ARC last month announced that a "significant volume" of American Airlines' online traffic had shifted to its Direct Connections program, helping further what ARC called its "viable" ambition to "be recognized as the industry's data store."
Continental, Northwest and three other major U.S. carriers are participating in the ARC program, which enables settlement, credit card billing, data storage and reporting on bookings made outside the global distribution systems.
AA named Orbitz, but other channels through which such direct bookings are being made include Navitaire and the carriers' own Web sites. "Conversations are picking up with large agencies," said Barry Lemley, ARC director of emerging markets. "Bypass has been whispered about before, but now it's coming out of the closet."
In dealing with the ramifications of bypass, ARC is competing with a number of parties seeking to collect data from a growing number of sources. ARC did not comment on word that it is seeking the help of such parties as WorldTravel BTI sibling TRX Inc. and Rosenbluth International's Eclipse Advisors to build what one source loosely called "an anti-Prism deal." Prism Group Inc. is the Albuquerque, N.M.-based technology developer and consulting firm that provides contract management solutions to such carriers as Continental, Northwest, United and, most recently, Delta
(BTN, Dec. 9, 2002).Eclipse would not comment on what BTN learned is a fairly new relationship with ARC, which was designed to apply Eclipse's decision-support and other capabilities to ARC's data. TRX president Trip Davis did not downplay his company's ARC partnership, but declined to verify that it entered a new phase in late 2001 with a particular focus on TRX's data consolidation, enhancement and reporting services. "We've been working closely with ARC for over seven years on ways to innovate and improve data flows, and we're really keen on continuing that innovation," he said. Some sources speculated that the ARC-TRX relationship may turn out to be short-lived.
Characterizing ARC's sleeping potential, one source said it "has everything but nothing at the same time. I'm not sure how far they'll get in convincing airlines they can offer what Prism does, because they're not as entrepreneurial."
"I'm not sure what they bring to the party on data," said Frank Bush, CFO at Hi-Mark Software in Atlanta. "They have severe limitations, and this is total hype. The fact is, there is serious competition in this data warehousing business. We and other players aggressively are going after the airline market."
In addition to such traditional providers of GDS-based MIDT data as Bradenton, Fla.-based Cendant subsidiary Shepherd Systems, other players making a more aggressive push into the realm of airline data solutions include Austin, Texas-based Trilogy Software. Trilogy last month announced an agreement with British Airways—which works with Prism in North America—to "build and deploy a global deal and contract management solution for the airline industry" that Trilogy "will offer to other businesses in the airline, travel and transportation industries."
Noting that Hi-Mark, whose customer base is strongest in the agency community, has "no airline customers we can speak about today," Bush said Hi-Mark has no relationship with ARC and "cautions buyers and distributors against aligning too closely with the airline community."
"ARC has a great opportunity to become a neutral data source to many parties in the industry," said Mat Orrego, president of Cornerstone Information Systems, which also provides data consolidation and reporting services. "Of course, neutrality is proven by action."
Despite the probable cost advantages, neutrality is one of many questions raised by the prospect of airline-owned ARC, Orbitz and/or UATP handling many of one's distribution needs.
"We think of ourselves as trusted and neutral," Lemley said during a January presentation. To its credit, ARC has been responsive to constituents other than the airlines. It weighed a substantial amount of feedback and modified some conditions on the controversial new rules that, as of last week, shorten the amount of time that is allotted for accredited agencies and the more than 150 Corporate Travel Departments to void and modify a ticket.
ARC is mum on the effective date of the next phase in its Business Process Improvement initiative—daily reporting by agencies and CTDs of data and expected remittance—which could position ARC as a data reporter that rivals the GDS providers in speed. As it captures the expansion of direct connections, ARC already beats the GDSs in scope.
"In 1983, GDSs processed 88 percent of all ticket transactions in the United States," said Sabre Holdings Corp. executive vice president and general counsel David Schwarte at last month's U.S. Department of Transportation hearing on GDS regulations
(see story). "By 2002, that number had declined to 53.7 percent."
"We're seeing an evolutionary change where, as more carriers set up to connect agents to their host reservations systems through different access points, there's an increased need for some kind of consolidation," said Bruce Berndt, ARC senior manager of emerging markets, in an interview late last year.
"ARC sales reporting is a logical step in American's efforts to decrease the cost of distribution and make direct connects more agency-friendly," said an AA spokesperson. "We have no plans at this time to add more agencies to the ARC settlement product, but we're always open to considering solutions that make sense for both parties."
According to Northwest, the number of agency participants in its WorldAgent Direct program had grown to nearly 5,000 by the end of April.
Debated for many years
(BTN, May 7, 2001), direct connections in the corporate marketplace have taken a long time to develop, partly because ARC took a long time to develop them. "Projects that have taken quite awhile to develop are coming to fruition," Berndt said.
"The airlines' host systems lack retail functionality, and so each carrier was facing the need for a custom solution to handle that," ARC's Lemley said. "This year, we'll see a number of new direct connections."
ARC's work on direct connections started in the latter half of the 1990s with what then was known as Via World Network. Now part of Accenture's Navitaire unit, that organization is processing direct bookings on behalf of one account, itself. Its agency, Carlson Wagonlit Travel, is poised to announce an expansion of that service.
"Via's goal was to provide an alternative to the GDSs," Berndt said. "When that was attempted, there were a number of pieces missing in the model that required considerable development. The airlines wanted Via to use ARC to avoid custom development of settlement, which is one of the least-understood aspects of the distribution chain."
A key achievement, he said, was the incorporation into ARC's Interactive Agency Reporting of a mechanism that allows agencies to provide to ARC the ticketing files that traditionally were transmitted from GDS providers.
"As the GDSs respond to direct connections and come out with their supplier fee discounts, they've made it clear they'll fund those discounts by reducing remuneration to agencies," Berndt said. "If agencies want to minimize that next big hit, they need to negotiate directly with the airlines. That's starting to happen."