Delta Air Lines and its dominant global distribution system Worldspan late last month announced a seven-year agreement through which the carrier will offer its full content to the global distribution system's subscribers, while Amadeus last week joined its GDS competitors in adopting an opt-in model, telling its United States-based subscribers it soon would launch a content access program. The movements further solidify the direction of corporate travel distribution—whereby airlines pay a smaller share of distribution costs, leaving agencies and corporations to make up the difference—as all the GDSs have initiated opt-in programs and all, barring Amadeus, have completed content deals with the legacy carriers.
In a memo to clients last week, Amadeus—the last GDS holdout to adopt the opt-in model—noted that the substantial shift in the distribution marketplace prompted the GDS to follow the lead of competitors.
In the Amadeus memo, North America president Kay Urban and senior vice president of sales and marketing Tom Cates said, "In response to airline surcharges, our GDS competitors were quick to announce opt-in programs that would immediately affect travel agencies. Amadeus has always believed that the marketplace would ultimately determine the success of any model. With regard to a charge for full content access without additional airline surcharge, the direction of the marketplace is now clear."
At press time, Amadeus would not discuss details or how the program would impact agency incentives. "It all depends upon the particulars in the program, the costs associated with it," according to Steve Reynolds, Management Alternatives vice president of technical solutions. "If they're offering a significantly better deal than the Worldspans or Sabres of the world, they might pick up some share. Just the fact that they have a program doesn't do anything."
Sabre Travel Network in June introduced its Efficient Access Solution, the first optional fee-based program that assures full content from its signed carriers and immunity from any new service charges carriers may introduce
(BTN, June 19). In the following month, Galileo and Worldspan introduced comparable, although not identical, programs amid a slew of major domestic carriers announcing $3.50 per-segment charges for bookings that go through nonpreferred channels.
Many agencies said they were left with little choice but to give up a level of financial incentives and opt in to such programs, since the consequence of opting out would lead to higher airline fees and incomplete airfare content
(BTN, Aug 14)."I question the whole way this has been presented to the travel community," exclaimed Norm Rose, president of Travel Tech Consulting in Belmont, Calif. "Even the term 'opt-in' in pure Web terminology means I'm giving permission so that I receive something. Here, if you don't opt in, you don't get to operate the way you've been operating since day one."
However, since going live with the opt-in programs early last month, the GDSs claimed strong levels of participation among their agency customers. Galileo, during parent company Travelport's earnings call, said it had gained 100 percent participation in its Content Continuity Program. A Sabre spokesperson last week also said "more than 99 percent" of its North American travel agencies were participating in its Efficient Access Solution, following the long-awaited reconciliation between the GDS and its most dominant carrier, American.
Worldspan chief commercial officer and senior vice president Ninan Chacko last week said that the majority of its agencies had opted in to its Super Access program, even before the GDS signed Delta to its agreement. "Numerically, among our base of agencies, the vast majority have already opted in to Super Access," Chacko said. "There are a very few individual agencies left—some large, some not. In terms of numbers, it's not more than some single-digit number in terms of agencies left that haven't made an election. So, the Delta situation doesn't really affect the equation very much."
Chacko added, "Some of those agencies have very strong relationships with airlines, so are maybe looking at establishing their own relationships."
Although reluctant to join the fold, Amadeus in its memo to subscribers said the stated success of its competitors' programs further fueled the decision to move toward an opt-in model. "Recently reported adoption rates of competitive GDS opt-in programs have shown that the market is willing to accept program access fees in order to ensure a commitment to full content and protection from airline segment surcharges," Amadeus said. Galileo also disputed the wisdom of Sabre's move, and the opt-in model in general, calling it "disappointing," but ultimately joined the fray.
"Amadeus probably saw an opportunity to grab some marketshare while Sabre and American were in a tussle," said Reynolds. "Now that they've come to terms, also Worldspan and Delta, maybe that opportunity came to pass."
The agreement between Worldspan and Delta places the GDS's Super Access opt-in program among the carrier's preferred distribution channels, shielding subscribers from a $3.50 fee on nonpreferred bookings. While Delta also has secured seven-year content deals with Sabre and Galileo, Worldspan is Delta's dominant GDS. While the previous deal between Delta and Worldspan would not expire until December, Chacko said the new content deal supplants the prior, as had been the case for all of its content deals with carriers.
The deal leaves Amadeus as the only major content distributor yet to secure a deal with all the legacy carriers.
Amadeus has lagged behind the other GDSs in structuring new carrier contracts, but this summer signed a "long-term" content agreement with US Airways, representing its first distribution pact with a major U.S. carrier since GDS deregulation
(BTN, Sept. 11). "Additionally, Amadeus has an ongoing agreement with United Airlines for access to full content through December 2006," a spokesperson noted by e-mail.
"Amadeus seems to be the odd man out since their strength is in Europe versus the U.S. As the airlines were planning and thinking about reducing some GDS fees, they were looking carefully at Amadeus," Rose said. "Their smaller marketshare in the U.S. hurts their ability to negotiate in a big way."
The GDS said it is in the midst of coming to full terms with major domestic carriers. Until agreements are reached, however, Amadeus has put in place protections to shield customers from $3.50 per-ticket surcharges imposed by American and Delta, while also reaching stopgap agreements with Delta and Northwest that temporarily protect the GDS's subscribers from their surcharges.
Major carriers told BTN they had discussed programs with the GDS, but it would not go along with similar structures or agree to similar deals they had reached with other GDSs. During court proceeding through which the GDS attempted to place an injunction against American's surcharge, the carrier's representatives argued that it offered similar economics to Amadeus that the other GDSs had agreed to. The carrier also argued that since Amadeus had not fallen in line with other GDSs in offering an opt-in program or offering "its subscribers a competitively priced booking option," that the GDS has "refused to compete."
"Throughout their negotiations, American has offered Amadeus a variety of options consistent with the changing marketplace and on par with its competitors, each with a larger domestic presence," David Cush, American Airlines senior vice president of global sales, noted in testimony. Delta also said it was "unable to come to mutually acceptable terms" with Amadeus.
"We continue to work diligently and responsibly with our North American airline customers to reach long-term agreements for full content," the Amadeus memo to customers said. "As our airline negotiations are not yet complete, we cannot provide further details regarding our content access program at this time."