Continental and Northwest/KLM Royal Dutch airlines today each announced their participation in the Sabre Direct Connect Availability Three-Year Option
(BTN, Oct. 28, 2002), a day after mutual partner Delta Air Lines announced it had signed up for the global distribution cost savings program. At the same time, Northwest and KLM launched Northwest/KLM All Fares, a new program for non-Sabre travel agencies that provides full fare content in exchange for a $1 per-segment fee.
Meanwhile, Galileo International today said it essentially would drop its Momentum program that requires participating agencies to contribute to the savings shared with participating carriers
(BTN, Feb. 10). According to a spokesperson, Aloha, Continental and United will join US Airways in offering all Galileo agencies full-fare content. Unlike in Momentum, agencies are not required to give up incentive fees as a condition of participation in the program, known as Preferred Fares Select. It offers participating carriers percentage savings roughly in the mid-teens, the official said.
Conceptually, Northwest's All Fare program is similar to American Airlines' EveryFare
(BTN, Oct. 7, 2002) in that a portion of the GDS cost burden is passed on to the agency essentially as a tradeoff for access to the airlines' Web fares, previously unavailable in the traditional agency channel. Specifically, the Northwest program--open to all ARC-accredited travel agencies based in the United States, Canada and the Caribbean, and connected to either the Amadeus, Galileo or Worldspan GDSs--provides full fare access with the $1 segment fee capped at $3 per ticket. Unlike AA's EveryFare, Northwest/KLM All Fares is not based on a fee schedule gradually calling for agencies to absorb more of the airline's GDS costs, nor does it require a lengthy commitment. AA's EveryFare binds agencies to the program through the end of 2007, while NWA's All Fares is based only on a 30-day commitment.
"For a lot of companies, the $1 fee is very little money in the grand scheme of things to get rid of all the search engines and have all content in one place," said Al Lenza, Northwest vice president of distribution and e-commerce. "There was a mixed reaction as to whether that was the right number but we made it very simple and very easy to terminate the agreement if an agency does not believe it is getting its money's worth."
Northwest made available the All Fares program for non-Sabre agencies that do not choose to access the airline's Web fares through WorldAgent Direct, a dedicated agency site. According to Northwest, more than 5,500 travel agencies since October 2002
(BTN, Oct. 7, 2002) have registered on the WorldAgent Direct site, which currently pays to agencies a $5 per booking incentive. "It is fair to say volumes are respectable," Lenza said. "It is not hundreds of millions of dollars, but it is growing."
Meanwhile, with Northwest and Continental aboard, Sabre DCA now has attracted five of the Big Six U.S. carriers, excluding American, which instead has sought GDS savings through EveryFare. "The announcements this week of more major carriers joining Sabre's new program underscores the reality that all airlines need to reduce their distribution costs. Those carriers have simply chosen a different way to address high GDS fees," American said in a statement. "We remain very pleased with the results of the EveryFare program, which reduces our overall GDS distribution costs, and we continue signing up new travel agencies throughout the U.S. and Canada."
While AA and Sabre remain in litigation over the carrier's Sabre participation agreement, Continental, Northwest and earlier enrollees United, US Airways and Delta for three years will enjoy a discount off the per-segment booking fee charged by Sabre that Sabre officials said represents a 13 percent savings off 2003 rates. In return, those carriers for three years will participate in Sabre at the highest level and provide all published fare content through Sabre's online and offline channels, including Web fares previously available only on the airlines' Web sites and through other third-party online channels.
Northwest's Lenza would not reveal the economics of the agreement with Sabre. "They became attractive enough for us to move forward," he said. "For a long time, the program did not meet our needs. We believe now it does."
"We have received a lot of feedback from the airlines' corporate clients, many of whom told us they don't want to have fares in alternate systems," said Sabre chief marketing officer Eric Speck. "It is a tremendous nuisance, causes angst among travelers and doesn't allow travel managers to control the process. Plus, it is costly to have travel management companies constantly searching a number of Web sites. All of the parties have urged us to solve this issue.
"There is no disputing that the revenue point for us just went down, but there also is no disputing that the agencies get a benefit," Speck added.
Northwest's Lenza said today's announcements do not signal a philosophical shift away from airline-direct channels. "It just is a recognition that we all want as much revenue as we can get. We saw our distribution costs go up 7 percent each year, and we found something that worked to get relief."