Air Canada and Sabre yesterday announced a new content-for-discount agreement conceptually similar to several struck in the past 18 months between U.S. carriers and global distribution system providers. The four-year deal, which provides to Air Canada a discount on GDS fees and enables Sabre-connected travel agencies to access nearly all the carrier's fares, primarily was the result of Air Canada's aggressive efforts to divert bookings away from GDSs in order to remain cost-competitive.
Air Canada on July 5 officially will begin participating in Sabre's Direct Connect Availability level, providing all published travel agency fares to Sabre agency subscribers via the traditional booking channel. Unlike U.S. carriers, Air Canada still will offer certain fares exclusively through its consumer site. "There is a small, niche market where we occasionally have consumer-only fares," said Marc Rosenberg, Air Canada vice president of sales and product distribution in North America.
The airline previously had made many of its new fare types available exclusively through its Web site, driving the share of domestic Internet bookings past 60 percent (BTN, March 15)
. Though travel agents can book through the Air Canada Web site on behalf of clients, the deal with Sabre is expected to improve agent productivity. Furthermore, it enables Air Canada "to reach a point of indifference," Rosenberg explained, meaning the cost of Internet distribution and the cost of distribution under terms of the new Sabre agreement are the same or very close.
Rosenberg added that negotiations with Sabre were lengthy because "U.S. models and U.S. assumptions cannot be used" in the Canadian market where just one legacy carrier battles three low-cost carriers that drive most sales through the Internet. "For GDSs to remain competitive in Canada, they need to construct a model best for the Canadian market," he said. "The dynamics are different and it took a while for a breakthrough."
He noted that the Canadian government's decision in April to change GDS rules "helped tremendously."
Stephen Outerbridge, vice president for industry relations at Carlson Wagonlit Travel Canada, was not surprised by the deal. "Air Canada wanted to clean up this GDS situation before completing the Canadian version of bankruptcy restructuring," he said. "They wanted to flex their muscles and lower distribution costs but, at the end of the day, the airlines and the GDSs need each other."
Outerbridge said the development likely would lessen the emphasis on developing direct connections between Air Canada and its domestic corporate clients. "It also will be interesting to see what Air Canada does with the cash incentives they had been offering to travel agencies booking on the Internet."
Vaughan Payne, president of Calgary-based ATCO Travel, welcomed the Air Canada-Sabre agreement as "a stepping stone" for the travel management community. "We are in the Galileo GDS, so we hope they do the same and come to terms with the airlines," he said. "The increased level or productivity for travel management companies is a huge plus."
Sabre claims 60 percent of all Canadian travel agency bookings made in a GDS. Air Canada now is looking to seal deals with Amadeus, Galileo and Worldspan. "The expectation is that we should conclude similar deals with each, reflecting the Canadian model," Rosenberg said.