January 5 - Future of Low Cost Travel Distribution At Stake


January 5, 2011, RADNOR, PA - Business Travel Coalition (BTC) today commented on the latest development in the battle for the future of low-cost, consumer-centered travel distribution as global distribution system services provider Sabre took steps to protect the interests of an independent travel distribution system from American Airlines’ (AA) attempt to impose a new model that heaps huge new costs on the travel industry and diminishes comparison shopping for consumers. According to its press statement, Sabre has downgraded AA’s offerings in most of its displays, eliminated booking fee discounts and delivered notice of termination of its agreement with AA.

This development puts to rest that this battle, which began with AA’s unprovoked assault on Orbitz late last year, is not a skirmish between AA and online travel agencies, but rather an all out war for the future of both airline and all travel distribution in the U.S. and around the world.

At risk are important benefits generated by the current distribution system including:

(1) robust comparison shopping among airlines’ offerings for consumers as well as corporate travelers using online booking tools;

(2) efficiencies inherent in one integrated workflow process of shopping, purchasing, capturing data, assuring travel policy compliance and auditing for products and services from more that 100,000 airline, hotel, rental car, ferry and rail companies as well as other suppliers; and

(3) transparency and pricing discipline that tens of thousands of independent online and offline travel agents bring to all offerings on suppliers’ own websites and other distribution channels.

“The stakes in this conflict are clear: either an improved airline industry and distribution marketplace centered around the consumer, or one that subordinates consumer interests to the self-serving motivations of individual airlines endeavoring to shift costs and impose their wills on consumers and the other participants in the travel industry,” stated BTC Chairman Kevin Mitchell. “Single-supplier direct connect proposals, like the one advanced by American Airlines, can significantly increase costs for all distribution participants and cause massive fragmentation of airfares and ancillary fees depriving consumers of the ability to compare the total cost of air travel options across all airlines.”

Interim results from a currently open BTC survey of corporate travel managers point to an overwhelming rejection of AA’s attempts to change the distribution system model to its unique advantage while driving corporate travel departments’ costs up and undermining their ability to adequately service their travelers.

• 94% of surveyed travel managers indicate access to all airfare and ancillary fee information is either indispensably important or very important for their corporate managed travel programs.

• 87% believe that in advocating its Direct Connect strategy AA is endeavoring to secure higher fares-paid by undermining the independent travel distribution system and corporate managed travel programs and by driving more consumers to aa.com where comparison-shopping, expert advice and corporate travel policies are non-existent.

• 88% of travel managers who oppose AA Direct Connect believe that the program will result in fragmentation of airfares and fees and that without access to all air travel options travelers will pay higher prices.

• 98% do not support American Airlines’ Direct Connect strategy.

“Since the U.S. global distribution system industry segment was deregulated in late 2003, the strategic interests among GDSs, travel agencies, travel management companies, corporate travel managers and consumers have evolved into near-perfect alignment,” said Mitchell. “Because the airline industry is one where competitors often follow one another, it is of paramount importance that corporate travel managers, individual supply chain participants, including the associations that represent them, stand up and very clearly communicate to the airlines what their distribution system requirements are.”

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