Frequent-flier Programs

nkralev on May 15th, 2012

The Star Alliance’s 15th birthday this month reminds me that a global airline alliance is one of the most fascinating concepts in the history of commercial aviation. It’s also an example of the airline industry’s creative thinking aimed at increasing revenues. However, unlike some of the questionable practices I described in “Decoding Air Travel,” this one has dramatically improved the customer experience.

It’s fascinating for me personally, because it combines my two passions and areas of expertise, international affairs and air travel. In fact, what alliance executive teams do every day is nothing short of diplomacy. International negotiations and dispute resolution are two of their specialties, and a big part of their duties is selecting new members, not unlike NATO and the European Union.

When Star was formed in 1997, the idea was not only to represent its members’ best interests — that’s primarily the job of trade associations — but to boost business by feeding passengers from one carrier to another in the smoothest possible way. Soon, airline diplomacy began in earnest — first among alliance members, which after all are rivals in a fiercely competitive industry, and then with airports, transportation authorities and governments around the world. The other two global alliances are Oneworld and SkyTeam.

“Much of what we do is diplomacy,” Jaan Albrecht, Star’s former CEO, told me when I first met him in the alliance’s Frankfurt office in 2008. “We try to educate airports, publics and governments about the benefits that come from a network like ours.” Albrecht is now CEO of Austrian Airlines, a Star member.

The benefits for customers that come with an alliance membership are both tangible and intangible. The first category includes interline ticketing and check-in, harmonized schedules to provide seamless connections, worldwide lounge access, mileage-earning and redemption opportunities, as well as elite-status recognition across the alliance, and round-the-world and other special-fare products.

It’s also important to appreciate the intangible benefits. The most important to me is that the experience on an alliance’s various carriers is so similar and yet so different. I like the predictability created by consistent and aligned policies — knowing how things work and what to expect gives me comfort at the airport and in the air. At the same time, I love the individual touches that each airline adds to the travel experience, based on its national, cultural and even corporate uniqueness.

For example, Scandinavian Airlines and Thai Airways are both Star members, and technically there is no difference which one you are booked on — you will earn miles, check-in all the way through to your final destination and access their lounges anywhere in the world. But when you enter a lounge or board a plane, you will never confuse Scandinavian with Thai.

Critics of the alliance concept usually argue that consumers suffer, because closer cooperation among airlines leads to higher fares. They refer to special arrangements, known as anti-trust immunity exceptions, which are granted to some carriers so they can coordinate fares, schedules and inventory on certain routes. The largest members of the three alliances have received such waivers on intercontinental routes. Some have gone a step further, securing approval to operate certain routes as a joint venture. Price-fixing is illegal, so these carriers needed the exceptions to publish identical fares — and if you compare their tariffs, you will see they are indeed identical.

When granting the immunity, the Department of Transportation is careful to exclude routes on which the only existing service is provided by the carriers seeking the waiver — those exclusions are known as “carve-outs.” So the government is supposed to protect consumers, and it seems it’s doing its job. Overall, there is no question in my mind that airline alliances have had a positive impact on customers.

All three alliances have had troubles lately, as member-carriers have experienced hard times, filed for bankruptcy or disappeared all together. But that’s the nature of the airline business. My only criticism is that none of the groups has done a good job at reaching out to a broad audience to explain and promote the benefits I described above.

Here is the current membership of each alliance:

Star Alliance

Adria, Aegean, Air Canada, Air China, Air New Zealand, All Nippon, Asiana, Austrian, Blue1, Brussels, Croatia, EgyptAir, Ethiopian, LOT Polish, Lufthansa, SAS, Singapore, South African, Swiss, TAM, TAP Portugal, Thai, Turkish, United, US Airways.

Accepted future members: Copa, Eva, Shenzhen, TACA.

Oneworld

AirBerlin, American, British, Cathay Pacific, Finnair, Iberia, Japan, LAN, Qantas, Royal Jordanian, S7.

Accepted future members: Kingfisher, Malaysia.

SkyTeam

Aeroflot, AeroMexico, AirEuropa, Air France, Alitalia, China Airlines, China Eastern, China Southern, Czech, Delta, Kenya, KLM, Korean, Tarom, Vietnam.

