Delta Latest To Join Sabre Discount Program

Delta Air Lines today announced its participation in the Sabre Direct Connect Availability Three-Year Option, joining United Airlines and US Airways. Under the terms of the program, Delta trades to the Sabre global distribution system access to all published fares, including Web fares, for roughly a 13 percent discount on Sabre booking fees.

In addition to the discount taken on 2003 per-segment fee levels, which remains frozen for three years, Delta also received additional, proprietary terms. "We get very improved economics," said Lee Macenczak, Delta senior vice president for sales and distribution. "We think Sabre will be a long-term player in the industry, and we wanted to better align our interests."

Macenczak added that participation in the Sabre DCA program does not minimize the importance of such online channels as Orbitz, Sabre Travelocity and Delta's own Web site. "We still see people moving online because it is more of a convenience for customers," he said, "but not everybody wants to come through delta.com. If they still choose to book through a travel agency, we want to make sure that transaction is cost-effective for Delta."

Securing Delta was "obviously very important," according to Sabre chief marketing officer Eric Speck. "Now that there is a critical mass of large, North American carriers participating in the program, I would anticipate more announcements in the fairly short term."

Speck said the DCA program, while simple on the surface, requires carriers to carefully review their distribution strategies. "This is more than just about Web fares," he explained. "Web fares certainly have been used as one way to attract carriers to alternate forms of distribution, but airlines have come to understand they are giving up more on yield than they would ever save on distribution costs."

According to a Sabre Securities and Exchange Commission filing this morning, the Delta agreement will cut Sabre's 2003 revenues by approximately $7.5 million. The filing also said the deal, combined with earlier agreements with United and US Airways, will slow the rate of channel shift to supplier-direct channels and "dampen incentive growth."

"As the travel distribution market transitions to new booking fee models, agency incentives are likely to be reviewed," added Sabre Travel Network president John Stow, in a company statement. "Sabre Travel Network believes it is important to manage incentive growth within the context of the benefits provided by the program."

Delta continues to explore cost-savings programs with other GDSs. Continental, United and US Airways, for example, participate in Galileo's Momentum program, which also offers carriers lower distribution pricing in exchange for fuller fare content. It is not yet clear how that program, which includes as a founding participant Rosenbluth International, will be impacted by American Express's intent to acquire Rosenbluth, announced earlier today.