More Distributors Decry NWA GDS Fee

In the first major distribution battle following the expiration of global distribution system rules one month ago, Northwest Airlines finds itself standing alone against a growing number of companies rallying against its new ticketing fees. In addition to GDS company Sabre Travel Network--which traded lawsuits with Northwest, both alleging breach of contract--GDS operators Galileo and Worldspan said they would take measures to de-emphasize Northwest.

The largest corporate travel agency, American Express, viewed Northwest's ticketing fees as "an indirect fare hike." Andrew Winterton, American Express vice president of supplier relations, said the company has been asked by corporate customers "to implement a fair number of changes to their programs."

Some, he said, have requested that American Express "not book that specific airline," while others want the agency to carefully examine every Northwest booking to determine if it is the lowest logical fare in the given city pair. "In a zero commission environment, where we receive remuneration from customers, the agency has no revenue stream to put this against," Winterton said. "It is a ticketing fee that customers and consumers will be paying. Corporations should be most concerned because they have a need for travel. If these changes gather momentum, it will increase the cost of that travel."

The Business Travel Coalition, an advocacy group for corporate travel professionals, said travel management companies, would be required to undertake complicated accounting processes to handle monthly invoices coming from Northwest. "Distribution costs are currently fully reflected in the price of an airline ticket," BTC said. "Northwest's policy represents an attempt to double dip from corporate accounts and adds to complexity and costs for distributors and ultimately for the end customer."

Worldspan expressed "shock" and said the carrier's new policies amount to fare increases. "Based on its agreements with Northwest, Worldspan firmly believes that the fees Northwest says it intends to bill to travel agencies cannot be charged to Worldspan's traditional or online travel agencies," Worldspan said. "Worldspan is prepared to take all appropriate steps to enforce its agreements with Northwest and prevent breaches of these agreements."

Cendant Corp. also said Northwest's new policy violates terms of an agreement with its Galileo GDS subsidiary. "As a result of Northwest's violation of its Preferred Fares Select agreement, Northwest will not be afforded the same benefits provided to participating carriers that honor their commitments under their PFS agreements, such as a more prominent display for Galileo agencies, access to Galileo low-fare shopping and flight information tools and access to the full PFS distribution discount." Like Sabre, Galileo said it would impose these changes on any carrier charging a fee on tickets issued through a GDS but not through its own Web site.

"Galileo agencies and others recognize this action for what it is: essentially a fare increase that will be passed on to consumers," said Mitch Gross, executive vice president and general manager for travel agency services in the Americas. "These agencies have indicated they will direct their business to those carriers that are supportive of the GDS distribution channel."

In a Securities and Exchange Commission filing submitted this week by Sabre, the company threatened to remove Northwest from its GDS if "Northwest's breach of contract is not cured."

For its part, Amadeus has no plans to pursue legal action nor apply protective measures to offset the impact of Northwest's decision. "There is a distinct difference between which moves Sabre would take and which moves we would, because Sabre is a retailer through Travelocity and Amadeus in North America is not a retailer," said Amadeus USA president and CEO Kay Urban. "If these surcharges apply to Travelocity, it is a huge concern for Sabre."

Northwest executives earlier this week identified Travelocity and Expedia as online agencies that would be subject to the new ticketing fees, along with all traditional "bricks and mortar" travel agencies.

Citing failures of several similar programs in the past, Urban said it is "questionable" as to whether Northwest's strategy is sustainable. "They have picked a very bold and controversial move that will affect only a small portion of costs," she said. "If you force someone to move away from a system of value and to lose control of the record by booking in various places, you cannot pass value down the chain to the traveler. Who suffers? The traveler."

Urban said many Amadeus travel agency customers told her they cannot take on the additional cost. "Some are saying they will book away [from Northwest], and some are wondering if they need to add a new service fee," she said. "We just want to make sure we are giving neutral displays."

In court documents relating to its suit against Sabre, however, Northwest said it "has not changed its fares" and violated no existing GDS agreements