Federal Acquisition Service U.S. General Services Administration December 2007 Airline Briefing City...

Federal Acquisition Service

U.S. General Services Administration

December 2007December 2007

Airline Briefing City Pair Program

Airline Industry Desired Changes and Government Findings

FY 2009 Solicitation

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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

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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

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Ticketing Time Limits (TTL)1. Evaluate the impact TTL would have on current booking and

ticketing practices including financial impact2. Develop a standard definition for TTL3. Impact of Continuing Resolutions on Government’s ability to

purchase tickets if TTL is implemented4. Evaluate ticket refund/reimbursement cycle-timeline along with

SmartPay card refund cycle-timeline and the impact on individually billed account card holders

5. Assess programming requirements for Defense Travel System and E-Gov Travel Service to accommodate TTL

6. Identify impacts of increased changes/cancellations to reservations and re-issued tickets i.e. travel agency fees

7. Assess overall cost impact Implement Penalty Fees

1. Assess overall cost impact

Action Items to Evaluate

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Ticketing Time Limit Findings

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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

1. Evaluate the impact TTL would have on current booking and ticketing practices including financial impacts

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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

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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

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Assuming a 7 day TTL ACTION

Reservation made months priorto departure

Issue ticket 7 days prior to departure

Reservation made 10 days priorto departure

Issue ticket 7 days prior to departure

Reservation made 7 days priorto departure

Issue ticket immediately or within 24 hours after reservation is made

Reservation made 6 days or less priorto departure

Issue ticket immediately or within 24 hours after reservation is made

Reservations not ticketed 7 Days prior are automatically cancelled

2. Develop a standard definition for TTL, continued

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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

3. Impact of Continuing Resolution on Government’s ability to purchase tickets if TTL is implemented

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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

4. Evaluate ticket refund/reimbursement cycle-timeline along with SmartPay card refund cycle-timeline and impact on individually billed account card holders

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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

Day 1-7 CTO’s/TMC’s process sales daily

Charges on IBA and CBA within

hours of ticket issueDay 7 Refunds processed by CTO’s/TMC’s

weekly – batched and sent to Airline Reporting Corporation (ARC)

Day 7-14 ARC validates refundsDay 14 Refunds batched and sent to

Visa/MasterCardDay 14-17 3 Day Process at Visa/MasterCard

Day 17 Refunds sent to banksDay 17-18 Refunds provided to IBA/CBA

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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

No. of Calendar Days from Closing Date

Suspension Procedure

30 Days Billing Cycle

0 Bill Released

21 Days Payment Cycle

46 Days Request payment from the individual cardholder on past

due account

55 Days Begin suspension process

61 Days Account may be suspended, unless otherwise directed by

the A/OPC

Source: Smart Pay Contract

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

DAYS CURRENT PROCESS 7 Day TTL

30 Days Billing Cycle Billing Cycle

21 Days Payment Cycle Payment Cycle

-7 Days Not Applicable Ticket Issued – CTO/TMC Transaction Fee charged

-5 Days SmartPay bill is sent to IBA SmartPay Bill is sent to IBA - Includes Ticket Charges and Transaction Fee

-4 Days Normally Ticketed - Trip Canceled(no impact with current practice)

Trip Canceled – Advise CTO / TMC to begin refund process. Transaction Fee still applies

0 Days IBA Holder receives Bill IBA Holder receives bill Ticket Charges and Transaction Fee included on bill IBA holder cannot dispute chargesBegin Voucher Process for Transaction Fee

+16 Days Bill due to Visa/MasterCard Bill due to Visa/MasterCard IBA holder must pay for ticket that is being refunded or be in default Pay Transaction Fee and Voucher Fee

+30 Days Next Billing Cycle closes new bill issued for current charges

Next Billing Cycle closes new bill issued for current chargesPrevious bill Past Due

+46 Days Not Applicable Request Payment from IBA holder on Past Due Account

+55 Days Not Applicable Begin Suspension Process

+61 Days Not Applicable Account may be suspended, unless otherwise directed by the A/OPC Suspension must be initiated

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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

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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

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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

6. Identify impacts of increased changes/cancellations to reservations and re-issued tickets i.e. travel agency fees (CTO/TMC)

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Implement Penalty Fee Findings

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1. Assess overall cost impact of penalty fees - Notional

Assume

5% tickets

Assume

10 % tickets

200,000 tickets 400,000 tickets

@ $50 fee $10,000,000

Cost to Gov’t

@ $50 fee $20,000,000

Cost to Gov’t

@ $100 fee $20,000,000

Cost to Gov’t

@ $100 fee

$40,000,000

Cost to Gov’t

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

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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

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Discuss findings

Next Steps

Federal Acquisition Service U.S. General Services Administration December 2007 Airline Briefing City...

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