Global distribution system firms in recent weeks altered their 2004 pricing structures and signed additional airlines to their content-for-discount programs even as the U.S. Department of Transportation finalized its rules governing such relationships in its Dec. 31, 2003, decision to deregulate the GDSs beginning this month. Complete elimination of the rules under which GDSs have operated since the 1980s will take place in July
(BTNonline, Jan. 5).
As a result of DOT's decree, corporate travel buyers will need to be wary of varying airline participation levels and display bias in global distribution systems, as well as airline access to booking data, said travel management companies.
GDS firms, TMCs and others, including the National Business Travel Association, hailed DOT's final rule, largely because it avoided new regulations DOT proposed more than one year ago
(BTN, Dec. 9, 2002). DOT's conclusion sanctions greater freedom for airlines and GDS providers to negotiate price and product with one another while prohibiting, until the end of July, flight display bias and certain contractual clauses that secure parity in airline participation or access to Web-only fares.
DOT assured consumers it remains committed to policing anticompetitive practices. "We intend to monitor developments in the industry during this period and beyond," wrote DOT, referring, in part, to such controversial industry practices as the sale to airlines of booking data
(BTN, June 9, 2003) and the tying together of GDS and airline deals with corporate accounts
(BTN, July 7, 2003). "We, of course, retain our authority to pursue future regulatory or enforcement actions against airlines or systems that engage in anticompetitive practices."
"NBTA does have some immediate concerns regarding DOT's decision to eliminate the display bias rules and to retreat from forbidding the sale of airline marketing and booking data, despite DOT's recognition that these two practices could be used in anticompetitive ways," NBTA said.
According to Carlson Wagonlit Travel, buyers "need to take a much more active role in choosing their GDS provider" to be sure it suits the needs of their airline programs and should be concerned about airlines' enhanced "ability to leverage the corporation during negotiations" using booking data from GDS companies. Northwestern Travel Management pointed out that it and other TMCs provide technology to customers that combats bias in airline displays to work in clients' favor.
"Individuals contracting with the GDSs are now free to request that GDSs maintain the privacy of all or part of their data," American Express said.
Amex's Eclipse Advisors subsidiary stated that smaller airlines may be disadvantaged vis-à-vis their larger competitors in negotiations with GDS companies: "There may well be situations in which your preferred carrier is harder to find on the GDS," and "it may be possible to garner additional savings by using a carrier's preferred GDS."
Overall, these and other companies, including Amadeus, Galileo and TQ3 Travel Solutions, cheered DOT's move.
Meanwhile, additional changes to the GDSs' 2004 pricing are underway, and new airlines have signed up for the GDS companies' discount deals. Beginning Feb. 1, Sabre Travel Network will charge airlines an average of 2.3 percent higher fees, with the exception of bookings covered under the DCA Three-Year Option discount program, which has two-dozen participants. Worldspan will not reveal its 2004 pricing, although one airline source said its international charges are rising.
Like Amadeus
(BTN, Dec. 8, 2003), Galileo has reworked the basis for its charges. "Our 2004 pricing actions are largely a fine-tuning of methodology," a spokesperson said. "We are moving toward aligning our pricing directly to those areas of an airline's business that enable it to generate revenue and better link our pricing to the transaction activities and associated costs of providing GDS services. Some airlines will see an increase, while others will actually experience a reduction in their booking fees."
Galileo this month said American Airlines joined its Preferred Fares Select program, becoming the last of the six-largest U.S. carriers to agree on a three-year, content-for-discount program with Galileo. AA partner British Airways also joined Preferred Fares Select and Sabre's DCA, and is imposing what it calls a "distribution supplement" of £3 per segment on flights booked by U.K. agents through GDSs other than Galileo and Sabre.
As part of Galileo's approach with BA, agencies will have the choice of opting in or out. Those opting out will have to pay the BA distribution supplement. Those opting in will not have to pay the supplement, but will have to pay a fee to Galileo, which is "considerably lower than £3," a spokesperson said. Early indications are that Galileo's larger U.K. business travel agency customers will opt into the scheme.
One senior agency figure said BA's deal amounted to a price increase for corporations. "You could classify this as a price hike," he said. "The GDSs have taken money from the travel agency's pot to fund cheaper prices to the airlines. That has left a hole in agents' money, which either means they will be less profitable or they will be charging clients for increased technology costs." However, the increases need to be seen in the context of average double-digit, short-haul fare decreases by BA during the past 18 months.
Though such programs offer to airlines immediate relief for distribution costs, not all carriers are interested. Some executives suggest the GDSs merely are offering quick fixes to a larger problem. "This situation with the GDSs is analogous to what airlines did with business passenger prices," said America West Airlines CEO Doug Parker in a BTN interview last month. "We let them get so far ahead that eventually companies figured out ways to get around the fences. Direct connect is our similar response to what the GDSs were doing, and we'll figure out ways to make it work. We have no interest in any GDS."
~Amon Cohen and David Jonas contributed to this article.