Tuesday, January 18, 2011

Travel Technology


January 17, 2011

American Airlines may or may not have known it but they launched a battle that goes beyond the pocketbooks of agents and may start a revolution -- for better or more likely, for worse -- in how consumers buy travel products.

The move could shake up travel’s long-standing Global Distribution System (GDS), often referred to as a “quiet giant” because it processes upwards of US$1 billion in travel transactions. In the US, GDS represented more than one-third of all travel supplier revenues and almost two-thirds of all airline passenger revenues in a recent year.

ASTA, or the American Society of Travel Agents, says the confrontation is the beginning of the airline’s campaign to force the travel industry into an expensive computer system change. The potential is to make it much more difficult for travelers and agents to compare airline prices.

The potential is also more costs for the consumer and less choices of booking sites with airlines, inevitably raising prices -- for the simple reason they could have a monopoly on ticket bookings.

Ultimately, that could lead to an end to GDS sales by what is now a wide variety of providers.

The dispute started last month when the Fort Worth-based American Airlines pulled its fares off Orbitz, one of the largest travel web sites. Expedia, another huge travel site, then decided to drop American’s flight information. Next came Sabre.

“The escalating fight may push some travel agents out of the airline-ticketing business altogether, particularly since American and other airlines eliminated travel agency commissions on tickets in 2002,” says the Fort Worth Star-Telegram.

American wants to bypass the GDS system entirely and have travel agencies and websites to connect directly to American's own system, ”American Direct.”

In recent weeks, American Airlines asked Orbitz to use American's new computer reservation system that's separate from the system used by most web sites and travel agents to compare flights and fares from all airlines. That would save the airline from paying commission on tickets sold. Orbitz refused, and American stopped supplying it with flight information.

"American Airlines wants to stop paying the global distribution systems fees and instead have people come to them directly," said Charlie Leocha, director of the nonprofit Consumer Travel Alliance in Washington, D.C.

If other airlines follow American, it could alter how travelers book their flights and, ultimately, how much they pay.

While no other airlines yet have gone to American's lengths, Delta Air Lines recently stopped providing its fare listings to more a half-dozen low-fare web sites.

For now, travelers can still find American's fares on its own site, of course, and on meta-search web sites such as Kayak, Bing and others that compare multiple airlines' flights and fares, but link buyers to airlines and other sites for purchase.

For sites such as Expedia and Orbitz, the conflict has compromised one of the major benefits of travel web sites — one-stop shopping.

Agents obviously could be hurt in the pocketbook but how will this impact consumers?

American said the move to direct distribution would benefit travel agents and consumers.

"Our direct connection will help travel agencies help their own customers by giving them access to customized choices and delivering the best value to travelers," said Derek DeCross, American's vice president and general sales manager.

Most travel observers, however, predict less choice will mean higher fares.

A major concern of travel providers is that their agents will be forced to spend a lot more time finding airplane tickets.

But industry analyst Henry Harteveldt of Forrester Research said the current distribution model, in which the airlines pay fees to the GDS companies and the GDS companies share the revenue with travel agents, is not sustainable.

"What is really needed is a new model where the airlines pay less for distribution and the travel agencies pay more, but are compensated in another way, recognizing their benefit,"Harteveldt said.

By David Wilkening

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