industry advisory

EU Business Travel Industry Advisory – Sweeping New Airline Distribution Changes Would Imperil Travel Management

This advisory is intended for UK / EU corporate travel managers and TMC executives as well as corporations that have substantial travel activities in Europe.

Business Travel Coalition
London, England
23 January 2007

In the US in 2006, new long-term CRS-airline agreements ushered in major distribution system changes that impacted all industry participants. While there was much anxiety during the summer months about how reform would ultimately take place, who would bear the costs and what they would receive in return, many travel managers did not simply sit back and let others dictate new terms to them.  Instead, they actively engaged and made their views forcefully known to both airlines and CRSs. As a result, proactive customers succeeded in achieving reasonably balanced changes that protected their corporations’ interests and built upon advances to professional travel management made over the last 25 years.

Based upon BTC sources and research, some airlines in Europe are planning to unveil proposals to shift distribution costs swiftly and surely to end customers and fragment content in the near term, and completely marginalize trusted players in business travel distribution in the longer term. What’s more, these airlines have done minimal outreach to the industry and to business travelers to explain their intended moves.   Indications are that new programmes will be announced with little or no discussion and with little or no lead time.  Unless the industry demands its seat at the table soon, these unilateral reforms will become a dangerous reality. 

Such ambitions are significantly more far reaching than US airlines’ efforts in 2006 to revamp the distribution system to their benefit. British Airways appears to be in the vanguard of reengineering distribution at the expense of its most valuable customers as multiple CRS agreements are up for renewal at the end of February. Instead of advancing the clear consumer preference for consolidating travel purchasing through one efficient source, BA seems intent on reversing the march of modern travel management. BA wants to charge customers for distribution costs they are already paying for in the price of airline tickets, and then fragment content to its further strategic advantage -- and to the corporate buyer’s detriment. 

Corporate buyers as well as TMCs unequivocally embrace the single channel approach (CRS) and its role in supporting a results-driven corporate travel program. And it’s not just about air travel. As Ron DiLeo, American Express Business Travel SVP and head of corporate travel in Europe, the Middle East and Africa, told The Transnational, “One of the things we have asked our European customers to consider, as part of identifying a hotel as a preferred supplier of theirs, is to require them to be in the global distribution systems. We all do workarounds, but ideally everyone would be in the GDSs.”

European airlines seeking to change the distribution structure to their long-term advantage will likely offer their largest customers a ”Faustian Pact” wherein they would be made whole financially with respect to anticipated content fees in return for their implicit acquiesce in this distribution scheme. Of course, even these corporations will be asked to pay content surcharges in their next airline contracts. Encouraging accelerated content fragmentation, and accepting a distribution cost-transfer, places all corporate travel buyers on a slippery slope where what could be transferred next might be the cost of credit, airport service costs and pilot pension expenses. As a matter of principle, customers should not pay twice for the cost of distribution, or any other cost, already reflected in the price of their tickets.

Importantly, CRSs should not repeat their rather anemic outreach to end corporate customers in the US in 2006 the consequence of which was less informed, and therefore, less engaged corporate travel managers. CRSs need to step up to the plate and articulate their visions for the future of travel distribution in Europe including what steps they intend to take to protect their corporate customers’ interests. 

In collaboration with major European travel associations, BTC is reaching out to industry stakeholders with lessons-learned from distribution system reform in the US to ensure painful mistakes are avoided in Europe and that travel distribution remains efficient and affordable. To this end, an Industry Position Paper is being developed by European travel industry participants utilizing wiki, a collaborative, peer review-enabling technology. All travel industry executives are welcome and encouraged to participate in this highly dynamic and interactive process at http://btc.editme.com/.