Amadeus and Sabre this month announced an agreement enabling each global distribution system to leverage the other to access nonparticipating carriers' fares. Travel management companies, travel managers and corporate travel associations generally favored the agreement, noting that it would provide fare content should a carrier refuse to participate in all GDSs, yet some domestic carriers—led by American Airlines—said the deal conflicts with existing content agreements, while also taking away the potentially powerful bargaining chip of withdrawal threats as distribution contracts expire this year. As such, the matter may be settled in the courts, not at the negotiating table.
Amadeus and Sabre are positioning the agreement as a safety net that allows clients to gain access to potentially unavailable airfares, but said they have yet to execute the agreement, nor will they if content negotiations with carriers go as planned.
"We continue to do business as we normally do and compete as vigorously as we have," a Sabre spokesperson said. "This really is an insurance policy for our travel agents, corporations and travelers to make sure they can continue to travel without disruption."
Amadeus in a statement said the agreement allows customers "to complete bookings on an airline in the unlikely event of that airline withdrawing from participation in Amadeus. Amadeus will offer the same back-up for Sabre." Neither Sabre nor Amadeus would release specific terms of the agreement.
Labeling the new Sabre and Amadeus relationship a "cartel," David Cush, American Airlines vice president and general sales manager, last week said that both GDSs denied requests by American's legal department to review the agreement. From what the carrier already knows, however, it appears the deal violates American's contracts, he said. "We requested the documents from each of them and each of them have denied the requests, citing the confidentiality clauses in their agreements," Cush said. "With one of the two parties, this arrangement—with what we've read in the press—is expressly prohibited from even entering into the agreement. In the other contract, the entity is prohibited or not allowed to fulfill the agreement and become the backup. One is already in violation by even signing the agreement. The other one would be in violation if they tried to honor the agreement."
While still negotiating contracts with all GDSs, American said that in the approaching weeks it would continue discussions on contracts with Sabre and Amadeus, while its legal department explores other options.
"Some of it may depend on whether we're able in the next several weeks to reach commercial agreements with any of the GDSs. Lacking that, we will probably be taking action in court—to either go in and gain access to those documents if we think they're in violation, which we do, or seek some type of injunction for them entering into those agreements. The other thing, of course, which remains to be seen, is if the Department of Justice gets interested in this. I would assure you that if it were American and United forming a negotiating cartel, the Department of Justice would be quite interested in this."
Other major carriers were more subdued in their commentary, while others declined to comment.
"Continental has not authorized content sharing between GDS operators, including Sabre and Amadeus. We will challenge sharing our content without our authorization, which is not permitted by our GDS agreements and is clearly anticompetitive," a Continental spokesperson said last week.
"We have one agreement covering Sabre subscribers and one agreement covering Amadeus subscribers and we expect the parties to respect those agreements," Northwest Airlines said in a statement, but would not comment further. Meanwhile, United said it is reviewing the matter, but would not comment on whether there is a conflict with existing agreements.
Amadeus and Sabre, however, continue to vigorously defend the agreements. "We certainly wouldn't have entered into any type of agreement if we didn't think there was legal basis to do so," said Amadeus North America director of marketing Owen Wild. "From both an agreement standpoint and a competitive standpoint, the agreement should meet the litmus test both domestically and internationally."
The Business Travel Coalition and the American Society of Travel Agents weighed in on the side of Amadeus and Sabre, saying the "forward-thinking agreement gives travel agents, on behalf of their customers, the ability to complete bookings on an airline that might not participate in one of the GDSs but continues to participate in the other."
Rich Products Corp. travel administrator and BTC member Jean Covelli in a statement issued by ASTA and BTC said, "A corporation losing the complete inventory of a major airline would face a significant and costly short-term business continuity crisis. In such a scenario, a corporation would be forced into a highly inefficient process requiring employees to shop for and purchase air travel services through a variety of alternative distribution channels to their travel agency of record. A corporation could potentially need to switch to a new travel agency—a costly and disruptive process. Overall administrative, process and purchasing costs would likely increase dramatically."
BTC and ASTA encouraged other GDSs to forge similar arrangements, yet as of press time no other major travel distributors had yet to follow.
Amadeus and Sabre said they are not pursuing similar arrangements with other GDSs, and Worldspan elected not to comment. Sabre in a filing submitted to the Securities and Exchange Commission at the time of the agreement said it is not working with other GDS companies on similar agreements, but would not disclose whether it is pursuing further projects with Amadeus.
Sabre said the deal is not without precedent, as the GDS already leverages other distribution partners outside of the United States, including Abacus in Asia and Falcon in the Middle East. "It's not unprecedented, but what gets people's attention is that it's Amadeus and Sabre," a spokesperson said.
Ron DiLeo, American Express senior vice president for EMEA Business Travel, said the agreement gives travel managers "better data, better compliance and one place for multinational inventory."
Sabre said the deal covers only airline content, since "it is in the area of air that there has been a lot of noise and rhetoric, including some speculation that an airline may withdraw from one of the systems."
"A lot of the airlines are threatening to withdraw content from the channel," said Andrew Winterton, American Express vice president and global leader of the Supplier Relations Group. "This agreement makes it far more difficult to implement that threat."
Among those carriers that have posited possible withdrawal from one or several GDSs is American. In a memo sent to clients days following the Amadeus/Sabre agreement, Cush said that American—like all the major U.S. carriers—is "striving to decrease the distribution cost disadvantage we have relative to many of our competitors, while providing you with several choices as to where you access American's fare and inventory content."
"We want you to know it is possible that we may not participate in all GDSs going forward," the memo said. "Further, if you choose to source your fare content through a more expensive distribution channel, you may be asked to cover some distribution expense. While these situations are not desirable for either of us, they may be necessary to insure American's competitive position."
Amadeus and Sabre asserted that the agreement does not lessen ongoing attempts to sign major U.S. airlines to full content deals, many of which are up for expiration this year. Sabre, which recently signed Northwest and US Airways to separate five-year, full-content arrangements
(BTN, Feb. 6), now has full content from carriers that make up 20 percent of the U.S. market and expects that others will follow. "We have signed up over 200 carriers worldwide for full-content one-year agreements, and are having productive conversations with the other DCA3 carriers," a Sabre spokesperson said.
As both GDSs and airlines continue to renegotiate expiring contracts, Amadeus' Wild said of the agreement, "We don't anticipate ever having to use it, but we want to make sure there's coverage for our customers, and our customers' customers as well."