Observers Fear BA-GDS Conflict Impact - Business Travel News

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Observers Fear BA-GDS Conflict Impact

January 24, 2007 - 07:38 PM ET

By Jay Campbell

Following the effective settlement of major global distribution system content conflicts in the United States, British Airways now is preparing alternative schemes of its own in an effort to pressure GDS providers into offering it lower prices. At least some of BA's GDS deals are set to expire in and around the end of February.

Business Travel Coalition chairman Kevin Mitchell was in London this week partly to sound the alarm on BA's apparent plan 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." Key industry leaders in the United Kingdom are listening and responding by warning the trade and BA about potential consequences.

A Sabre official confirmed that the firm's "current agreements" with BA expire on 28 Feb. According to a spokesperson with U.K. market leader Galileo, "I can confirm that we are in constructive dialogue with BA to reach an agreement which takes into account the needs of all parties." An Amadeus official confirmed the company is in "ongoing negotiations" with BA on distribution, but did not elaborate.

A BA spokesperson did not comment on the carrier's plans regarding distribution. Sources suggested the airline is considering GDS-bypass options as well as a special distribution fee.

One idea is to "pass on the cost of the GDS fee via the tax box [on tickets]," said Guild of Travel Management Companies chief executive Philip Carlisle. "I could say it's good news that we [TMCs] don't have to place the additional charge, but profitable companies must cover their own operating costs as part of their pricing structure. This would be double charging." He suggested such a move could be considered fair if BA also charged fees for bookings on its own Web site.

"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," advised Mitchell, who has worked closely with GDS lobbying group C-FARE on potential GDS deregulation in Europe. "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."

In addition to a possible fee, BA may be revisiting supplier-direct or direct-connectoptions that would bypass the GDSs. "BA have been 'consulting' with the industry on other options, such as direct connect feasibility, etc., and I would not be surprised if this is not a small part of their game plan," according to a source who requested anonymity.

Speakers at this week's GTMC annual general meeting indicated that bypass options represent an attack on TMCs. TravelMolequoted Mitchell as saying, "some major European airlines' distribution strategies indicate that intermediaries are marked for extinction." GTMC chairman Paul Allen said supplier-direct relationships "de-value" the roles of TMCs, according to e-tid.

Consultant Robert Daykin of The Corporate Travel Partnership said he already is aware of a situation in Europe where "the self-booking tool goes straight through to the airline's database, the airline fulfills it and cuts out the agency." He said BA is "quite right" to try to reduce distribution costs. "All suppliers need to be looking at the cost base and challenging it. Sometimes the travel supply chain doesn't always offer value for money. The customer also is keen to minimize costs."

Unilever supply manager in Europe for non-production items Bill Doullsaid that his company might be interested in a setup that hooks together a self-booking tool with an airline's inventory, but he also noted that he's heard such proposals before.

Doull said BA "promoted" supplier-direct in 1999, actually calling it "disintermediation." Later, however, the carrier "backed off."

"They would probably love to do it if they could manage it, but I doubt the practicalities are there," Doull added. "They can't deliver another airline's corporate deals and they can't do other things because they're not a travel agency. They would have to buy a TMC."

Nevertheless, distribution "is certainly one of [British Airways'] top three or four costs, and I know they have a dedicated team of people that work on this area," Doull said.

According to Institute of Travel Management executive director Paul Tilstone, "Whilst we understand that the negotiations between the GDSs and British Airways are essentially private commercial matters, we took the step of writing to BA because of the considerable implications for our membership if deals are not struck which allow full content at no additional cost. We did this because we believe that the interests of our buyer membership ultimately represents the long-term interests of our supplier members and we are aware that there is a real possibility of a move to content withdrawal or surcharging."

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