Airlines Advance Direct-Connect Strategies - Business Travel News

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Airlines Advance Direct-Connect Strategies

November 05, 2009 - 10:30 AM ET

By David Jonas

Citing the need to better tailor services, products and pricing, several airlines are pushing ahead with plans to build new links to distributors, including corporate travel agencies, that don't rely on the traditional connections through global distribution systems. Though it remains to be seen how soon and how broadly such direct-connect models will be used to service managed business travelers, the intentions stated by the likes of Air Canada, AirTran, American Airlines and Southwest Airlines are clear: They want to control their product and inventory and establish closer ties to their customers.

Airline direct connects generally take the form of links between a carrier's internal systems and an external distributor via an application programming interface (API). They use XML messaging, which according to airline executives allows more functionality than the messaging capabilities now provided through traditional GDS channels. With such capabilities, airlines could, for example, offer corporate customers specific packages that include free checked baggage and seat assignments, something GDSs now also are endeavoring to facilitate.

Long a stickler about its product distribution, Southwest Airlines this quarter expects to activate an API enabling direct bookings within Concur's Cliqbook system--its first direct connection with a corporate online booking tool. Southwest's fares and schedules would be integrated within Cliqbook's full search result screens. In addition to what is currently available through GDS channels, Southwest would provide Cliqbook users with live availability, last seat inventory, pricing and fare rule support, low-fare searching, loyalty program support, "deferred ticketing, cancel reservation, retrieve reservation and exchange funds towards the purchase of new itineraries," among other benefits.

A vocal critic of what it describes as content fragmentation, GDS operator Sabre took issue with the Southwest-Concur arrangement. "Southwest access, but at what cost?" asked Sabre senior vice president Chris Kroeger. "This is a pay-for-content model. If you want to book Southwest, the economics are shifted to the buy side, whether it's a full pay for content or partial pay for content. We have heard and saw in some initial pricing that in order to book a Southwest segment, there would be a charge to the agency, which presumably flows to the corporation as well."

Neither Concur nor Southwest divulged the economics behind their connection. "Whether or not there's a transaction fee that a client is paying in certain situations is a small component in a bigger picture," said Concur executive vice president Michael Hilton. "Is there value that comes from getting that content? From our standpoint, there will be multiple models for how that happens. In some cases, the client may pay for that value; in other cases not. Southwest is an example where, regardless of whether there's a fee being charged or not, there's massive adoption. Philosophically, we really try to do direct connects where we feel that the customer demand is high for content that is not in the GDS."

Southwest Airlines corporate sales and distribution director Rob Brown said the airline will consider other similar connections once it is sure the Concur set-up works as advertised.

American Airlines Aims To Shift All Indirect Volume

In a rather bold stance, American Airlines executives said the airline intends to shift all of its indirect volume--including bookings typically made via GDSs by corporate TMCs and online self-service tools--to its direct-connect API. According to manager of distribution strategy Don Bender, speaking last month in Las Vegas at a Computerized Airline Sales and Marketing Association conference, the airline first made sure the API included such basic travel agency capabilities as availability, pricing and shopping, passenger name record creation, ticketing, settlement processing and customer service functions like exchanges and refunds.

When asked how soon corporate TMCs might start using the direct API, Bender said AA is "in discussions with a number of different players--TMCs, online travel agencies, etc. Those conversations are confidential. My sense would be that once we reach an agreement, there is some time to do an integration and test it. Three to six months is what we estimate that timeframe to be."

To help agencies make the transition, Bender said, American has discussed its direct-connect strategy with tech provider Farelogix, GDSs, content aggregators and providers of back-office and mid-office systems and user interfaces. "Ultimately, the way most agencies want to connect to us is utilizing some of the technology providers that they use today," he said.

AA now is tackling "advanced functionality." Bender cited more automation, improved productivity, flight checking and merchandising capabilities.

Merchandising And "Full Content"

Bender said the AA direct connect would allow the airline to have closer relationships with agencies and to more flexibly provide content. "As we get into merchandising and ancillary services, there are going to be ways to better personalize the offer," he said. "By insourcing some of that functionality, it gives us the ability to do that. If we negotiate a specific corporate bundle with a corporate client, we can better service that through our direct connect."

AirTran has not yet decided whether its ultimate merchandising strategy would focus on product bundles and so-called fare families or something resembling an a la carte menu approach. Either way, the carrier's direct connect--in place since 2004--will be able to handle it, according to director of pricing and distribution planning Matt Klein. "We recognized years ago that we weren't connected to the indirect channel in the way that we wanted to," he said.

Air Canada's API connects to more than a dozen distribution outlets, including a product from GDS operator Travelport, according to distribution business development manager Keith Wallis. "It does everything you want to do in terms of making a booking, and it goes beyond what can do," he said, noting "very targeted promotions" and "very interesting discounts."

As it stands now, when considering Air Canada's Flight Pass products, branded fare families and other ancillary options, channels without a direct connect are missing "about 40 percent to 50 percent of our content," said Wallis.

"We are not intending to have differentiated content, but if technology is not in place to get at the content, it seems there will be a natural differentiation," added AirTran's Klein. That reality, he said, affects not only GDSs and other distributors but also the booking tools "that sit on top of those platforms. They have to be capable of accessing and knowing what to do with the content."

At Southwest, the direct connection with Concur can include "full" content, but may not in all cases. "Through this connection we have the flexibility to provide customers with that level of content if that's what meets their goals and needs from a business travel perspective, and with their travel policy," said Southwest's Brown. "This will not just be turned on for all customers. We'll work strategically and tactically to offer this level of connectivity and functionality to corporate customers who have expressed to us that this is something they desire to have. This level of connectivity may not work for how their policy is currently set up. It will certainly be offered to some of the top companies and corporate accounts that we have heard from that expressed a desire to have Southwest available in this way."

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