TMCs Hand Buyers Opt-In Bill
Many travel management companies, including American Express and Carlson Wagonlit Travel, are passing to corporate clients the opt-in charges imposed on them by global distribution systems for booking British Airways tickets in the United Kingdom and Ireland. HRG, however, will not pass to clients those expenses incurred as result of the distribution shakeup—at least for the next 12 months. The news has drawn an angry response from some customers subject to new charges and resigned acceptance from others.
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Following British Airways' recently completed GDS deals, agency subscribers in the United Kingdom and Ireland must pay to access British Airways' content. While GDS opt-in programs shield subscribers from BA's £3 per-segment surcharges for "full content," opt-in fees are, broadly speaking, £1 for discounted, non-refundable fares and £0.50 for all other fares. The new GDS charges went live April 10, except for Sabre subscribers, which the distributor said "have been protected from the BA surcharge until May 1, 2007."
Meanwhile, Amadeus has yet to sign a new content deal with British Airways, but a spokesperson said it would "reimburse in full the £3 per-segment surcharge incurred by the agencies during the period from April 10 to May 1," as it continues to work toward an agreement with the carrier. A British Airways spokesperson said that "talks continue with Amadeus, and we remain hopeful of reaching an agreement with them as we have with Galileo, Sabre and Worldspan."
TMCs have had to consider whether to pass the opt-in charges on to their corporate clients and CWT and Amex have decided that they will. At press time, an informed HRG source said the company was likely to issue a statement that it will not pass on the opt-in charges for at least 12 months. Sources said HRG's GDS economics are structured differently than the other travel management companies and less affected by the new deal than its rivals.
Alison Johnston-Ralph, global travel manager for Air Products, and a customer of American Express, expressed anger with BA, the GDSs and her TMC over what is a price rise for her company. "It is absolutely what I thought might happen. Amex is going to start charging us as of 1 May," she said.
Johnston-Ralph said Amex also told her it will be unable to bill the opt-in charges at the point of sale, making it difficult for her to pass them on to travelers and their separate cost centers. "That means the charges will have to be a central cost," she said. "That will absolutely drive us to move marketshare from BA, where we don't have a deal in place."
The Air Products global travel manager added that she is unhappy with GDSs being "a law unto themselves" and "corporates always taking the charge at the end of the line. If our companies passed on all their cost increases from third parties, we would be out of business."
BA has hinted that it will make good to long-standing corporate clients on the effective increases they are paying. However, Johnston-Ralph said, "I've heard not a dicky-bird from BA."
Commenting on how TMCs are responding to opt-in charges, U.K. and Ireland Institute of Travel Management executive director Paul Tilstone said: "As far as I am aware, it's split down the middle. Some are passing the charges on, while others are absorbing them, although the likelihood is that the latter will pass on their increased costs in some other form at some stage."
"I haven't heard many adverse comments from our members," Tilstone continued. "In the first instance, they are still happy there is full BA content in the GDSs. They are not overjoyed about the charges but they are saying that will become part of their negotiations with both TMCs and BA. Any procurement manager worth their salt will be looking to negotiate hard on this."
Andrew Waller, executive vice president for Carlson Wagonlit, said his company had little choice other than to pass on the charges. "The new GDS opt-in fees are charges directly associated with the cost of accessing a BA ticket and therefore simply an increase in the BA ticket price for tickets booked via a GDS, impacting both corporations and travelers. As such, CWT is passing onto clientsall GDS opt-in fees as incurred, in a transparent process."
A statement from Amex, which primarily uses Sabre in the United Kingdom, said: "The new programs introduced by Sabre have modified pricing schemes that materially change the costs we incur when making BA reservations from the U.K. and Ireland for clients. To allow for the new GDS programs and continue uninterrupted BA content access, starting May 1, 2007, all BA bookings will incur an additional charge of £0.50 or £1 per segment, depending on fare class."
U.S. Amex clients that use the TMC's TravelBahn DS alternative distribution program have been shielded from GDS opt-in charges. However, an Amex spokeswoman said there are "no plans" to introduce TravelBahn to the United Kingdom.
Amex said participation from such U.S.-based carriers as American, Continental, United and "various other carriers" has "helped preserve continued access to airline supplier content when similar developments occurred in the U.S." However, Amex noted that "British Airways has chosen to not participate in DS at this time. In turn, we have worked with all parties to minimize the potential cost impact associated with the new economics, and most importantly, secured continuing access to BA fares, schedules and inventory for our clients."
What might puzzle some U.K. travel buyers is that Galileo was charging an across-the-board opt-in fee of £0.50 to TMCs for the three years leading up to its deal last month with BA. During that period, however, few TMCs passed the charge on to clients. The explanation of why they are being charged this time appears to be that many of the larger TMCs successfully negotiated a waiver with Galileo for the 2004 deal, but have not been able to repeat the feat this time. Similarly, Sabre did not impose opt-in charges following its 2004 deal with BA, but this time it has.
The outcome of BA's GDS negotiations has been considered an important indicator of how relations between other European carriers and GDSs will develop following last year's U.S. distribution overhaul.