Accepted future members: Garuda Indonesia, Aerolíneas Argentinas, Saudi Arabian, Middle East, Xiamen.

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nkralev on April 30th, 2012

American Airlines has finally decided to take advantage of the problems many United Airlines fliers have experienced since the merger with Continental Airlines was completed on March 3. In an extremely rare move, American is now offering conditions-free top-elite status match to United’s most loyal customers.

Having read and heard about many United customers’ troubles after the carrier adopted Continental’s reservations system — and having encountered some problems myself — I e-mailed American spokesman Tim Smith on March 16. Smith has been the best PR person to deal with at any airline since I started writing my column in the Washington Times in 2008. I asked him whether American had any intention of capitalizing on United customers’ dissatisfaction by stealing some of them away through a status-match offer.

He involved his colleague Stacey Frantz, who works directly with American’s AAdvantage program. She said she couldn’t comment on “marketing strategies,” but it was apparent from her and Smith’s messages that American wasn’t considering such a move at the time. More than a month later, however, it decided to follow my suggestion — not that I’m taking any credit.

When the promotion first started last week, elite United fliers at all levels were eligible, but on Friday, American decided to limit participation only to United Premier 1K members, the highest published level. A memo was sent out to customer service agents on that day. So if you are a 1K, you can get Executive Platinum status on American.

The carrier is not advertising the promotion, so you need to call AAdvantage Customer Service to request an e-mail outlining the offer. Status is valid through February 2013, and all you have to do is submit proof of your current elite status with United. On the rare occasions when American has offered matches in the past, it has extended challenges, meaning you had to fly a certain number of miles during a certain period to qualify. There are no conditions this time. Challenges to Executive Platinum have been even rarer than to other levels.

But is Executive Platinum better than 1K, and is American better than United? Let’s review.

Executive Platinum advantages

This is truly American’s top elite level. Concierge Key, the unpublished super status that George Clooney’s character had in “Up in the Air,” is awarded only by invitation to very few hyper-frequent and high-paying travelers. In contract, United’s Global Services status has been given to so many people — albeit still “by invitation” — that it has somewhat devalued the 1K level.

Executive Platinum members are the only ones eligible for complimentary domestic upgrades that clear as early as 100 hours before a flight — at United, all elite fliers are, and lower-level elites on full-fare tickets trump 1K members on discounted fares. United also aggressively sells domestic upgrades at check-in for as little as tens of dollars to non-elites, while elites linger on waiting lists. As a result, the upgrade rates for 1Ks have gone down significantly.

As for international — or systemwide — upgrades, American is much more generous than United. Executive Platinum members get eight of those so-called eVIP certificates each year, compared to six for 1Ks. More importantly, on American, they are valid on all published fares, while United excludes its five lowest booking classes — S, T, L, K and G — requiring at least W class. That means you need to pay hundreds of dollars more on W class, and if your upgrade doesn’t clear, you’ve wasted your money.

American has the best domestic First Class soft product. It’s the only airline to still use linens and menus during meal service, as well as pillows and blankets on transcontinental flights. United used to have linens, pillows and blankets before the merger with Continental, but it lost them. The food also tends to be better on American. Many of its domestic planes have no in-flight entertainment at all, though wi-fi has been installed on a big part of its fleet.

As an Executive Platinum, you get Emerald status on the global Oneworld alliance, which gives you access to First Class lounges on foreign Oneworld members, such as Cathay Pacific and Qantas. The Star Alliance has only two levels, instead of Oneworld’s three, so United Gold, Platinum and 1K members get the same access to Business Class lounges.

American has dedicated agents working on the Executive Platinum phone line, and they are not only the best trained agents in the airline industry, but also the ones given the most authority and discretion to help customers in any way possible, even if that means sometimes bending the rules. United’s so-called 1K Desk is not really a dedicated desk — those agents service all callers, but 1Ks get priority in the queue.

No one knows if any of the above might change as a result of American’s Chapter 11 restructuring or in a potential merger with US Airways, but this is where things stand right now. For me, American’s main disadvantages are the limits of Oneworld, whose size is about half the Star Alliance’s, the hefty fuel surcharges imposed on award tickets with British Airways flights, and those old McDonnell Douglas planes American still flies. In addition, if you live in a United hub, it might be hard to give up nonstop flights to many destinations in favor of connections on American. That said, American often offers very low fares out of United hubs, while United does the same out of American hubs.

