American Airlines' EveryFare program further advances a threat that airlines have been making to their global distribution system offspring for years: Lower your fees or we're going direct.
AA's gambit attempts to trade Web-only fares for lower GDS fees, but a litany of questions on the value of those fares could mean GDSs will not cave. Early indications are that many travel management companies are not interested in this method of helping airlines tip the GDSs' hands.
While the airlines' ultimate threat of providing agency bookings on their own Web sites is only just getting real, carriers also are attempting to regain as much control as they can over the distribution of their products through actions taken against such other distributors as Expedia and the newer crop of Web fare screen-scrapers.
With the exception of airline-owned Worldspan, which offered no comment, global distribution system companies were less than enthusiastic in their reaction to EveryFare.
The EveryFare program "doesn't change anything for us," said Ellen Keszler, Sabre senior vice president for North America travel agency solutions. "The key value proposition here is Web-only fares, but we believe there are fewer available now." Madrid-based Amadeus echoed Sabre's view. "Participating travel agents are set to face significant short-term disruption and long-term benefits remain unclear both for them and the consumers they serve," said a spokesperson. Cendant's Galileo maintained its stance that it has its own plans for reducing carrier costs, "rather than just shifting them around as many recently announced programs do."
While many agreed that the benefits to agencies of EveryFare are neither obvious nor guaranteed, some saw long-term potential for agencies to earn payments from AA for bookings made through aa.com, Orbitz or another Web-based channel if it were cheaper than the GDS.
While no carrier yet has come up with an offering on its Web site that completely supports agencies—particularly in terms of corporate travel reporting—the Airlines Reporting Corp. is working to help out. ARC was unable to provide additional detail other than to say it is "working with several carriers on models that would include TMCs and corporate travel departments in such channels," said a spokesperson.
AA, Continental and Delta have laid some groundwork on agency booking sites, but Northwest appears to be closest to the finish line on a robust product
(see story). "We've been talking with Northwest about that," said Danny Hood, president of WorldTravel BTI. "We have been testing some things with them. Around the first quarter we will have the beginning of a solution."
"The future to me is to have an application programming interface to each airline's site," said Dan Bohan, COO at Omega World Travel. "We've also got some early indication from Sabre that they will allow us access through an API to Travelocity."
Building a connection to AA's site using the XML Internet language is the direction EveryFare participant TQ3 Maritz Travel Solutions will take if it cannot get GDSs to lower their segment fees. But that also requires a faring engine, said corporate vice president for information technology Richard Spradling. Asked about the Web site screen-scraping solutions employed by some agencies, Spradling said some of that technology could be used to support a complete offering, including the elusive super PNR. However, he said, "AA and Orbitz have said screen-scraping is not a valid way to access their fares. In general, once travelers are booked that way on aa.com, enroute assistance is challenging because we no longer have access to the PNR. For reporting, we have to build a passive segment in the GDS. It's not a sufficient solution and adds cost."
Given the early stages of all such development, it is understandable that Sabre's Keszler said, "We don't believe airlines have proven they can offer corporate bookings on their Web sites." Sabre's strategy acknowledges that its success depends, in large part, on its ability to maintain solidarity with the travel agency community.
It is that very cooperation that AA is attempting to divide, both to put more downward pressure on GDS pricing and to generate business for aa.com and the company that runs it, Orbitz. Considering that GDSs pay agencies a portion of the money originally provided to them by airlines and other suppliers—such as the recent deal between Navigant and Sabre
(see story)—an industry novice might ask, "Why shouldn't AA just offer to pay travel management companies something less than a GDS fee for bookings they make without a GDS?"
If only things were so simple in the travel industry.
Because businesses want to shop for published, Web-only and negotiated rates among all carriers—and since one-to-one connections cost more to build than using a "switch," like the GDSs or Pegasus—Orbitz probably offers a better option than a single-airline site. Even putting aside the limitation that it does not offer Southwest Airlines, however, Orbitz needs to tread carefully on any bridge to travel management companies for fear of being subjected to the government's GDS regulations. Its only effort so far to provide agents access to its site was crafted not with an agency, but with an agency's automation subsidiary, Navigant's Aqua Software Products in Santa Ana, Calif. Now Orbitz is in talks with Atlanta-based TRX Inc.
Most importantly, though, airlines and agencies would prefer to avoid forcing the reinvention of the GDSs with which they all still are so closely integrated. "We believe the GDS has the best long-term potential to be the lowest cost channel," Spradling said. So far, the GDSs' willingness to reduce segment prices has formally surfaced only in programs related to self-service reservations, which carriers said is not enough.
Meanwhile, Internet technologies continue to proliferate airlines' fares and inventory, causing some—particularly AA—to get finicky about which sites they will work with cooperatively. Airlines also are asserting control over who gets direct access to their internal res systems. While it now allows Orbitz to book in its host system, for example, American denied such access to GetThere, the Menlo Park, Calif.-based Sabre subsidiary that leads the corporate self-booking market. The carrier also has rebuffed companies that use Web search tools to funnel aa.com content through nearly every corporate booking product.
GetThere's planned AA direct access had been its answer to the Web fare problem. Now, AA is blocking GetThere's latest solution for the same, Web-based screen-scraping tools.
Underlying all these issues is the movement by American and such other airlines as Northwest to separately and jointly assert control over the distribution of their products, partly to prevent respectively less friendly distributors from getting too powerful and commanding a bigger slice of the price.
Northwest, for example, last week acknowledged it no longer was available on Expedia due to a contractual dispute. Southwest is not available on Orbitz.
Asked about the effect on Expedia of no longer listing Northwest flights, Dan McCarthy of New York's Neuberger Berman—an investor in travel distribution that formerly owned Travelocity shares but now owns some of Expedia—turned the question around: "The power of the travel aggregators is inexorable, so this could harm Northwest more than Expedia."
Bohan fears carriers have created a scenario in which continued growth by Expedia, Orbitz and Travelocity in the end will create costlier channels than bricks-and-mortar agencies ever were. Perhaps the Expedia-Northwest bust-up and other examples like it indicate this already has begun. As such, Bohan said, "I've decided I need to do business" with those three players. There may never have been stranger bedfellows in travel distribution, but then again, there may never have been a stranger time. "We're in a very confused situation," Bohan said. "GDS prices are too high and the GDSs are trying to figure out how to bring it down without collapsing their financial model."