American Airlines in recent days signaled its intention to use alternate distribution systems as leverage in upcoming negotiations with operators of legacy global distribution systems. Most other major carriers have expressed similar sentiments in recent months and several this morning provided quotes for a G2 SwitchWorks press release supporting that company's new distribution model.
"Some time over the next few months we will be in full production mode with G2 and will have a significant number of bookings very quickly with them," said Dave Cush, AA vice president and general sales manager, in a
BTN interview this week. He also noted intended cooperation with ITA Software, another company that claims to be building a GDS alternative. "These guys are important for two reasons. They provide savings in their own right through compelling economics and they provide a potential point of leverage as we get into our discussions with traditional GDSs."
Existing agreements between several major carriers and the four primary GDS operators--Amadeus, Cendant, Sabre and Worldspan--will begin to expire this autumn. As they did with Web fares to first secure GDS discounts a few years ago, airlines will attempt to use their content and the threat of new entrants to strike new terms, or consider severing ties.
"This is, pure and simple, an economic play," Cush explained, adding that legacy GDSs already offer sufficient technology, products and services. "We cannot afford to pay $11 or $12 on a ticket when our fiercest competitors are paying nothing. Our direct channels are becoming strong enough, and the alternatives out there for travel agencies to gain access to our content are numerous enough, that we don't consider it necessary to participate in four GDSs going forward."
Such a firm stance could complicate matters for certain corporate accounts that are dependent on distributors that may not come to terms with the carrier, but Cush said American is committed to developing full-content solutions for its clients.
Securing support from large travel management companies is a key challenge in shifting to alternate distribution systems. Though Cush said paying agencies to influence usage of any given system is "a bad model," he conceded that certain transitional considerations may be required. "There are other things you can use to incentivize agencies to go to the new entrants, like content and access."
Cush said alternative systems need not capture significant share right away to produce the desired effect. "It may be that one of these guys coming up with 5 percent of the market in the course of the next six months is big enough to impact the economics of the entire market."
American also is working on new corporate and travel agency portals for transactions via its Web site--both slated for introduction later this year--and is pursuing the "next wave" of direct connections with travel agencies. "That may include direct-connect technology into our partition in Sabre or some kind of XML logic giving their online booking tools direct access into our AA.com inventory," Cush explained.
Meanwhile, G2 restated endorsements from most major U.S. carriers
(BTNonline, Aug. 25, 2004) and said American, America West, Continental, Delta and Northwest airlines each agreed to pre-pay distribution fees for up to 8 million total tickets. In exchange, those five airlines would receive discounts on typical G2 fees and "the opportunity to acquire a minority stake in G2." G2 previously announced funding from Norwest Venture Partners and Texas Pacific Group's TPG Ventures
(BTNonline, March 2), but has yet to identify any travel agency clients.
The company said United and US Airways, like their five peers, also agreed to distribute inventory through G2's TrueConnect system.