Premier 1K advantages

United offers 1K members so-called regional upgrade certificates, which can be used to confirm an upgrade on North and Central American flights at the time of ticketing — just like using miles or systemwide upgrades. Unfortunately, this year, United reduced the regional certificates from eight to four a year. It also eliminated the two upgrades million-mile fliers used to get annually. It’s worth noting that the Executive Platinum exclusive perk of complimentary upgrades on American compensates for the lack of certificates to a large extent, though those can be confirmed only within 100 of departure.

United offers instant upgrades without requiring any “instrument” to 1Ks on domestic M fares — all elites get the same benefit on the higher Y and B fares — as soon as the time of ticketing. The inventory is controlled separately and is not the same as regular First Class availability (it books in PN class).

United waives same-day confirmed changes on domestic flights for 1Ks, while American doesn’t for Executive Platinums. United also waives award booking, change and redeposit fees on tickets issued with 1K members’ miles — regardless of who the passenger is. American does so only if the Executive Platinum member is the passenger.

United allows stopovers on round-trip international award tickets. American permits those only in U.S. gateways — the city where you leave or arrive in the United States.

The biggest advantage United has is its membership in the Star Alliance, which has 25 member-carriers, including some of the best in the world, such as All Nippon, Asiana, Singapore, Air New Zealand and Swiss.

The biggest problem with United is that its new management doesn’t value long-term loyalty nearly as much as American’s — or United’s previous leadership team, for that matter. Unfortunately, my prediction in 2010, based on warnings from departing United executives at the time, came true after the merger was finalized. The current management apparently cares much more about making a quick buck. It prefers to sell an upgrade seat from Seattle to Washington Dulles to a non-elite flier for $99, as reported on FlyerTalk by a passenger who took advantage of that offer, rather than give the seat to a 1K member who spends tens of thousands of dollars on United a year. So much for complimentary upgrades.

At the end of the day, the choice is yours. If I’ve missed anything on either airline, feel free to let me know.

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nkralev on February 15th, 2012

How do you make sure a whirlwind trip round the world in just a week doesn’t wear you out and affect your productivity? Things went surprisingly well for me last week, as I flew from Washington to Munich to Paris to Bangkok to Islamabad, back to Bangkok, on to Seoul and back to Washington, so I thought I’d share the experience.

The first thing I have to say is that I don’t drink coffee or take sleeping pills. My only medicine when it comes to air travel is securing the best comfort and luxury I can — I need my flat beds, gourmet meals, lounges with showers, and sometimes even chauffeur-driven cars to connecting flights. I certainly can’t pay for them, but we’ll come to that momentarily.

Second, if you are going to circle the planet in a week, fly to the east, not the west. As much as I dislike those overnight flights from the U.S. East coast to Europe, because they are too short to get decent sleep, moving in that direction is much better in terms of adjusting to time differences. I was never jet-lagged during or after my journey.

The trip, which was blessed by the State Department, was part of the final research phase for my upcoming book on the U.S. Foreign Service, “America’s Other Army,” during which I visited the U.S. embassies in France, Thailand and Pakistan. Overall, I’ve visited almost 60 diplomatic and consular missions for this project, which began with my 2004 newspaper series, and interviewed more than 600 diplomats and other officials.

I used frequent-flier miles, but instead of getting what would have been a very expensive and restrictive round-the-world ticket, I issued two one-way tickets: One in First Class from Washington to Asia over the Atlantic, with a 24-hour stop in Europe, and another one in Business Class from Asia back home over the Pacific.

As I wrote in my first book, “Decoding Air Travel,” the best use of miles is for premium cabins. But why did I book First Class on the outbound for 80,000 miles, and not Business for 60,000? When I use miles, I make an effort to fly on the world’s best airlines. Of those, on my departure date Lufthansa was the only option, but it has some of the worst Business Class seats in the civilized world. First Class, on the other hand, is quite good, except for the small TV screen — that’s not the case with a few aircraft that have the new First seats with much bigger screens.

