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As next week's scheduled expiration of British Airways' global distribution system contracts nears, many in the global travel management community are bracing for the outcome. In one scenario, BA would finalize cheaper long-term deals with multiple GDS operators, maintain complete content in their systems and levy no new fees on business travel bookings. If the airline fails to finalize agreements with one or more GDSs, however, corporations could be forced to seek BA's fares and inventory from multiple sources and/or accept new surcharges on many tickets--consequences that likely would draw condemnation from corporate travel managers, travel agencies and industry trade groups.
Though some big European carriers have struck deals with at least one of the four primary GDSs, BA’s experience will be closely watched and could influence other discussions between airlines and Amadeus, Travelport's Galileo, Sabre and Worldspan. Meanwhile, the European Commission is considering the next steps in its review of the European Code of Conduct for Computerized Reservations Systems. It may opt to change or completely phase out rules governing GDS activities in Europe, and will start asking for public comment in the coming weeks.
"Essentially, corporate travel managers share two concerns," said Institute of Travel Management executive director Paul Tilstone, during a recent Business Travel Coalition webcast. "Firstly, they are concerned by the whole money-go-round in travel distribution, as it stands at present. Not many of the buyers understand who pays who for what. Secondly, travel managers are concerned about changes to content that undermine managed travel programs … Neither the buyers nor the travel management companies has a full provision in place for dealing with carrier removal of content."
For example, by seeking lower fares and booking them outside preferred travel management channels, travelers jeopardize their employers' ability to track them, achieve higher program compliance and collect data.
"If airlines work in tandem with GDSs, TMCs and buyers to evolve the model to ensure transparency, at least buyers can make the decision to either pay a higher fee for fully assisted managed programs through the GDS and the TMC, or they can work outside the program on a total spot-buy basis and take data collection for the purpose of traveler tracking, etc., in-house during the authorization process," Tilstone continued.
British Airways has been tight-lipped in providing updates and has not communicated contingency plans should it fail to finalize new agreements with all four GDSs by 28 Feb. In October, BA head of corporate sales Richard Tams had said the airline disfavors surchargesand acknowledged that, "We as an airline do not aspire to be a travel management company. If we did, we'd be really bad at it."
Should BA withhold certain content from GDS channels, however, it could ask business travel clients to book directly via its Web site, an idea anathema to most travel managers.
"Our companies demand a vast array of pre- and post-trip services your airline Web site simply cannot accommodate," explained a letter addressed to BA CEO Willie Walsh, drafted by the Business Travel Coalition and signed by travel management professionals at about 100 multinational companies, including such firms as McKesson, Merck, Oracle and Philips Electronics.
The letter conveys "profound concern" about any BA intentions to remove content from GDSs or impose new fees: "Such negative actions on your part will make it more difficult and expensive for our companies to continue purchasing your product ... Our companies will direct future business to airlines that build their distribution programs around our preferences."
During his organization's webcast this month, BTC chairman Kevin Mitchell described BA as "the uber-user" of complex GDS and travel management company distribution services, owing to its market position, geographic scope and mix of business customers. BA, he said, "potentially secures more value from TMC distribution than any airline in the world."
During that same webcast, Guild of Travel Management Companies CEO Philip Carlisle said BA bookings would be more difficult and expensive for corporations "if anything disrupts the current system without having a good replacement." He said he was "optimistic that we can reach a sensible compromise."
The Scottish Passenger Agents Association was less optimistic, suggesting this week in a statement that any decisions by BA would present "stark" choices for TMCs. "We will be forced either to use BA’s own online booking facility to source purely BA itineraries, with the resulting increased administration workload, or to pass on the increased charge to our customers," according to Brian Potter of the SPAA air committee. "However we respond, our customers will inevitably pay more to fly on BA services."
In another BTC webcast that aired today, Mitchell said the BA "is risking being out of alignment with the strategies of their best customers."
If recent history from the United States--where intensifying rhetoric from airlines and GDS operators in 2006 eventually gave way to new, long-term deals--serves as a guide, it is predictable that BA will hammer out at least a couple of new agreements, or temporarily extend existing contracts.
In a broader sense, EC is examining when and how to alter the GDS code of conduct. One approach favored by some parties is the nearly complete elimination of regulations, with any remaining rules to be phased out should Air France, Lufthansa and Iberia divest their stakes in Amadeus--the only GDS that still has airline owners.
"We envision a code in Europe that is stripped down to a bare minimum," said Bruce Charendoff, Sabre Holdings senior vice president for government and external affairs, speaking last week at the Business Travel Show in London. He said such "core protections" as mandatory participation in all GDSs by any airline that owns part of any one GDS company, and prohibitions against airlines tying travel agency commissions to use of a GDS in which that airline hold an ownership stake should, for now, be maintained. "Whatever rules may survive this analysis would sunset the moment airline ownership goes away."
Without rules, Charendoff added, airlines that own part of a GDS company "have the means and the incentive to distort competition."
Fellow panelist Angel Gallego, Amadeus director of markets in Western Europe, countered that assertion. "The financing investors only care about the return and the profitability of Amadeus," he said. "If we were to favor one airline over another, we would do a weak favor for our company. It is in the best interest of Amadeus to have as rich content as possible and gave fair access to that content … We see no reason why Europe should be regulated while many regions of the world are not."
EC will "keep a very open mind and keep all the options on the table," according to Frank Laurent, representing EC's directorate-general for energy and transport during last week's panel discussion in London. EC soon will ask for public input and could propose changes to the code "perhaps before the end of this year."
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