Air Canada and Sabre this month 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 is the first of its kind in the Canadian market and provides a discount on GDS fees to Air Canada, which aggressively has been diverting bookings to its Internet site. In exchange, Sabre-connected travel agencies in Canada will gain access to nearly all of the carrier's fares, provided they opt into the program and accept a 50-cent (68-cent Canadian) reduction in segment incentive payments.
Air Canada on July 5 officially will begin participating in Sabre's Direct Connect Availability, providing all published travel agency fares to Sabre agency subscribers via the traditional booking channel. Sabre said agents will access "45 percent more Air Canada domestic fares and 15 percent more transborder fares." 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 should improve agent productivity.
From the airline perspective, the deal 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. He 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 awhile 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 it had been offering to travel agencies booking on the Internet."
IncentivesAs for GDS incentives, Sabre will reduce by 50 cents the incentive it pays per booked Air Canada segment to connected agencies. The reduction applies to those agencies that opt into the program. Sabre would not divulge the average incentive paid to Canadian agents. Those not opting in will not have access in the GDS to the broader range of Air Canada fares and instead they must book many fares on the carrier's Web site.
Joe Herzog, Sabre Travel Network divisional vice president and general manager for Canada, said opting in provides agencies with a competitive advantage and "allows agents to book with confidence that they have the best content and information available and can give their customers the best possible service and value."
Vaughan Payne, president of ATCO Travel, a division of Calgary-based ATCO Group, 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 claimed that 60 percent of all Canadian travel agency bookings are made in a GDS. Air Canada now is looking to seal deals with Amadeus, Galileo and Worldspan. "The expectation," Rosenberg said, "is that we should conclude similar deals with each, reflecting the Canadian model."