American Airlines' EveryFare agencies are reluctant to accept AA's new offer of compensation to book on aa.com, citing a short list of reasons topped by their need to support global distribution system contracts.
AA said it is not surprised most EveryFare agencies would defer to their GDS deals. However, that position differs from the assertion by hundreds of agencies, in comments to the U.S. Department of Transportation, that GDS contracts do not stop them from booking online.
The effectiveness and longevity of EveryFare remain in question as participating agencies said it is more useful for addressing potentially temporary perception issues than for actually making bookings. Meanwhile, most major carriers continue to press for GDS-based solutions.
Rumors of an imminent distribution announcement from a major carrier prompted some large airlines to elaborate on their positions, including a statement from Delta Air Lines senior vice president for sales and distribution Lee Macenczak: "We are not looking at anything along the lines of EveryFare. We are still looking at our options in terms of other models out there, but we are not close to finalizing a decision."
"We made our play," said a United Airlines executive, citing the Sabre and Galileo discount programs in use by United and US Airways. Continental Airlines, which participates in Galileo's program
(BTN April, 28), recently told the other three GDS companies they could access virtually all Continental content in exchange for 25 percent lower GDS fees, higher than what the GDS firms previously offered. "We have had some follow-up discussions, but there's nothing tangible to date," John Slater, Continental managing director of distribution planning, said last week. "Something like EveryFare is a little extra effort, and clearly we'd rather do this through the GDS provider."
Speculation about Delta's plans circled the industry last week. Should Delta join Sabre's discount program, through which Sabre offers airlines roughly 13 percent savings in return for fuller fare access
(BTN, Oct. 28, 2002), or some related variation, AA could dump its EveryFare initiative while declaring it a success in helping lower GDS fees.
Bolstered by the settlement of a lawsuit with Web screen-scraper FareChase, American is facilitating access to aa.com for EveryFare participants. EveryFare places the burden of GDS costs on the agencies, defrayed partly by credits returned by AA. With aa.com bookings, the charge levied on agencies (see chart) is lower than the credit AA pays them, which on July 1 will fall to $3.72 from $4.13 per coupon, according to the AA schedule.
To take advantage of that offer, though, participants would have to send segments to aa.com that otherwise would earn them incentives from the GDS companies. Another unresolved question, EveryFare agencies said, is whether AA would be crediting such bookings to clients and agencies as part of their overall relationships with the carrier. To a lesser degree, the challenges in servicing an en route traveler ticketed on aa.com and the need for a product like FareChase or the other tools it backs to handle reporting also make aa.com less attractive.
Seven corporate EveryFare agencies said they were uncertain of whether they would move bookings to aa.com, but most said it was unlikely. The largest of them, TQ3 Travel Solutions, as of last week still was determining the potential impact on its relationships with the GDS companies, primarily Sabre. "We're now doing an analysis of how bookings will be made," said TQ3 director of technology marketing Kathie Lia, who said the agency now offers EveryFare to all clients after dropping the $1 per transaction fee it was charging them to participate
(BTN, Oct. 7, 2002). She said the issue of serving a traveler ticketed on aa.com "probably isn't solvable," but noted TQ3 is examining the extent of the problem and possible technical solutions.
Other agencies cited similar issues. "I'm not sure yet where we stand on aa.com, but the feeling is we'll stick with the GDS base for now," said Marc Casto, CFO of Casto Travel, a Galileo shop. "The primary issue is the GDS relationship. We'd have to balance the segments out with the GDS so we still meet our goals." Casto has made bookings for travelers on Web sites, and has managed to track those for reporting, but en route customer service is complicated because it requires the travel agent to speak to an airline rep rather than have access to the PNR themselves. That extra step could cost in productivity more than what the agency gains in booking online.
An alternative solution, to have the traveler rely on the airline for support on the road, would signal a concession of traveler loyalty to the supplier that flies in the face of the truly managed travel model. Corporate buyers resoundingly support the more centralized GDS-based model, still the standard despite a proliferation of Web-only fares during the past couple of years.
"Web fares are disappearing," said Richard Esman, co-president of Rich Worldwide Travel. "Why would I dilute my segments with my GDS?"
One reason might be that DOT has proposed to ban the agreements that allow agencies to shift segments to certain GDSs in exchange for up-front and per-segment incentives. Few observers think it likely DOT would establish such a ban, particularly as the U.S. Department of Justice, among others, has said it should not do so. Nevertheless, agencies are fearful. "That would be a major blow to the agency community, which is doing quite well with GDS contracts," said Rock Blanco, Atlas Travel chief technology officer. "I just don't think customer fees could be raised any higher to make up for it."
The Large Agency Coalition, representing Adelman and about 20 other midsize corporate agencies, stated that its "main goal" in lobbying DOT is to preserve productivity pricing agreements with GDS companies that exchange agency loyalty for per-segment incentives that can reach as high as $1.50.
"It is simply not true that productivity pricing keeps travel agents off the Internet," LAC said. "A travel agency today can move as much as it possibly can onto the Internet and book e-fares and fares that are not available in a GDS, and yet it's not in danger of going below its quota and incurring a penalty. Corporate clients call the shots. If the corporate client obtains a discount fare that is only available on delta.com, then LAC's members will book there."
EveryFare agencies said they are happy with the program as it is used through the GDSs, mainly because it tackles the traveler perception that the agency and, in turn, the corporate travel department, is not accessing the lowest fares.
"We've sold maybe a half-dozen 'true' Web fares through EveryFare," Blanco said, "but from a marketing perspective, customers are asking for it and we've been able to win accounts for which EveryFare was a big factor. They're convinced EveryFare is supposed to offer the best AA fares in the market."
According to TQ3, the vaunted extra five points off lightly restricted fares for EveryFare users remains, and "that's where clients are finding the greatest benefit," Lia said. Adelman Travel Group CFO and COO Bob Chaiken said that discount plus the other Web fares they would not otherwise access in the GDS have provided his clients with savings of as much as 3 percent to 4 percent off their overall AA bill.
Ericsson U.S. travel manager Meade Hubby, who switched to TQ3 in April partly because of EveryFare
(BTN, March 24), said the "preliminary indications" are positive. "Any time you can opt for a GDS booking, that's the easiest way since the agency runs our reporting process and you can be proactive off of that," Hubby said.
"Not only are we losing traveler loyalty, but we lose control of the program" when bookings are made outside of the GDS, said American Standard Companies global strategic sourcing director Tom Barrett. "Philosophically, that's not okay, but I'm at the point where I'm wondering how long I will get beat up by this issue. It's a small percentage of fares and of people, so we've got to decide how much longer we can debate this individually with 5,000 travelers. I'm caught between the devil and the deep blue sea."