Face To Face With NBTA's McCormick On Distribution Dispute

The National Business Travel Association this week welcomed as a "positive step" the decision by American Airlines and Sabre Travel Network to postpone their litigation and try to overcome their impasse over distribution economics and capabilities. "Ultimately, business travel buyers would foot the bill for marketplace fragmentation, so we're pleased to see their voice is being considered and that American Airlines and Sabre are working together to find an approach that will work for everyone: business travel buyers and travelers, airlines, global distribution systems and consumers," NBTA stated. BTN editorial director Jay Campbell last week spoke with NBTA executive director and COO Mike McCormick about the organization's involvement with the issue.

BTN: I find it interesting that NBTA has said anything about this topic, since in the past NBTA was more conservative. For example, The Beat published a story in 2006, during the last major round of negotiations between airlines and global distribution systems, indicating that the leaders of one of NBTA's chapters in Silicon Valley were concerned that the national organization was not representing their interests in the debate. NBTA had no comment. That was before your time, so what can you say has changed?

McCormick: When I joined [in 2009], in talking with the board and a lot of our membership and asking them what they want from their association, certainly having a strong voice in industry matters was very high on their list of things for us to do, and a role that they wanted us to play. It's one we take really seriously. One of my frustrations coming into this job was that for all the talk about distribution issues, the customer is the corporation and the business traveler, and they haven't historically had a voice or a seat at the table when it comes to all of these discussions. They are basically paying for this distribution system, they are paying for those airline tickets, and yet they seem to be of no one's concern historically when it comes to all of these issues. We feel that our job as an association, and certainly my role, is to pull together and project that point of view and make sure we are heard. The policies we are putting forth are the ones that our members back and believe in. Probably in years past, it has been missing. The last time around in the GDS negotiations, I don't think that voice was heard. A lot of people try and speak for it in a sense, but they have been largely ignored. We need to make sure that doesn't happen this time around.

BTN: NBTA has said buyers would have to pay for "marketplace fragmentation caused by airline initiatives that push the travel distribution marketplace in the wrong direction—away from transparency and competitiveness and toward confusion and higher costs." Also, "airline-mandated 'direct connects' to bypass the existing GDSs will result in a significant increase in capital expenditure that purchasers of business travel will ultimately bear. The current system for business travel procurement isn't perfect, but it is marked by transparency, access and competition. NBTA calls on all airlines with an interest in the business travel market to ensure their fares are widely available to buyers through all commonly used online purchasing channels." The position NBTA is taking pretty well lines up with that of the GDSs and folks from Business Travel Coalition and the American Society of Travel Agents. Is the position based on feedback from direct members?

McCormick: There's probably a little more to it than that. Again, what we put forth certainly reflects what our members feel and what they believe in, and what's best for their businesses. There's a bit more to it in that we understand completely that American or any airline or any travel supplier has the right to charge for whatever they want. It's a free market. They should be able to charge for their product based on the factors that they see and how they can best run their business. But when it comes to these distribution issues, it is more complex than that. In order to reach the managed travel buyer—and with all that comes with that—which airlines rely on for the core of their profitability, they need to support a distribution system, and there is one that works today. Airlines are looking for ways, in this case, to more effectively merchandize their products and that's going to be great. The distribution system needs to step up and answer to that need, and those things will happen. But it doesn't happen when you have a game of chicken happening publicly. It doesn't help the industry. It's not good for buyers not having a product available through all the distribution channels so that business travel buyers can intelligently compare prices and make purchases. To take a step back and have buyers go and create new connectivity or basically replicate connectivity they already have in place just adds cost to the system. All the reconciliation that has to go on after the fact is another big part of this, and if that all gets disrupted, you start to have to redo work with direct connects. Corporate buyers don't want that to be a part of their responsibility.

BTN: Is it that NBTA is opposing American, or is it really opposing the whole situation?

McCormick: First off, we are not against American. It's not a matter of it being for or against any one airline or supplier. We are here to represent our buyers' needs and our members' needs. We want to make sure that there's transparency in the system. We are not here to take sides.

BTN: One of the issues is determining who will pay for the development in the GDSs to enable ancillary sales. Do you have any theories on how the industry should share the expense?

McCormick: To me, it starts by actually wanting to solve the problem. Nobody is talking. Everyone is spending their time focused on lawsuits and pulling out inventory, and there's no spirit of trying to solve this as an industry. There are enough smart people and there is enough money to go around, and enough opportunity in terms of incremental revenues for all parties, that this could be solved. All this is right now is about the money. That's what it always comes back to.

BTN: Is there a company that appears to not want to solve it?

McCormick: I can't speak for the parties. They're in one-to-one negotiations over the economics.

BTN: The allied (supplier) members are divided on this issue, so are you speaking to what the direct (buyer] members want?

McCormick: We are a direct-member-led association. Whenever we can, we want to look at the overall health of the industry first, but when it comes down to an issue where we have to think about the needs of the members, we are going to look at the direct members. And frankly, the supplier community wholly embraces that and they understand. That is what the purpose of the association is, it's what it's based upon and it's the right way. It's the right foundation for what we need to do as an organization. It's very rare when you have really that much conflict. Sometimes it's not an issue of a black-or-white difference; it's the nuances sometimes that vary.