Sabre Slaps On Int'l E-Tix Fee

<B> Sabre Slaps On Int'l E-Tix Fee</B>

By Mary Ann McNulty

Just as electronic ticketing appeared to be taking off outside the United States, Sabre announced that it will begin charging $70,000 per airline, per country to do paperless transactions.

As expected, airlines are blasting Sabre's new fees, with United even going so far as to call them "extortion and greed." Several airline executives said the fees will force them to evaluate whether to offer e-ticketing in Sabre as they expand their use of this technology globally.

"This could cause some airlines to truncate how quickly they will move ahead in other countries," said John Heilner, vice president with Management Alternatives consulting firm in Mt. Kisco, N.Y. The potentially significant expense is problematic for most airlines, which already have set their 1999 budgets, he added.

Northwest's Al Lenza, vice president of distribution planning, said, "One side of me says that if a carrier requests Sabre to do the development for e-ticketing someplace like Pakistan, where the market is unproven, then yes, the airline should pay for it. But this will retard the growth of electronic ticketing where market conditions are good, such as in Germany or the United Kingdom."

He said the charge will lessen the probability that Northwest, for one, will proceed with electronic ticket availability to Sabre subscribers outside Canada and the United States.

Continental too expressed its surprise and disappointment with the new fee and "will review its participation with Sabre going forward," said Steve Cossette, staff vice president of distribution planning.

Travel buyer Earl Foster, director of global travel management for Joseph E. Seagram & Sons Inc., New York, and president of the Association of Corporate Travel Executives, said the cost is too steep.

"There's a cost to technology and somebody has to pay that cost, but I'm not sure a flat fee of $70,000 is the way to go. I think they're making a mistake. The CRSs are going crazy with some of this stuff, saying they're going to develop technology and then charging for it on top of the booking fee. What does the booking fee pay for if not the development of new technology?"

Responding that it had to devise some means to prioritize the overwhelming demand for e-ticketing, not to mention cover its significant development costs to link to the world's bank settlement plans, Sabre executives said the implementation fee was the fairest plan it considered since mid-year, when demand began to ramp up.

"The vast majority of the majors now have e-ticketing and are looking to expand it into the next tier markets in Latin and South America, Europe and Asia," said Scott Alvis, vice president of airline sales and marketing for Sabre. Currently, 90 percent of Sabre's U.S. booking volume is eligible for e-tickets and the CRS is in the process of automating Mexico. Sabre is offering e-ticketing for 18 airlines. Outside the United States, it offers e-ticketing in Australia, Canada and New Zealand.

But airlines have asked Sabre to write specifications to issue e-ticketing for 10 additional bank settlement plans, Alvis said. Sabre currently processes 40 percent of eligible tickets worldwide through electronic ticketing.

"It costs several hundred thousand dollars to connect to each BSP. If the carrier is issuing e-tickets for the first time, it also costs several hundred thousand to connect the carrier," he said. Acknowledging that airlines were unhappy about the new charges, Alvis said many weren't happy with the old structure either, "because they couldn't get e-ticketing in the time frame that they wanted it."

Competing CRSs had little comment on Sabre's announcement at press time, except to agree that development costs are substantial and the demand is huge. Only Amadeus said it doesn't intend to introduce an e-ticketing implementation fee. However, a spokesperson said, "we do sympathize with Sabre as there are exorbitant development costs associated with the technological implementation of e-ticketing, especially as it has to be done on a market-by-market basis, along with BSP implementation."

Amadeus currently is processing e-tickets for 13 airlines while Worldspan is issuing e-tickets for 15 carriers. Galileo didn't return calls by press time.

Not surprisingly, the airlines had plenty to say about the news.

A United spokesman called the plan "extortion and greed."

Patrice Miles, director of distribution planning for Delta Air Lines, Atlanta, said, "We don't support it at all. Each of us is having to look at the ways we do business and think about ways to do it smarter, and we don't see the CRSs really trying to rethink the way they're doing business. We understand that as publicly traded companies, they have to show their shareholders a profit. Talking about unbundling fees is heading in the right direction, but it's been the worst possible situation as far as the airlines are concerned because they're charging rate increases and development fees.

"This example is forcing us to ask if we can really afford to continue to enhance the development of our e-ticketing product using Sabre. That concerns us because nobody wins in that situation. If this is the direction CRSs are headed, then we're being pushed to look at the channels that are independent of the CRSs and to look for some alternative methods of distribution. That may not be the best course of action, so we really are hoping the CRSs try to rethink the way they make their profits and look to some other economic models besides the ones they're talking about today."

Austrian Airlines' Roland Scherabon, global key account manager, also noted that "the unfair thing is that these costs are charged regardless of the size of the airline. We carry 4 million passengers a year, so for us this is much more expensive than for BA. But customers are demanding e-ticketing." Austrian alliance partners plan to roll out e-ticketing in Europe in 1999.

Bruce Bishins, president of the USTAR and Genesis efforts to establish a non-profit CRS, said, "In another outrageous display of avarice and arrogance, CRSs continue to assault airlines, and the impact on travel agents will be devastating. We warned carriers that they were all at risk by placing their technology future in the hands of CRSs which have one and only one motivation: greed."

"Airlines would like to think it's as easy as flipping a switch, but it's not," a Sabre spokesman said. Sabre also countered one airline's criticism that the programming shouldn't take more than 10 hours, contending that the computer programming will take much longer for each country.

Pointing to Galileo's aborted attempt to charge airlines 50 cents per e-ticket, Sabre noted that the model would have cost airlines millions of dollars in the long run. The one-time implementation fee will quickly be recouped by airlines as they begin driving electronic tickets, it argued.