Global distribution system operator Amadeus in 2006 will include new options for airline pricing by further segmenting booking-fee types, increasing rebates paid to carriers providing full content and introducing the first stage of unbundled pricing for other airline products and services. The changes represent "an evolution" of the Amadeus approach, according to company officials. Amadeus in late 2003 was the first GDS operator to formalize and widely communicate value-based airline pricing
(BTN, Dec. 8, 2003).
Specifically, Amadeus will introduce a booking-fee level for regional segments, between fee levels levied on domestic and long-haul segments. Differentiation within each category separates bookings that are executed in a carrier's primary market—as selected by the airline—versus those that are made out-of-market, meaning the Amadeus fee structure now includes six levels.
The highest fees are on long-haul bookings and the lowest for domestic bookings. "In its domestic market, an airline tends to have more brand power and generally finds it easier to sell their tickets through direct channels or whatever, whereas when you get far away from that market, the airline sees a lot of value in the GDS," said an Amadeus spokesman. The company would not predict the aggregate overall change in the average segment fee expected for next year.
Other GDS operators similarly have been developing differentiated segment fee models. "We have some flexibility that we did not have before," said Sabre Travel Network senior vice president Chris Kroeger, in a
BTN interview this week. "There is a booking fee for trips that fall within your home country. There is a booking fee for trips that go between your home country and another country, and another booking fee for trips that start outside your home country. Each of those has a unique value to the airline, each of those has different complexities from a pricing perspective and each drives different revenue for the airline."
Kroeger said some airlines have shown interest in the model, while "other carriers prefer simplicity."
Meanwhile, Amadeus increased the rebate paid to airlines that provide full content to Amadeus-connected travel agencies, including their lowest available fares. The rebate will rise from 25 euro cents (29 U.S. cents) to 45 euro cents for bookings "in certain agreed fare classes." The spokesman said that while such programs still are in testing, several airlines are participating.
The company also said it has started to unbundle pricing covering other types of airline products and services. As a first step, it is itemizing pricing on yield-management tools. "They can choose if they want to take it or do not want to take it," the spokesman said.
As other GDS operators similarly have indicated, a deeper relationship with Amadeus would provide a carrier with more favorable pricing. "You move away from a booking-fee approach to a completely different model," the spokesman said, noting as an example a new framework with United Airlines based in part on passengers boarded. United recently signed a far-reaching agreement with Amadeus in the context of a planned Star Alliance common IT platform
(BTN, Sept. 19). "If you move into that bigger relationship with us through that technology route, it will affect the amount that is paid."
Sabre's similar approach was exemplified most recently in a new, five-year full-content agreement with AirTran Airways. "It is not just a GDS deal," Kroeger explained. "It covers many different aspects of Sabre's business. There is an airline solutions element, there is a Travelocity relationship and then of course there is the distributing through the Sabre Travel Network of agencies. Before, your GDS booking fee discussion had to be standard and structured, and available to every other airline. Now, being able to look holistically and combine pieces, we are able to structure something unique to each airline."