The four major global distribution systems—Amadeus, Galileo, Sabre and Worldspan—are in the midst of enabling airfare unbundling and other travel merchandising options. Such carriers as Air Canada, Ryanair and Spirit Airlines have initiated such pricing models, breaking out from total airfare fees for services like checked baggage, assigned seating and frequent flyer points. However, those carriers have enabled such pricing options solely through their Web sites.
Distribution executives said more carriers are flirting with the concept of unbundled pricing as they seek new sources of passenger revenue and further ways to differentiate product. Such carriers as AirTran, United and US Airways have said they are exploring such models.
Sabre said it soon would launch to travel agency subscribers unbundled options with an undisclosed carrier. A Sabre spokesperson last week said, "In the coming weeks, there will be a substantial addition to our agency customers shopping and selling through merchandising tools." The GDS said it has partnered with an airline outside of North America to leverage new merchandising options. "For us, over the course of the remainder of this year, we think we'll be able to introduce capabilities like pre-reserved seats and intelligent upsell," the spokesperson said.
Galileo Americas president David Falter last month told BTN that Galileo is "in the 75 percent to 80 percent complete range, and we're thinking we'll launch with an unbundled, merchandising carrier by the end of the year. We're talking to all the carriers—the network carriers and the LCCs—and a lot of them are interested, but not many have developed the technology internally to do this merchandising anywhere outside their own Web site."
Amadeus offers carriers FlexPricer, "which allows airlines to essentially package up core attributes of products and services" through Web sites, said Robert Buckman, Amadeus North America director of airline distribution strategies. "It's no longer about a fare and a flight," Buckman said. "It's about a product, and that product adds value to the consumer and that product can be compared to similar products in the marketplace, offering more choice. We've been successful with customers like British Airways, Qantas and Air Canada." Amadeus is working with airlines and industry groups to help standardize and enable practices around airline merchandising through the GDS.
Worldspan COO and senior vice president Ninan Chacko last year told BTN that merchandising "is where the emphasis and focus will be
(BTN, Nov. 6, 2006)." A Worldspan spokesperson said "That was all part of the intention and some of the discussions with the airlines last year as we were offering our optional products." Worldspan said it could not immediately give an update on details of its airline offering, but Kathy Fitzpatrick, Worldspan vice president of North America sales and worldwide travel supplier solutions, who handles rental car and hotel relationships for North America said, "We're doing some unbundling-type things on the car side, where we offer car upsell to our travel agents. We're also looking to roll out something on the hotel side."
Sabre in a survey of 197 airlines released in May noted that 48 percent "believe developing new revenue streams is important to the overall airline revenue strategy, but only about one-third or fewer thought some of the most talked-about ideas for generating new revenue would be effective, such as some airlines moves toward offering unbundled pricing and service."
Thirty-five percent of those carriers said charging extra for seat selections would be a viable source of added revenue, while 34 percent agreed that inflight entertainment would work, 24 percent suggested meals and only 17 percent saw viability in monetizing "comfort items" as blankets and pillows. "There was a significant difference of opinion on this issue between North American and international airlines, however; 30 percent of international airlines said meals could be an effective revenue source but only 13 percent of their North American counterparts agreed," Sabre noted.
"The opportunities are endless," Buckman said of airline merchandising opportunities at the point of sale. "The bottom line is you just need to have the technology that's flexible enough to adopt to whatever you want to do. Engineer the platform and architecture so it's portable and flexible for whatever the airlines want to do."
Still, challenges remain in standardizing airline merchandising options sold through GDSs , as industrywide standards have yet to be adopted. Amadeus' Buckman said the challenge to the airlines is technological "and the infrastructure to support that new model." As such, the GDS has worked with the International Air Transport Association and individual carriers to develop common standards for advanced selling options.
"The airlines need to find ways to expose the technology logic of that merchandising to us," Galileo's Falter said. "We need to develop an environment that meets the airlines more than halfway, but they'll have to do things on their end to expose that to us."
Buckman said, "As far as optional services goes, we would look to see an industry solution in place some time midyear next year. It's a key initiative for IATA and ATPCo."
Sabre CEO Sam Gilliland earlier this year said a more comprehensive industrywide solution to new merchandising options could take longer. "We're going to see experimentation over the next year or two, but it will take a number of years before we get to the standards that I'd like to see. The success of these types of product offerings will hinge around getting to new standards. If there's a lot of disparity of product offerings out there, it's actually going to make it more challenging for airlines to offer them up."