Taking aim at global distribution system segment fees, Northwest Airlines today laid out new ticketing fees that pass costs to travel agencies and consumers not booking directly through the carrier's Web site. Among the new charges is a $7.50 per roundtrip "shared GDS fee" applied to tickets issued through a GDS by U.S. and Canadian traditional and online travel agencies. It will apply to all tickets booked beginning Sept. 1 and is nonrefundable. The airline said the new fees, which will apply to all tickets for travel within the United States, will help it align distribution costs more closely with low-cost carriers.
"Since we compete with low-cost carriers on price, it is essential that we take steps to be competitive with them on distribution costs, where they currently have a clear cost of business advantage over Northwest," said Tim Griffin, executive vice president of marketing and distribution. "Instead of an all-or-nothing approach, this gives travel agents control over what services they want to use when issuing a ticket."
The carrier said it would continue to absorb $5 of the $12.50 average fee it incurs for each domestic booking in a GDS. It expects the new fees will cut $70 million from annual distribution costs, which last year included $180 million in GDS fees.
Northwest vice president of sales and customer service Fay Beauchine said the airline did not discuss the new fees with the travel agency community before this morning. "They are now digesting it," she said. "They have told us all along that they want alternatives." Beauchine would not speculate about whether agents would seek to pass the new fee to clients and what impact such decisions would have on Northwest's corporate business.
A spokesperson from American Express said the company currently is "assessing the situation." Representatives from Carlson Wagonlit Travel and WorldTravel BTI said their companies would not comment. At press time, other large corporate travel agencies were not immediately available for comment and the American Society of Travel Agents was preparing a statement.
Travel agents booking through Northwest's WorldAgent Direct Web site
(BTN, Oct. 7, 2002) will not be charged any fees. Northwest also will not levy the fee on travel agent bookings that "use technology that bypass GDSs," specifically citing Orbitz's Supplier Link affiliate agency program.
In addition to new fees levied on travel agencies, Northwest on Aug. 27 will impose a $5 fee on any domestic ticket--one way or roundtrip--purchased through a U.S. reservations center and a $10 fee on any ticket purchased at U.S. airport locations. All fees will be nonrefundable.
Griffin said costs associated with Northwest's various channels, following the implementation of the new fees, "are roughly equivalent and that was a major consideration in determining the fee levels." Northwest has no plans to amend current GDS contracts nor did it indicate any longer-term strategy to remove its content from one or more GDSs. Executives also refused to comment on Northwest's plans should major airline competitors refrain from implementing similar fees.
Northwest's policy change is the latest attempt by an airline to recoup distribution costs by passing some of the burden to consumers and travel agents. Delta in early 1999, for example, began adding a $1 surcharge to tickets not booked through its Web site
(BTN, Jan. 25, 1999). Though the carrier reversed its decision shortly thereafter, it proved airlines were intent on shifting volume to lower-cost channels.
Changes in airline distribution accelerated two years ago when American Airlines introduced EveryFare, which essentially traded access to Web fares in exchange for agencies taking on some of AA's GDS costs
(BTN, Oct. 7, 2002). The complicated program partly led to a spate of new agreements between airlines and GDSs that traded full content for discounts off segment fees
(BTN, Oct. 28, 2002). Many such agreements remain in force through 2006 and 2007.