The more important reason for choosing First Class, however, was Thai Airways, which operates its Paris-Bangkok flights on planes leased from India’s Jet Airways that have private cabins with sliding doors in First. I had flown in one of those cabins from Tokyo to Bangkok a couple of months earlier and wanted to experience a much longer flight in such luxury. In addition, Thai Airways offers First Class passengers complimentary full-body massages in its Royal Orchid Spa at the Bangkok airport.

My Lufthansa flight from Washington to Munich was excellent, as expected, with top-notch flight attendants, which can’t be said of the ground staff at Dulles airport. I liked the new design of the pajamas they give First Class passengers. The food was consistent with my previous experiences, including the signature black caviar and several other appetizers. Although the seats are rather old by now, I always found the bed very comfortable.

I broke my habit of not having breakfast on overnight flights to Europe so I could have enough time for a shower in the First Class lounge in Munich before my connecting flight, since I had a full schedule as soon as I arrived in Paris. When it was time to board, I was whisked to my Paris plane in a Porsche.

The ambassador to France, Charles Rivkin, one of the best non-career ambassadors I know, couldn’t have been a better host, opening the doors of both his embassy and residence, and having a dinner in my honor, according to the elegant menu, with some of the top French journalists. My 24 hours in Paris were very productive, thanks to everyone I met, and especially spokesman Paul Patin, who put together my schedule at a very short notice.

It was time for the 11-hour flight to Bangkok, which didn’t disappoint, except for turbulence during most of it — and a 90-minute delay because of a flight attendant who fell ill just as we prepared to take off. After great meals, three films and a few hours of sleep behind closed doors, I was met by a Thai representative upon arrival in Bangkok and driven in a gold cart to the First Class lounge, where I took a shower before heading to the embassy.

Another full day of meetings and interviews followed, including two sessions with Ambassador Kristie Kenney, a career Foreign Service officer and one of the most capable, according to her colleagues — I hadn’t met her before. With the help of embassy spokesman Walter Braunohler, I covered enough ground with employees in several embassy buildings. The only slightly unpleasant part of the day was the 90°F temperature, especially after 20°F in Paris just hours earlier.

There was no time for a massage at the airport in the morning, but I managed to squeeze one in just before I flew to Islamabad in the evening. Unlike my plane from Paris, most Thai aircraft have old unimpressive seats in Business Class — and no First Class. Still, the food and service were up to standard, and I got some sleep before my 10:30 p.m. arrival in Pakistan.

My visit to Embassy Islamabad was the longest part of the trip — two full days and nights — and I was hosted by Ambassador Cameron Munter, whom I’ve known for eight years and consider one of the most brilliant serving U.S. diplomats. I also think he has possibly the most challenging job in the Foreign Service. He has assembled an outstanding team at the embassy, which actually surprised me, given the perception in Washington that few good officers volunteer to serve in Pakistan.

Munter went out of his way to accommodate my research needs, as did his chief of staff, Scott Kofmehl, with help from embassy spokesman Mark Stroh and many others.

On my flight back to Bangkok, I managed to get one of the embassy employees on a coach ticket into Business Class, thanks to an oversold Economy cabin. I had a long enough layover in Bangkok for a light breakfast in the lounge, some work and a foot massage, which is offered to Business Class passengers.

Then my Thai flight to Beijing had a significant mechanical delay, causing me to miss my connection to Washington on United Airlines.

While the Thai staff in the Business lounge scrambled for two hours to find an alternative way to get me home, I decided to apply in practice one of the things I preach in “Decoding Air Travel”: How to turn a negative airline situation into a positive one. In any case, I was looking at an arrival in Washington more than 12 hours later than scheduled, so the goal was to minimize my delay and stay in Business Class — preferably on an airline that has fully flat beds.

Korean Air met those requirements, and I added to my list a very good airline I’d never flown before — in fact, the 52nd carrier on that list. Korean Air is not in the Star Alliance, but to their credit, the Thais agreed to pay the Koreans a full Business Class fare in order to accommodate me, even though I was on an award ticket. They also agreed to let me spend the remaining 10 hours before my flight to Seoul in the First Class lounge, where I had a great lunch, did more work and slept for a few hours in a real bed, in one of their sleeping rooms.

