London. The deal, which is reportedly worth millions of dollars, marks a new trend in corporate travel, where large travel companies are buying tickets in bulk to resell to clients.

According to Melissa Abernathy, a spokeswoman for American Express, the discounted fares, estimated at 25 to 30 percent, are significantly lower than what most corporate clients could negotiate on their own. The seats will be sold as fully refundable unrestricted tickets to American Express's corporate clients, with some made available to the company's retail travel agency network for sale to individuals.

Not all large corporate travel companies are jumping on the bandwagon, however. Travis Tanner, chief executive of the Carlson Wagonlit travel agency chain, is skeptical about the value of bulk purchasing airline seats. "We haven't seen yet where that creates any greater value," he said. Carlson Wagonlit has instead opted to contract for volume discounts without purchasing the seats outright.

Other companies, such as Rosenbluth International, have been negotiating bulk purchases for clients for about three years, but have turned down similar deals with Continental. However, American Express's deal may be a bellwether for future arrangements between airlines and large corporate travel companies.

Key Takeaways:

  • American Express is purchasing airline seats in bulk from Virgin Atlantic Airways and its partner, Continental Airlines, marking a new trend in corporate travel.
  • The discounted fares, estimated at 25 to 30 percent, are significantly lower than what most corporate clients could negotiate on their own.
  • The seats will be sold as fully refundable unrestricted tickets to American Express's corporate clients, with some made available to the company's retail travel agency network for sale to individuals.
  • Not all large corporate travel companies are jumping on the bandwagon, with some, such as Carlson Wagonlit, being skeptical about the value of bulk purchasing airline seats.
  • Other companies, such as Rosenbluth International, have been negotiating bulk purchases for clients for about three years, but have turned down similar deals with Continental.
  • American Express's deal may be a bellwether for future arrangements between airlines and large corporate travel companies.

Statistics:

  • 25-30% discount on fares offered by American Express
  • Millions of dollars worth of deal between American Express and Continental Airlines
  • 1-year time period over which the seats will be sold
  • 2.6 million square feet of the main terminal at the new Kuala Lumpur international airport
  • 25 million passengers per year capacity of the new Kuala Lumpur international airport

Sources:

  • American Express spokeswoman Melissa Abernathy
  • Norman Sherlock, executive director of the National Business Travel Association
  • Travis Tanner, chief executive of the Carlson Wagonlit travel agency chain
  • Patty McMenamin, spokeswoman for Rosenbluth International
  • Dave Messing, Continental spokesman