AA To Give Agencies GDS Fee Burdens, Web Fare Access

American Airlines today announced a program aimed at lowering distribution costs while opening access to all of its Web fares for traditional U.S. and Canadian travel agencies willing to take on the burden of global distribution fees.

As part of the voluntary EveryFare program, to be launched Oct. 1 with TQ3 Maritz Travel Solutions and Corporate Travel Management Group, AA will provide participating agencies with allowance credits to partially cover GDS fees. Those allowances, initially set at $4.13 per flight coupon, gradually will diminish over the next five years. In return, participating agencies compensate AA with an amount equal to the fees paid to their GDS of choice. In addition, the carrier said registered agencies later this year will have the option of booking directly via aa.com, thus eliminating all GDS fees from those bookings.

Currently, AA's Web fares are available only on the carrier's Web site and through certain lower-cost online channels, notably Orbitz and Travelocity. Registered agencies would access those fares via the GDS under a different fare basis code. Considering that access, AA said agencies "should enjoy increased revenues to offset any GDS fees above the allowance."

"Our expectation is that EveryFare will inject some much-needed price competition among the handful of large GDS suppliers who have a stranglehold on the market right now," said AA CEO and chairman Don Carty in a conference this morning with analysts and journalists in New York. AA's reservations system is hosted by Sabre and parent company AMR owns 26 percent of Worldspan. "Previously, travel agencies had no incentive to shop around, as airlines bore the full brunt of the ever-escalating GDS fees. Now, participating agencies will have every reason to seek out the GDS that provides them the best value."

Craig Kreeger, AA vice president of passenger sales, added that agencies likely will have a better chance of negotiating lower GDS fees than airlines, potentially developing a fresh revenue source. "We will calculate the GDS costs and pass on the net bill to the agency if the allowance does not cover the bill that would be incurred or rebate if it did," he said during an afternoon press conference.

TQ3, however, said the AA allowance already is less than its GDS costs. "Even though this represents an additional expense for us, we believe that the Web-fare access to our clients outweighs the incremental cost to TQ3 Maritz," said Jack O'Neill, president of the mega travel management company.

EveryFare agency participants in a few months will have the ability to book fares directly through aa.com. The carrier said a fee lower than the current average GDS fee would be applied, but the agency still would receive the same allowance from the airline. The carrier said it continues to work through technology that will enable aa.com to accept bookings based on agencies' Airlines Reporting Corp. numbers.

The EveryFare program is scheduled to run through Dec. 31, 2007. The last phase, which will begin July 1, 2006, involves agency allowances of $2.48 per ticket.

AA said it set a schedule of gradually declining agency allowances to enable participants to secure lower GDS fees and realize efficiencies from new distribution technologies. The carrier also suggested participating agencies would gain a competitive edge over those that do not sign up for the program.

"We are saying to travel agencies, this is our cost of distribution through Orbitz," Carty said. "If you want access to the same inventory as Orbitz, these are the costs to manage." He added that agency access to Web fares nullifies competition-related complaints lodged against Orbitz.

AA last year paid about $400 million in GDS fees, a number it expects to halve in five years should all agencies take part in the EveryFare program.