Of course, they wouldn’t have done any of those things had I not been insistent — actually, a pain may be a better description. But I felt it was their fault, and they were responsible for rectifying the situation. I also knew they wouldn’t offer any compensation — Asia doesn’t have the rules Europe, and to some extent the United States, have — so I had to get whatever I could in other forms.

To sum up, my weeklong round-the-world trip didn’t wear me out — and now you know why.

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nkralev on December 7th, 2011

While most U.S. airlines have learned to be relatively honest with their best customers, many of their foreign peers have not yet realized that travelers are not as stupid as to fall for their PR spin and questionable practices.

It’s time for those carriers to wake up to the fact that it’s the end of 2011, and much in the airline industry is rather transparent to those of us who pay attention. Trying to persuade customers that bad news is actually good may be an essential PR trick, but in today’s hyper-connected world, it’s not hard to figure out someone’s true intentions.

Among the airlines still using the old playbook is British Airways, which is surprising for such a major and quite good global carrier. Last month, it drastically devalued its award redemption chart, but it tried to present that negative change as a positive one.

The clue came with the usage of the world “revitalizing” to describe the changes to the carrier’s frequent-flier program, Executive Club. At least they steered clear of “enhancement,” which is what many U.S. carriers used in the past, inviting much derision from frequent fliers.

British Airways announced a few weeks before the changes took effect that they were coming, but what those changes actually were going to be remained a secret until the very day they were implemented. That move showed gross disrespect for the company’s best customers who deserved much better for their loyalty.

In contrast, many U.S. airlines and hotel companies publish their new charts, as well as other program changes, months in advance. One recent exception was Delta Airlines, which didn’t really have an official global chart for more than a year, until it finally published one in February, effective immediately — actually, much of it was already in use unofficially.

Apparently, British Airways was afraid that many Executive Club members would rush to burn their miles before the last change — after all, there were plenty of miles on its books, partly thanks to its giving away 100,000 miles as a credit-card sign-up bonus. So it said that the number of award miles required for “97 percent of our routes” will stay the same or even go down.

In fact, that turned out to be false. In an attempt to save face when the new chart came out, the airline said it had meant 97 percent of the nonstop routes out of London.

While some of those nonstop routes have indeed become cheaper, there are many Executive Club members outside London who earned their miles hoping to use them for trips to cities other than London. Unfortunately, they are the big losers — the increases in those cases can be over 80 percent. Substantial premiums have been added to connecting and partner flights across the board.

Those changes, along with the huge amounts British Airways charges in taxes and fees on award tickets, have drastically devalued its miles. Just this week, I booked award tickets to Asia for two clients, and I really wanted to help them burn their British Airways miles. However, that particular award had almost doubled in price, and the taxes were over $1,200 per person. So I booked with another airline for nearly half the miles and $85 in taxes.

British Airways in certainly not alone in thinking that customers are stupid. Air Canada quietly started charging fuel surcharges on some partner award tickets earlier this fall. Did it hope no one would notice that they were asked to pay hundreds of dollars more than before? Finally, after Air Canada was exposed on various blogs, it admitted what it was doing and said that even more partner flights would be included in the new program.

And then there is the scandalous behavior of the United Arab Emirates’ Etihad Airways last month.

For two days in October, it advertised a First Class fare from Spain to Australia on its website for less than 400 euro. According to Spanish media reports, about 300 people bought tickets. The first of them traveled 10 days later, when an agent in Brussels noticed the fare and alerted the appropriate department. It was then determined that the fare was a mistake, and the passenger was downgraded to coach without any compensation. The rest of the tickets were canceled.

I’ve written about mistake fares before, but the issue here is not whether Etihad was wrong not to honor the tickets. I said scandalous because of a letter the airline sent to the passengers who decided to put up a fight and wanted to defend their rights through the media.

Etihad hired a law firm in Spain that in no uncertain terms threatened those customers in writing with litigation, if they dared to go to the media. The last time I checked, Spain was a democracy with freedom of speech, and the United Arab Emirates was something quite different. I don’t believe anything has changed since.

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nkralev on September 6th, 2011

When was the last time you used a travel agent? I asked that question in my book “Decoding Air Travel.” Last month, President Obama asked it, too, and the American Society of Travel Agents speedily protested. So let’s examine the modern — or perhaps not modern enough — travel-agency system and the value it brings.

