Sabre Holdings today said it expects incentives it pays agencies, including its own Travelocity, to grow by as much as $50 million in 2004, adding to a cost line that now is Sabre's largest at approximately $400 million in 2003. Asked whether the $50 million estimate excludes the impact of renegotiations next year with agencies, chairman and president Bill Hannigan said, "For the most part, that's correct as we sit here in October."
Hannigan said Sabre in 2004 will be renegotiating between 30 percent and 40 percent of its agency contracts, which are expiring, and "our expectation is that the market rate for incentives can improve."
Noting that the company will reveal more about a model for such reductions, Hannigan said Sabre now is providing to subscribers more of what might previously have been known as "Web fares," and that carriers are beginning to differentiate between high- and low-cost GDSs. Like some of its competitors, Sabre is arguing for reduced incentives because it is getting less revenue from carriers following the proliferation of discount deals that secure more universal content in the GDSs
(BTN, Aug. 11). Sabre today said its Direct Connect Availability Three-Year Option now is in use by more than 20 airlines covering 40 percent of Sabre's direct bookings. "We're no longer actively marketing DCA-Three, but we are in discussions with a couple of the participants' affiliated carriers in Europe," Hannigan added, noting that discounts will remain "in the ballpark of about 12.5 percent." Next year's pricing for non-participants, he said, would be announced in early December.
Hannigan said it remains unclear whether the new programs are slowing the rate of bookings shifting away from the GDS, which Sabre of late has pegged at 4 percent to 5 percent.
Amadeus Global Travel Distribution, meanwhile, yesterday called models like Sabre's DCA-Three "a short-term solution for a new business environment that is here to stay" and said that while it does offer a solution to access Web fares, "Amadeus believes that the future of distribution lies in an alternative approach where the value of GDS distribution is linked to the benefits that travel agents bring to the airlines, irrespective of the carrier's size, geographic location or business model. Consequently, over the past year Amadeus and a selection of airline customers have held extensive discussions on ways to address distribution issues."
Officials with Galileo International parent Cendant Corp. this week said they expect by year-end to have signed all major U.S. carriers to its Preferred Fares Select program, which recently added United Airlines.
Both Cendant and Sabre reported lower earnings in the quarter ending in September than they enjoyed in the same period a year ago. Amadeus, which will report quarterly earnings next week, also is planning to reveal its 2004 pricing in December.