Major domestic airlines and global distribution system
providers appear to be at odds over whether full content agreements cover
ancillary services, adding a potential obstacle to ongoing efforts to make a la
carte airline services available through corporate and agency channels.
The full content agreements under which both parties
continue to operate largely were forged in 2006, before the current wave of
unbundling and merchandizing hit the domestic industry. While the contractual
language and terms remain obscured to other industry participants in a cloud of
nondisclosure agreements, conversations with airlines, GDSs and other industry
participants show some variance in interpretation of the definition of "full
content."
Sabre vice president of marketing Kyle Moore said solving
issues related to ancillary airline fees is, for Sabre, more of "a
technology question" than a content question, as some have surmised, and
Sabre therefore would not have to modify air contracts to enable shopping,
booking and fulfilling ancillary fees.
"Our view would be that our contracts already govern
this content and that we would simply need to figure out the appropriate
technological way to introduce it to our booking path." Moore added, "Just
because the airlines have unbundled their products doesn't mean we have to."
Cyril Tetaz, head of marketing for airline distribution with
Amadeus, struck a similar chord in the global distribution player's
interpretation of "full content." Said Tetaz: "Whenever we
negotiate full content agreements, we include ancillary services as well. That
was the case in the past, and for Amadeus, we believe the full content
definition we have covers ancillary services, and we've made even more
clarification in the past year when we underwent negotiations," Tetaz
said, noting recent content agreements with several major European carriers,
including Iberia, Air France and Lufthansa.
ARC vice president of sales, marketing and customer care
Mike Premo, who along with corporate travel buyers and agencies sits in the
middle of the airlines and GDSs on the supply chain, said, "I'm not sure
the carriers share that interpretation of full content."
Though other major domestic carriers would not provide
comment on their interpretation of what, if any, ancillary services are
included in "full content" deals with the GDSs, American Airlines
vice president of sales and general sales manager Kurt Stache was unequivocal
in sharing his carrier's own interpretation. "American Airlines is not,
and has never been, contractually required to provide the GDSs access to
non-fare products and services," Stache said in a statement. The carrier
has been pushing its own direct connect offering as its preferred way for
travel agencies to purchase some ancillary services.
Congress To The Rescue?
If their contracts don't compel carriers to provide GDSs
with ancillary fee data, perhaps regulators will. That issue, and others that
surround a la carte airline pricing took center stage during a House
Transportation and Infrastructure subcommittee on aviation hearing in
Washington, D.C., last month. While there, the U.S. Government Accountability
Office as well as members of Congress joined a few industry groups in calling
for regulations to force airlines to disclose ancillary service fees through
all distribution channels.
A GAO study prepared for that hearing recommended that the
U.S. Department of Transportation require airlines to "disclose baggage
fees and policies along with fare information such that this information can be
consistently disclosed across all distribution channels used by the airline,"
a principle endorsed by representatives for the American Society of Travel
Agents, the Interactive Travel Services Association and the Business Travel
Coalition during testimony. Joining in the chorus, Rep. James Oberstar
(D-Minn.) concluded a four-minute admonishment on ancillary airline fees by
calling the GAO recommendations on disclosure "a starting point."
DOT is examining such a proposal in its latest round of
passenger protection rules, released in June and slated for enactment by
year-end, but not before the end of a 180-day comment that began with a notice
of proposed rulemaking on June 2.
DOT general counsel Robert Rivkin during the hearing said
the department plans to enact the rules, as shaped by comments, by the end of
the year. He said, "The department proposes to require airlines to provide
their agents and global distribution systems complete, accurate and up-to-date
information on ancillary fees so that the information is readily available to
consumers."
In a survey of 86 corporate travel managers submitted by BTC
as part of chairman Kevin Mitchell's testimony, 95 percent said they would
support such a requirement that airlines make ancillary fee data available
through global distribution systems. BTC's survey found that all of the travel
manager respondents either agreed or strongly agreed that, "unbundling and
ancillary fees have caused serious problems for corporate travel programs."
Further, the survey found that 86 percent of the travel buyers "believe
that airlines, absent government regulation, will not make fair, adequate and
readily accessible disclosure of their extra fees and charges so that travel
managers and/or their TMCs can do comparison shopping of the all-in prices for
air travel across carriers."
Industry Works On Solutions
Contractual and congressional issues aside, technology
issues remain underdeveloped to fully enable ancillary services to be sold
through the GDSs. Still, some in the industry have pinned their hopes to sell
and track ancillary services through the corporate channel on the electronic
miscellaneous document—a solution that has been likened to an electronic ticket
and has been embraced by ARC, the International Air Transport Association, some
payment systems, all the major GDSs and a number of airlines.
The GDSs are targeting this year as doable timing to bring
the EMD into corporate travel channels. "The technology is there,"
Amadeus' Tetaz said. "What is at stake is more a change management and
adoption issue. It does take time to adopt the technology and appreciate the
impact on your operations, whether you're an airline or a travel agency. That
is what's happening right now."
Amadeus last month said it is piloting a shopping and
booking facility with the small French airline Corsairfly that can be used both
on the carrier's website and by travel agents through global distribution
systems, while it also has worked with Finnair as the first airline to issue,
store, manage and distribute electronic miscellaneous documents using Amadeus
technology.
A timetable of the third quarter of 2010 long has been
targeted for achieving this goal, though there remain suggestions the date will
slip. Tetaz told Business Travel News that Amadeus will begin piloting EMDs
with agency customers in November, adding that much will depend on the
readiness of each national billing and settlement plan to handle EMDs.
"BSP readiness varies on a market-by-market basis, just
as was the case with e-ticketing," he said.
Sabre last month unveiled a placeholder solution with its
Total Pricing initiative, which the GDS said would enable travel agents and
other bookers to see the true cost of an airline itinerary, inclusive of any applicable
add-on fees—from baggage fees to seat assignments—before booking a flight.
Moore said Sabre is on pace to deliver the next, and more complicated, step of
enabling booking, payment, settlement and fulfillment through the global
distribution system channel by year-end.
"We're rapidly moving down the path of enabling all of
the payment and fulfillment of all of the ancillaries as well," Moore
said. "ARC and all of the BSPs around the world are moving toward 4Q 2010
timeframes for introduction of EMD settlement. We intend to get our EMD
capabilities out there to the agency community in roughly the same timeline."
Moore added, "The booking capabilities are moving down
toward a fourth-quarter delivery as well, and that would be across multiple
ancillary types. We absolutely expect that to happen in the travel agency
channel beginning this year."
As for ARC's own schedule in enabling electronic
miscellaneous documents as the U.S. bank settlement plan, Premo said, "We're
still on schedule for an end of third-quarter, early fourth-quarter rollout,
but we're really not going to see a whole lot of these unless the carriers make
the content available, so at the moment, the only public conversations have
been the American-Farelogix connection. We've been working closely with them,
so when American is ready to make that available we'll be ready to process it,
and if agents are using Farelogix for that then we'll be able to close the
loop."
—Amon Cohen
contributed to this story.
This story originally
appeared in the August 9, 2010, edition of Business Travel News.