The European Commission has ordered the global distribution systems to amend the MIDT booking data they sell to airlines so corporate clients no longer can be identified from the information, just as the GDSs find themselves under fire in Europe from different corners of the travel industry.
While corporations continue to express concern about the GDSs revealing their data, airlines are intensifying pressure for a reform of pricing and travel agents are questioning whether the GDSs are working for them or competing against them. The EC also is taking a wider look at the GDSs by conducting a review of its computer reservations system code of conduct
The commission's action on MIDT, marketing information data transfer, stems from official complaints by travel agents about airlines poaching travelers booked on flights with competing carriers. Agents have alleged that MIDT particularly helps airlines to identify clients booking through agency implants, although carriers also have ways of tracking bookings by individual travelers, such as through matching frequent flyer membership numbers.
Identification of clients breaches the existing code of conduct, which states that data released by GDSs shall include no direct or indirect identification of or personal information on a passenger or a corporate user. "The European Commission has written to the GDSs advising them to stop the sale of MIDT reports that can be used to identify corporate travel locations," said an industry source. "The Commission has asked the GDSs to mask out the relevant information and there is now a discussion on how to get this done."
Sabre already has taken action unilaterally on the issue by encrypting client-specific data in the MIDT it sells to airlines (BTN, May 13). "That was good PR for Sabre, knowing this was coming from the European Commission," the source said.
However, Sabre simultaneously announced that it will start selling MIDT to travel agents, as will Galileo International through the Agentflash product. Herman Mensink, Europe, Middle East and Africa director of the Association of Corporate Travel Executives, welcomed the action from the EC, especially in light of fears about leading European airlines sharing information through their jointly owned Web sites, Opodo and its U.S. equivalent Orbitz. Mensink, however, does not want MIDT to be made available to agents or any other parties. "The major concern of corporations is over who owns booking data. The EC is not very clear on this," he said. "Currently, corporations are not able to purchase the data. The European Commission may say everyone can buy the information but that is not what corporations want. The only thing GDSs should do is facilitate the booking and ticketing processes. They should not be passing data to other parties."
Amadeus, Galileo and Sabre all declined to comment directly on the letter sent to them by the European Commission.
The action over MIDT coincides with the EC taking a fresh look at its CRS code of conduct. Conceived in the late 1980s, its primary original intention was to ensure impartiality in screen displays at a time when the GDSs largely were owned by airlines. Now that has changed, and the Internet has opened up other forms of airfare distribution, one of the issues the review will consider is whether there still is a need for a code.
Also likely to be on the agenda is the question of pricing. In particular, airlines want to revise Article 10.1, which states that "Any fee charged by a system vendor shall be nondiscriminatory, reasonably structured and reasonably related to the cost of the service provided and used, and shall, in particular, be the same for the same level of service."
Carriers want the GDSs to be allowed to vary their fees according to the amount of business they receive from each airline and according to the type of fare. British Airways, for example, has introduced a low-price structure on its domestic routes where the GDS fee can account for almost 10 percent of the money it earns.
BA officials said GDS fees are too high in any case. The airline is seeking US$950 million in annualized savings following its recent Future Size and Shape strategic review, of which it has identified US$150 million to come from distribution. BA already has cut agency remuneration and refused to accept the merchant fee for card payments and net fares, and clearly is gunning for the GDSs as its next target (BTN, March 4).
At last month's U.K. Guild of Business Travel Agents conference in Toronto, BA worldwide sales director Dale Moss pointed out that GDSs have an operating margin of 30 percent, whereas airlines earn only 6 percent. Ian Heywood, the airline's field sales manager, made it clear that BA no longer would accept the status quo. "The GDS charges are not acceptable, and we cannot be expected to pay the prices being demanded," he said. "Either we reach a managed solution or we put in place a solution ourselves. We can limit the number of GDSs we use and go to a tender process, like a corporate customer."
The GDSs have acknowledged the need to reform their price structure, but still have not found a solution that will suit both them and their airline clients. "We have been working on this with Boston Consulting Group for six months and we still don't have any answers," Galileo U.K. general manager Pat Minogue told GBTA conference attendees.
Chris Kroeger, Sabre senior vice president of Europe, defended GDS pricing at the same conference. He said it had gone up by an average of 3.3 percent annually since 1993, with the most recent increase being the lowest in a decade. However, he acknowledged, "the economic model needs revamping."
When asked whether Sabre intends to buy any corporate travel agencies, Kroeger said: "No comment."