Southwest Airlines last week signed a distribution agreement with Galileo, offering its published fares and inventory—not including exclusive Web fares—to subscribers of the global distribution system. The 10-year agreement is signed, but Southwest director of corporate sales Rob Brown said its content would not go live in the Galileo channel until later this year, as there's "still technical work that needs to be done to connect the two."
The deal gives Southwest more meaningful penetration in a channel it largely has shunned, except for limited participation in Sabre, while giving further access of its fares to corporate travelers.
Galileo and Southwest in a statement said subscribers will pay a fee to access content, but the carrier and GDS would not yet disclose the pricing, and even Galileo subscribers said they have not received specifics. "Details of the cost to agents for this Southwest content will be available shortly," the companies said.
"Because of the specifics of the agreement, there's a lot I can't share, but we are going to participate at their entry level of participation. That's the initial arrangement. Over time, it's going to evolve to a more interactive level," Brown said.
Corporate Solutions Group consultant Bob Lichtman said the agreement has been a long time coming and would be welcomed by corporate travel buyers. "It did surprise me," Lichtman said. "It's something that should have happened years and years ago. Sabre is the only GDS that has held at least minimal content with Southwest for years. This is a big deal. I can't believe it took so long."
While Brown said there are no immediately pending agreements with other distributors, he noted, "In this changing and crazy world, we're always having conversations with technology companies and other distribution channels. As opportunities are presented to Southwest, we'll evaluate them accordingly."
Southwest CEO Gary Kelly last Wednesday during a shareholder meeting said the initiative is one of many in the pipeline that he hopes will spur new forms of passenger revenue at Southwest, which is seeing some softness in domestic demand. "This is a significant revenue growth opportunity for Southwest Airlines and will help us further penetrate that business travel segment," CEO Kelly said of the Galileo agreement.
Southwest always had garnered the bulk of its business through direct distribution channels. However, amid new distribution economics that entered the industry last year, GDSs have become more affordable for many domestic airlines. Southwest vice president of marketing, sales and distribution Kevin Krone last month told BTN that even though the expense had come down for other carriers, it still would come at an additional cost to Southwest, but still did not rule out the channel. Last week, Kelly said, "this agreement with Galileo provides a very cost-effective distribution alternative for us and one that supports our low-cost leadership position."
JetBlue last year began relisting in all of the major GDSs, noting a windfall of incremental revenue
(BTN, Nov. 6, 2006), but Southwest remained steadfast, still preferring its Swabiz booking tool as the direct link to corporate travel buyers. The tool has gained favor with some companies, but kept Southwest penetration down at others
(BTN, April 2). "Swabiz, for what it is, was a decent product—easy to use, very functional," Lichtman said. "However, in large organizations, it takes you away from that centralized database that everybody uses for all the other travel. It makes the process of procuring air much more difficult for a larger organization."
Marc Casto, president and COO of Santa Clara, Calif.-based travel management company Casto Travel, said, "Southwest is one of the top carriers for many of our clients, given our location. Our clients want to have access to inventory at all times—whether that is online or offline."
Casto said his agency, which is a Galileo shop, currently uses Swabiz and BookingBuilder to access Southwest content. "Swabiz is in our estimate a good bridge, but an insufficient bridge, particularly as it relates to the integration of travel data for management reports," Casto said. "By including it within the GDS, it will allow us to give more accurate and detailed reports to our clients."
Southwest in the past participated only in the Sabre GDS to a limited degree. "We've been in Sabre for years, but that's really for brick-and-mortar travel agencies. There's no online distribution of us," Krone said last year. "We're probably in our about 20th year with them, but we've not paid to be in any other CRS."
Sabre said in a statement last week said, "We are pleased to see the ongoing recognition of the importance of the travel agency channel and their corporate customers and believe it confirms the value and importance of the GDS channel for all size carriers."
Lichtman said Galileo's access to Southwest content "will add more competition to Sabre, which is a good thing. The fact that the GDSs have been more competitive in their fees to airlines I'm sure played a big role in the deal."
Meanwhile, Kelly said Southwest plans new sources of passenger revenues "so we can rely less on fare increases." He noted that while Southwest recorded record load factors in the past year, it still is below the industry leaders. Kelly also hinted at broadening partnerships with other airlines a la the carrier's codeshare partnership with ATA Airlines. "Our plan in 2009 is to expand our codeshare network and our revenues with near international destinations. We'll consider far international destinations, like Europe or Asia, after that." Kelly said the carrier has invested in new codeshare systems and reservations capabilities.