American Airlines and global distribution system (GDS)
Sabre on Monday, 24 January announced that they would return to the bargaining
table in a good-faith effort to attempt to reach an agreement over their
contract dispute.The parties have set 1
June as a date by which they would reach agreement or resume their legal
battles.Business Travel Coalition (BTC)
applauds this development, but cautions that this pause in litigation does not
eliminate the broader threat to consumers of being denied full access to
airfare and ancillary fee information and to comparison shop among competing
airline offers.A positive outcome for
consumers will fully depend on travel management companies (TMCs), corporate
travel managers and consumers continuing to express their preferences to GDSs
and airlines regarding their distribution system needs.
BTC and most others in this debate neither oppose ancillary fees nor direct-connect strategies. However, hidden ancillary fees and incomplete, untested and risky single-supplier direct-connect solutions combine to represent a dangerous and misguided distribution future for our industry. The cost, resourcing and management requirements for some direct connect proposals in the marketplace for TMCs is a formidable barrier in this equation. Moreover, the managed travel community out-and-out rejects the concept of disintermediation of the travel-purchasing environment; there is too much value generated by the current distribution system model to not protect and build upon it.
TRAVEL DISTRIBUTION TECHNOLOGY CHOICES
There is simply no technological substitute for GDSs at this time; Extensible Markup Language (XML) has been in general use for more than ten years, but despite its availability through GDSs, uptake by airlines for distribution purposes worldwide has been virtually non-existent. Solutions from newcomer-niche players can, to some degree, reintegrate data from individual airlines’ direct-connect “pipes” for TMCs, but that should not be confused with innovation or efficiency, nor does it support the front, mid and back office accounting processes critical for corporate managed travel programs.
Likewise, the XML solution really does not address a core and necessary capability to secure the lowest possible airfares that TMCs are required to accomplish on behalf of their customers. Very often the optimal fare for a traveler is a combination of different airlines for a single itinerary. Unfortunately, some of the XML-based approaches that are being pushed don’t do this. GDSs rely on filed fare information across all airlines using public and private fares to find the lowest fare alternatives. What’s more, ATPCO OC and the IATA EMD, as pricing and payment mechanisms for ancillary fee sales, and the fact that all the major GDS are very close to completing the technology required to sell the ancillary items from the TMC agent or corporate online booking tool screen, are further evidenced by the recent announcement that Expedia has signed a distribution deal with US Airways which includes ancillary services.
This of course is more than just an airline issue. Worldwide supplier schedule, price and inventory data-feeds are transmitted through the “front doors” of GDSs from hundreds of airlines, scores of rental car companies, 100,000 plus hotels, numerous rail and ferry companies and thousands of other suppliers. Out the “back doors” flow normalized data for comparative-display for use by tens of thousands of travel agencies, hundreds of thousands of corporate online booking-tool implementations around the world and billions of consumers with access to online travel-agency marketplaces.
MANAGED TRAVEL COMMUNITY SUPPORT
The independent distribution system anchored by the GDS is a successful, efficient and low-cost one that corporate, university, government, NGO and other major travel buyers on all continents support and willingly pay the costs of in the price of tickets they purchase. The managed travel community in particular has technology and business-process requirements that cannot be satisfactorily met on required scales by any other solutions currently offered in the marketplace other than by GDSs. On this there is nothing to debate.
Managed travel needs include:
Financial: Can services and costs be compared on an apples-to-apples basis?
Duty of Care: Can travelers’ locations - especially on international trips - be accurately tracked? Can it be ensured that a predetermined threshold-number of travelers on the same flight is not exceeded?
Compliance: Can corporate travel policy compliance be verified and enforced?
Service: Is it easy for travelers to see all the travel options and find the best deals within corporations’ travel-policy parameters?
Virtually all air, hotel and rental car pricing is currently disciplined because suppliers know value-conscious leisure and business travelers are comparing offerings side-by-side every minute, every hour, every day. It is understandable why some suppliers would like to see total disintermediation and drive as many consumers as possible to supplier.com where comparative shopping, expert advice and corporate travel policies are not available. However, that is not in the interest of the leisure or corporate traveler – either managed or unmanaged. Indeed, it’s not in the long-term interest of the airline industry either, if it seeks to remain deregulated.
One only has to look at the current state of play with respect to ancillary fees to foresee difficulties that could lie ahead in a disintermediated and content-fragmented environment. Airlines currently refuse to provide these fee data to travel agencies; therefore, consumers cannot see and compare the total cost of air travel efficiently and before a purchase decision is taken. Importantly, ancillary-fee components, as a growing percentage of overall air travel costs, are not effectively price-disciplined because consumers cannot view them on an apples-to-apples basis across multiple airlines’ offerings. This runaway pricing situation with ancillary fees is a good proxy for problems that would lie ahead in a disintermediated travel-purchasing environment where all manner of content is fragmented and comparative shopping is substantially degraded.
A CALL FOR TRUE COLLABORATION
The managed travel community as well as consumer advocacy organizations around the world will support an airline ancillary-fee financial model along with strategies that enable airlines to offer traveler-authenticated, customized offerings, including through direct-connect systems. However, consumers, and those responsible for managed travel programs, will require no less than (1) complete access to fares and fees, (2) consumer control over the ability to efficiently comparison shop, and (3) the preservation of low-cost and efficient travel distribution system work-flow processes.
There is little doubt that many enlightened airlines will see the strategic wisdom in working collaboratively with supply-chain stakeholders, including corporate travel managers, to build out a technology platform and overall stakeholder business model that can provide sustainable airline industry profitability while meeting the needs of all other participants.