Ahead of the Business Travel Show, Ian Skuse, Partner of Blake Morgan, an ABTA Partner reflects of the challenges for Travel Management Companies

2017 was an incredibly busy year for my legal team which help clients ranging from airlines and the travel management sector.

There was a significant merger and acquisition activity, as the sector consolidates into fewer bigger players. Many smaller and mid-sized TMC's had good offers for their businesses and there was no shortage of takers, with some serial offenders building up the scale of their TMC businesses over relatively short periods.

On the ticket distribution side, IATA's NDC business model encouraged bookings direct with airlines or the payment of GDS fees, which has changed the distribution model and online offering. First off was Lufthansa, shortly followed by BA and Iberia and then Air France/KLM. The GDS and the airlines seemed unprepared for these changes, and the new systems seem to disadvantage smaller TMC's by requiring additional fees or the means to book direct.  These structural changes have a ripple effect on a variety of contracts between the TMC and its customers and with suppliers and intermediaries, all of which will need review. 

2017 also saw preparation for the Payment Services Directive (2) which came into force on 13 January 2018.  It looks like many business travel transactions on corporate cards will be outside of the scope of these new regulations, meaning that for certain business cards, surcharges can continue, provided transaction costs justify this. 

Also in 2017 globalisation with networks such as Radius and Globalstar has enabled TMC's to offer truly worldwide services to larger corporate customers, despite their multi-jurisdictional requirements, and emphasis on GDPR and other new regulations coming from Europe.

Airlines generally had a good year in 2017 with some exceptions such as the loss of Monarch and Air Berlin. In the passenger claims market for flight delays, airlines had a significant victory in the European Court (Peskova v Travel Service). The case found that a bird strike was an extraordinary circumstance excusing the payment of the usual compensation, as birds are not linked to the aircrafts operating system and not inherent in the normal exercise of the airline’s activity and outside of its control. This is a market where airlines’ focus is on pushing back in operational areas where claims companies are seeking to expand the scope of the EU Regulation.

Looking ahead to challenges in 2018

GDPR
For 2018, all eyes are focused on GDPR. Business travel is particularly exposed to the retention and processing of traveller data and profiles from the corporate client to the TMC and on to suppliers and intermediaries. Entities such as the GDS process vast amounts of traveller data, with storage facilities outside of the EU. Smart TMC's will be carrying out audits and reviewing their contracts with their customers, intermediaries, suppliers and others holding or processing data and will need to beef up their liability and indemnity provisions to protect against large claims and regulatory fines. There could be a new market for insurers, but this may be at a substantial cost.

Travel Management service agreement reviews
2018 will see more TMC's looking to review their Travel Management Service Agreements with their clients. Simply charging booking fees without a contract is asking for trouble. I also expect larger corporates to come up with agreements passing liability for data protection and other aspects of the supply chain to the TMC.

Brexit
Finally, Brexit will continue to cause uncertainty 2018. Airlines and airports are desperate to get certainty about freedom to fly and to operate their route networks without the need for new bilateral rights with the countries they fly to. Poor exchange rates will continue to make it cheaper for overseas buyers and winners might be those buying in GBP using their foreign currency.

Otherwise I predict another great year for M & A activity in the TMC sector, with particular interest from overseas markets and private equity. New technology is likely to impact on how travel arrangements can be advertised, booked and paid for, whether through a traditional TMC or by self-booking tools.

Visit ABTA at the Business Travel Show on 21-22 February on stand B2304.