Many young people don’t even remember the time when using a travel agent was the only practical way to book a trip. While many consumers today book their own travel, using travel agencies is still quite prevalent in the corporate world.

However, many business travelers I know are unhappy with their company’s travel agency. It’s clear the current system isn’t working well anymore for a variety of reasons. Without taking sides, let’s look at those reasons from the perspective of travel agencies and their customers.

If you are a traveler — for work or pleasure — you probably have at least one of the following problems with travel agents:

• They don’t always offer you the lowest fares or best itineraries;

• They only book tickets and leave the rest to you;

• They know little, if anything, about frequent-flier programs, elite status, miles and upgrades;

• They are not familiar with on-board products and don’t know which airlines have flat beds in Business Class;

• They don’t travel frequently, if at all, but sit in an office and rely on computers to tell them what to do;

• They are inflexible when schedule changes affect your tickets;

• They don’t take care of all your travel needs.

As the air travel system has become more complex and customer-unfriendly in recent years, the needs of the modern traveler have grown and diversified enormously. The traditional travel agency model has so far survived the Internet threat, but its relevance has diminished significantly, because it hasn’t caught up with the changes in travelers’ needs and demands.

Booking a ticket is no longer even close to enough. You have to be able to compare fares and products of different airlines and alliances, and to offer your customers the options that provide the best combination of price, comfort, convenience, maximizing frequent-flier miles, progress toward elite status, best upgrade opportunities and the most effective use of elite benefits.

For this to happen, you need a wealth of knowledge, which most travel agents don’t have. For example, you need to know what booking classes are eligible for upgrades and which don’t earn miles. It’s certainly unreasonable to expect one person to be familiar with each airline’s requirements, but there are ways to deal with that — an agency can have employees or teams specializing in the different alliances or groups of carriers.

Probably the two most important and consequential weaknesses of the agency model are its use of limited data and booking sources — often just one Global Distribution System (GDS) — and its almost exclusive reliance on automated systems to do all the work.

If you’ve read my book, you already know more than the average travel agent — and you realize why those two weaknesses result in millions of customers paying much more than they could be. Automation is no doubt vital for the travel-booking process, but given the intricacies of airfares and the tricks airlines have adopted to “maximize revenues,” sometimes we need to rely more on our brains than on machines.

One other thing to keep in mind when dealing with a travel agency is whether it has contracts with specific airlines. Airline commissions were discontinued years ago, but large agencies still have contracts. How does that affect you? The purpose of those contracts, of course, is to encourage agencies to send more business to the respective carrier. If your agency receives its biggest commission from American Airlines, it might book you on American even if Delta has a lower fare.

Now let’s look at the above-described picture from a travel agency’s perspective. Most agencies don’t have the pull of American Express and Carlson Wagonlit, and they don’t receive airline commissions. They do get GDS kickbacks, as well as transaction fees for provided services directly from clients — about $35 on average, though some charge as much as $90.

For what you pay them, they have decided that it’s not worth more than several minutes of an agent’s time to work on booking you a ticket. Then how do you expect them to do more than letting the computer do all the work? Would you pay them more to take care of your upgrade and other needs? I suppose it depends on whether you trust that agent to do a good job. There is no point in paying for something that you later have to fix yourself.

So what’s the solution? Should everyone stop using travel agencies? Of course not — they do have a place in the travel industry. Many companies simply can’t handle their travel volume without outside professional help. At the same time, the gap between agency services and travelers’ needs keeps widening.

One solution could be for agencies to have teams dedicated to high-end, high-demand executives, who are willing to pay more for additional services. Some large agencies already have such teams, but their tasks usually don’t include creative ways to save on airfare or any of the frequent-flier services described above.

There is another solution, which was suggested to me by — ironically — travel agency owners last year. They shared my observation about the gap between what they do and what their clients want, and urged me to bridge it. How? First, by educating their clients in seminars and private training how to do for themselves what the agencies don’t offer. Clients who don’t have the time or patience to learn can ask me to provide those additional services to them.

So to bridge that gap, I started my company, Kralev International LLC. As one of my clients says, we can do your homework if you don’t have time to do it yourself.

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