The strife between airlines and global distribution systems spread in recent weeks, even as the U.S. Department of Transportation's proposed GDS regulations were poised to directly impact all combatants. Among other developments, Amadeus raised its pricing for 2003 by an average—arguable to some—of 2.9 percent, and American Airlines signed up additional agencies for its EveryFare program.
AA's EveryFare
(BTN, Oct. 7) initiative, among others, is attempting to overcome what DOT described as airlines having "no practical ability to induce travel agencies to use systems charging lower fees."
American Express did not characterize as similar to EveryFare its new agreement with AA, announced last month, to access by next quarter fares now only available through such online channels as Orbitz and aa.com. Calling their deal "a new model that helps American reduce distribution costs," neither AA nor Amex would explain how the program saves AA money, even after vice president of passenger sales Craig Kreeger noted the carrier's GDS costs exceeded $400 million in 2001. Executives from both companies avoided calling the arrangement a GDS bypass, though the program uses Amex's TravelBahn platform
(BTN, July 29), which was designed in part to facilitate bookings outside the GDS.
"They have kept everything close to the vest," in terms of financial specifics of the deal, said Mark Williams, Tampa, Fla.-based director of Americas travel and meeting management for PricewaterhouseCoopers, an Amex client. "I am still somewhat skeptical as to the true impact because there are not as many Web fares out there in the business markets. I guess there are some, and it certainly is great news from a perception standpoint."
"This jockeying over the GDSs and what's really behind it may be a little bit different than what meets the eye," said Rosenbluth International chairman and CEO Hal Rosenbluth. "I think it's in a very bizarre way the airlines' attempt to lessen the amount of Web fares that are out there. If everything's laid out in one place, you might tend to see less."
A handful of well-connected sources characterized the AA-Amex deal as roughly similar to EveryFare, though perhaps without the same economics or timeframe. Two sources separately said the deal would trade paying the GDS for paying Amex, an "unfair" comment, said an Amex spokesperson.
"Unlike other proposed solutions, we're reengineering costs out of the distribution system," said Pam Arway, American Express corporate travel executive vice president and general manager. "Also, we have made a long-term financial commitment to AA to help them lower their costs. We can't give you the details on the economic model—you just have to know that it's helping lower the costs. The bookings will be made the same as they are made today through the GDSs. In fact, not much changes." She also said access would come through all four GDSs.
Referring to AA's more explicit EveryFare program, Kreeger said, "That's a little different than this one, and we're beginning to see some uptick on it. Amex has a different solution that gives us economics that make it attractive."
AA welcomed two new agencies into the EveryFare program after TQ3 Maritz Travel Solutions turned it on in mid-November: Chicago-area Bannockburn Travel, with 130 employees, and San Antonio, Texas-based Corporate Travel Planners Inc., which said its annual sales are $105 million.
According to TQ3 Maritz Travel, six participating clients were due last week to receive some reporting on the program.
Meanwhile, after calling it "illogical" that no carriers joined US Airways in Galileo's and Sabre's offer of 10 percent lower segment fees in exchange for Web fares
(BTN, Oct. 28), chairman of Cendant travel distribution division Sam Katz said the resulting spat between Worldspan and US Airways is "hypocrisy at its best."
Countering skeptics who said Worldspan's ultimatum
(BTN, Nov. 11) was issued on behalf of its owners, Worldspan president and CEO Paul Blackney said, "Contrary to public perception, our airline owners, while they are keenly interested in the health and performance of the company, do not get involved in the day-to-day in which we manage the company—and they clearly do not get involved in our pricing decisions. We're having very fruitful discussions with US Airways."
Other efforts to pressure GDS costs showed further development. Orbitz CEO Jeff Katz said the company's Supplier Link option
(BTN, Sept. 9), now in effect at American, Continental and Northwest airlines, would spread to eight other carriers "in the next couple of quarters. In prior lives, I would have thought this was an impossible task, but today it's really rather straightforward."
Katz also related direct connections to Orbitz's corporate efforts: "Lower distribution costs and the opportunity to drive more through those pipelines will be really in the crosshairs, particularly for airlines, of the way the corporate travel market works. Vice president of distribution planning Al Lenza said half of Northwest's Orbitz bookings now are made directly. He added that Northwest's World Agent Direct Web site
(BTN, Oct. 7) has 9,000 individual travel agent users in 3,500 locations.
Lenza claimed the Amadeus 2003 increase amounts for Northwest to twice the 2.9 percent average Amadeus publicized, saying perhaps the lower figure was more applicable to European carriers. "Reservation fees for the pricing option chosen by most U.S. carriers will not change," Amadeus said. "Amadeus will, however, begin charging for services, such as ticketing, in line with industry practice."