BA Signs GDS Deals Altering Fees In Exchange For Access

British Airways finally has secured major discounts from Galileo and Sabre in return for guaranteeing the two global distribution systems full access to all fare types. Although no figures are being released, the discounts, effective March 1, are understood to be significantly deeper than the 12.5 percent Galileo and Sabre agreed to with numerous airlines in the United States last year.

BA also is taking punitive measures against users of other GDSs, such as Amadeus and Worldspan. It is imposing what it calls a "distribution supplement" of 3 pounds sterling per segment on flights booked through all GDSs other than Sabre and Galileo after failing to reach agreements with them on major cuts in segment fees. However, this is unlikely to impact business travel agents or their corporate clients severely because the supplement is only being charged to U.K. agents. Although they have made greater inroads in the leisure market, Worldspan and Amadeus are used by only a handful of small business travel agents in the United Kingdom, where Galileo and Sabre are clearly first and second, respectively.

The deals negotiated with Sabre and Galileo differ from each other. Sabre has signed BA into its Direct Connect Availability Three-Year Option program, which guarantees full availability of fares in return for a discount. A Sabre spokesperson said the GDS is reviewing the incentives it pays to agents--a key issue for corporate clients because incentives effectively subsidize the fees charged by agencies. "We want to bring down incentives--they are our largest cost line--but we are not going to start slashing left, right and center," the spokesperson said.

Galileo's approach is more complicated. Agencies will have the choice of opting in or out of its deal with BA. Those opting out will have to pay the BA distribution supplement. Those opting in will not have to pay the supplement but will have to pay a fee to Galileo. The fee is "considerably lower than 3 pounds," a spokesperson said. Early indications are that Galileo's larger U.K. business travel agency customers will opt into the scheme.

One senior agency figure said BA's deal amounted to a price increase for corporations. "You could classify this as a price hike," he said. "The GDSs have taken money from the travel agency's pot to fund cheaper prices to the airlines. That has left a hole in agents' money, which either means they will be less profitable or they will be charging clients for increased technology costs." However, the increases need to be seen in the context of average double-digit short-haul fare decreases by BA during the past 18 months.

Galileo and Sabre expect to sign similar deals with more airlines in Europe. "We have been speaking to a number of them and, realistically, other airlines will have to go this way," said a Galileo spokesperson.

Ian Heywood, head of U.K. & Ireland corporate sales for BA, said, "We are happy that we have managed to reduce the one line off our distribution costs that we have not been able to address in the past."