Southwest Airlines raised eyebrows across the industry last week when it announced a new, long-term distribution agreement with the Galileo global distribution system, a unit of Travelport. Though the deal broke from the carrier's longstanding distribution strategy which had involved only direct channels and basic booking capabilities within the Sabre GDS, it remains to be seen how much of an impact it will have in the managed travel community.
The 10-year pact would enable Southwest bookings later this year through many more corporate traveler points of sale, including travel agencies subscribed to and online booking tools connected to Galileo's Apollo system. Initially, it will mirror Southwest's deal with Sabre, though Galileo agencies--thus far, unlike Sabre agencies--will be asked to help subsidize Southwest's participation. Details of that fee structure have not been revealed.
Corporate travel programs for years have had options for accessing Southwest's fares, even if their travel management companies were not Sabre subscribers. Some allowed direct bookings on the carrier's Web site, instructed agents to call Southwest when needed or used other work-around solutions.
At the beginning of the decade, Southwest dove into the business travel sector by formalizing a corporate sales force and launching the Swabiz online portal. Swabiz quickly attracted managed corporate and collegiate travel programs of all sizes, due to its no-transaction model--unlike bookings through travel management companies or online booking tools that generally incur fees--and reporting capabilities. Like Southwest's consumer site, Swabiz also contains a full listing of available Southwest airfares. [Participation in Sabre and forthcoming participation in Galileo excludes certain Web-only fares that Southwest lists exclusively through its direct Internet channel.]
Southwest eventually allowed links to Swabiz from Expedia Corporate Travel and a BookingBuilder Technologies tool that helps agents book content not found in GDSs. The carrier previously had spurned any attempts by third parties to access its inventory.
Currently, Swabiz is an entrenched element of many managed travel programs, offering the side benefit of discreet bookings that are not included in the GDS data that airlines buy partly to assess corporate client performance.
Given the advantages of direct Swabiz bookings by corporate travelers or via BookingBuilder by TMCs, some sources said they would continue using that online portal even once they can access Southwest fares via Galileo.
"A lot of heavy Southwest bookers who are on Sabre prefer to use our product [for Southwest bookings] because ticket numbers and frequent flyer numbers don't transmit" through GDSs at basic airline participation levels, said BookingBuilder founder and president Seth Perelman. "The process is more efficient in our product."
Perelman, however, suspected that travel agency functionality related to Southwest ticket numbers and frequent flyer membership would "be resolved in time," when Southwest moves to a higher participation level in Galileo/Apollo.
The higher, or "interactive" participation level, allows GDS users to "actually book inventory in real time," rather than relying on requests to and responses from airlines, said Jean Collier, senior director of supplier services for Galileo Americas. "You know the seat is available and you don't have to wait for confirmation back from the airline. For the airlines, it is a more efficient way of handling business from other channels aside from their own." [Neither Southwest nor Sabre said the parties are actively involved in raising the carrier's participation level within the Sabre GDS.]
Regardless of when Southwest and Galileo complete the technical work required to get the airline into the GDS's interactive level, Galileo expects the addition of Southwest to help round out the content it offers to subscribers
"Subscribers recognize the value of having content in one place," Collier said. "It improves their productivity and efficiency. There is a value to them that they are prepared to pay for."
In addition to support from subscribers, Galileo no doubt offered economic terms that Southwest found compelling. Those terms were made possible by GDS deregulation in the United States a few years ago that freed GDS operators to more flexibly set airline pricing--and prompted major network carriers to compel them to do so downwardly. In addition to the lower-priced agreements that GDS firms signed last year with larger airlines, JetBlue Airways' decision in 2006 to resume GDS participation is a testament to the practical application of that flexibility.
From the Southwest perspective, the Galileo deal "provides a very cost-effective distribution alternative for us," said CEO Gary Kelly, who announced the agreement last week during a Southwest shareholder's meeting.
Moreover, GDS channels--generally favored by managed travel programs for their efficiencies--are widely considered a generator of higher yields than direct Internet channels. "This is a significant revenue growth opportunity for Southwest Airlines and to help us further penetrate the business travel segment, which will itself be a major initiative for us over the next several years," Kelly said.
Officials at both Southwest and Galileo claimed that Galileo parent Travelport's proposed acquisition of Worldspanplayed no role in finalizing the agreement. "Our existing relationship with Galileo is what opened the door to this deal," said Brad Newcomb, Southwest senior director of sales and distribution, noting that Galileo provides hotel and car rental content for Southwest's consumer and business-to-business Web sites.
"We have always tried to leverage our strengths in terms of distribution, our global footprint and our business mix where the GDS channel brings a higher yield and brings corporate customers to the airlines," added Galileo's Collier. "The timing was right."