Marketplace jockeying over global distribution costs and regulatory lobbying on the rules that govern GDSs continued into the new year. Sabre in December raised rates for 2003 and last week revealed four new airline participants in its lower-cost program, while American Airlines continued to enroll agency participants for its EveryFare initiative.
Sabre last month said it would increase by 2.9 percent the average global booking fee for 2003, effective Feb. 1, matching the average increase Amadeus earlier had claimed it would implement. Such fee increases vary by region and the differing levels of supplier participation.
"The price increase recognizes the stress in the industry," according to Sabre chairman, president and CEO William Hannigan. "Our price increase is lower than airline-owned Amadeus' own price increase. Our view is that their North America price increase is in the 6 percent range and ours is just above 3 percent."
Galileo and Worldspan have yet to unveil 2003 pricing.
While trying to avoid signaling "anything we're thinking about in terms of pricing," Worldspan president and CEO Paul Blackney last month said, "it won't happen in January." A Galileo spokesperson said its pricing levels remain in effect until March. Such changes generally require 30 days notice.
Asked what happened to Worldspan's goal to produce a new economic model on GDS costs by last fall
(BTN, July 29, 2002), Blackney said, "Honestly, the variety of opinion and position was wider than anyone had anticipated, including myself. If we turned back to June, I would have thought a number of almost Biblical truths would emerge, but they're not quite of those proportions. It's clear that what we're doing today isn't sustainable, but the answer is less than obvious."
One significant wildcard is the U.S. Department of Transportation's contentious, proposed GDS regulations
(BTN, Dec. 9, 2002). Sabre just before Christmas requested that DOT hold a hearing to vet a number of the assumptions in its proposals. Amadeus and Galileo supported a hearing, but airlines including America West—which had sided with Sabre and others on extending the proposals' comment period—quickly filed their opposition to a hearing. DOT has yet to respond.
In general, said Hannigan, "We don't expect anything meaningful from DOT until midsummer. My assumption is that the proposed rules will change, but I wouldn't go beyond that because it's early going. If the rules play out as written, you'd expect the airlines to have more leverage." He was speaking to analysts as Sabre last week announced a $900,000 fourth-quarter profit, excluding special items.
One attempt to get more leverage, meanwhile, is AA's EveryFare program
(BTN, Oct. 7, 2002), in which there are now more than 90 travel agency participants, AA CEO Don Carty said this month. Among the latest is Casto Travel, a San Francisco agency that claimed 2001 ARC volume of $118 million. EveryFare provides AA's complete range of fares in return for shifting the burden of global distribution booking fees from American to the travel agency. American pays agencies an allowance credit—currently about $4 per flight coupon—and travel agents then pay to American an amount equal to their own GDS fees. The allowance gradually declines during the term of the contract.
"With the recent changes in corporate and group/incentive discount programs, EveryFare will allow us to compete more effectively than ever," said Tyler Peak, president of Silicon Valley-based Peak Travel Group, a recent enrollee.
According to Steve Weiner, COO of Chicago-area EveryFare participant Bannockburn Travel, "We felt we had been losing up to 8 percent of transactions, even from loyal clients, to the Web. We expect this program to recapture a large percentage of that leakage. We also analyzed the potential new business opportunities because others are not using the EveryFare program. There are things in EveryFare that are not just Web fares. For example, you get 5 percent of full coach fares in addition to corporate discounts. Also, there are 'EveryFare specials' that change from time to time."
No other carrier has formalized a program similar to AA's EveryFare. However, US Airways' different approach
(BTN, Oct. 28, 2002)—in which it agreed to three-year programs with both Sabre and Galileo that provide those GDSs with virtually all fares in exchange for frozen, discounted per-segment fees—has seen some uptake by other carriers. A Sabre spokesperson last week said "nimble" airlines Air India, Air Jamaica, Gulf Air and Sun Country had joined US Airways in what Sabre calls the Direct Connect Availability three-year option.
"The GDS is a better way to get at the cost than from the people who benefit mostly from the fee," US Airways senior vice president of marketing and planning B. Ben Baldanza explained, noting that the EveryFare program calls on travel agencies and, in turn, their clients to handle the cost burden. "We say, make the GDS pay, somewhat." Baldanza added that US Airways overall has been selling more Web-type fares than before the GDS agreements. "We are seeing Sabre and Galileo selling quite a few, so there has been a shift."