GDS Vet Discusses Distribution
BTN executive editor Jay Campbell on Oct. 24 met with Worldspan president and CEO Paul Blackney to discuss rapidly changing travel distribution. The veteran global distribution system CEO joined Worldspan in 1999 after serving at Apollo's helm from 1993 to 1997.
BTN: What do you make of the airlines' efforts to cut GDS costs?
Paul Blackney: They're all grasping at straws as to what they can do, and, for some reason, have focused on the cost of selling things, which is surprising, in some ways, because there is no cost to an airline until something gets sold. All the shopping that takes place online, there's no charge for that—it's built into the cost of when something gets sold. The situation has become a cause celebre. I don't know what their motivation is.
BTN: Things appear to be changing rapidly in distribution; it's almost chaotic.
Blackney: Chaotic or frenetic. There's not a healthy airline. They all verge from terminal to very sick, and they are all reacting in whatever way they can to try and stem the flow, but I don't think I've ever seen a time in my experience where the industry is as weak as it is right now.
BTN: What's the status of Worldspan's plans for changing GDS economics?
Blackney: We're getting closer.
BTN: Do the other announcements, such as AA's Everyfare or US Airways' programs with Galileo and Sabre, change anything?
Blackney: Not really, because everything that's announced, somebody has said somewhere along the line. Whether they are parts of a real solution or not, I don't know.
BTN: Will these changes happen one to one or across the board?
Blackney: I don't think you do it on a one-to-one basis with customers, but it may be more evolutionary than revolutionary. Historically speaking, this industry has done precious little on a revolutionary basis. It took close to 10 years before the GDSs were really ubiquitous and universal.
BTN: Some have speculated about the impact on agencies of bundled programs in which the corporate self-booking provider also offers fulfillment. Expedia and Orbitz are coming at the market that way, and such other self-booking tools as GetThere offer similar programs. What about Worldspan with Trip Manager?
Blackney: We have fulfillment partners, and that is our preferred method. If a corporation contracts with us and their agency currently isn't a partner, we'd just as soon have the agency become one. We're not trying to get into that side of the business. You need to have the agency supporting it and fulfilling what gets booked, but even more than that, you need to have active promotion in using it and the involvement by the right people within the corporation to get it done. I don't want to be guilty of profiling or characterizing everybody as one way or the other, but there are agencies that view a corporate online booking tool as a box on a response to an RFP. Once the box is checked, they're done with it. If their service fee is $30 for a full-service booking and $15 for online, there are those who would rather have the $30 than the $15 because they're not willing, or able, or don't see that they need to, take out the cost from their own operation.
BTN: What do you think is holding back direct connections?
Blackney: Anybody in a reasonable period of time could make the statement that they connect with four or five airlines—you know, "We have direct connections with American, United, Delta, Northwest, Continental, even America West." Now what do you do about the other 400? Are you a full-service booking tool? Are you completely facile and useful to a corporation or an agency or anything else? Sure, you probably do 90 percent of your domestic travel with those carriers, but what happens when the trip you want involves the other 10 percent? There's still some wishful thinking on the part of some people that things like direct connect will continue to exclude the likes of a Southwest and actually give them a competitive advantage. That's just silly.
BTN: Some agencies appear to be responding to the likes of Expedia and Orbitz with small-account booking sites of their own.
Blackney: There is a diminishing return in the proliferation of travel Web sites. You've got Orbitz, Priceline, Expedia, Hotwire, Travelocity. If you're really inclined to do your bookings online and you can't find a home in one of those locations or among maybe five more, I'd be surprised. Why would you be more comfortable booking on the Web site of your bricks and mortar agency, which probably is not fully competitive with what an Orbitz or Expedia can do? Technology is not a commodity, but it's ubiquitous. If I owned a bricks and mortar agency, I'd play to my strengths on differentiating myself in what value I give to my clients. There's value in knowledge, not just on the high end, but it seems there's this constant rush for everybody to be everything.
BTN: Is Worldspan still ahead of Galileo in U.S. marketshare, at second place overall?
Blackney: Yes, and growing.
BTN: There's been some talk lately about GDSs buying agencies. Do you think it's likely?
Blackney: Maybe some will. We won't. First of all, I don't even like to think of us as a GDS anymore. It's a concept that's mired in the last century. For some of our suppliers, "GDS" usually has an adjective or a string of adjectives in front of it that I don't necessarily find appealing. Anyway, that's not what we do really.
We're not trying to be the overall broker of travel. We are a competent supplier of travel technology that enables sellers of products to connect electronically to distributors and buyers, which puts us in the middle of a chain of distribution. If you start buying retail agencies, you move yourself out of the center and out to the end, and at that point in time, not only do you get the adjectives in front of GDS, you get them in front of "distributor." I have a really hard time competing with our customer.
BTN: To what extent are agencies using a single GDS platform globally?
Blackney: No one's doing it. They're talking about it. It's hard to really enforce the discipline necessary to make something like that happen. For example, for a German company, Amadeus is a great decision. It doesn't work as well if you have a major customer or a branch in Atlanta or Denver.
BTN: How long do you see yourself at Worldspan?
Blackney: I see myself there as long as I'm having fun, and I'm having a great time. It's certainly a trying time in the industry, and one could argue a stressful one. I had surgery a year ago, and that's changed my outlook a lot, which has actually increased my fun component. That doesn't mean I don't take it seriously, it just means I won't worry myself into an earlier than necessary grave.