GDSs back flexible prices

A year after it introduced a two-tier booking fee, Global Distribution System (GDS) Amadeus is adding more price bands while Sabre is planning to join the flexible pricing bandwagon.

At the end of 2003, Amadeus was the first GDS to move away from charging a flat fee for all bookings. Its value-based model was designed to "get away from the tension around flat booking fees", says David Jones, executive vice-president commercial. "We wanted to have a much more constructive relationship with our customers."

The "modest" first step saw the flat fee of €3.92 ($5.18) replaced by two fee levels in line with the value delivered to the airline by a booking (see table above). Now Amadeus has taken another step and introduced two further fee categories. The fee range has expanded from 40 eurocents to 180 eurocents. A booking value is dependent on whether it is sold inside or outside an airline's prime market and whether it relates to a short-haul or long-haul booking.

Amadeus has consulted with carriers over its approach and "people absolutely understand the logic", says Jones. An advantage of moving to a menu of fees is the prevention of content slippage, he adds, where carriers may be tempted to remove flight content from the GDS if they feel it is not adding any value.

"If we've got it right we shouldn't be losing customers and hopefully are getting some new ones where we are bringing the price down," says Jones. In setting its new prices, Amadeus has held its standard fee steady and introduced a fee discounted by 17% if airlines agree to give the GDS their full content, including web fares, says Jones. The next step for Amadeus will be to move to a form of "a la carte" pricing. This will unbundle many non-booking functions that are currently wrapped up in a single booking fee and charge for them separately.

Others are evaluating a move away from flat fees. Sabre chairman Sam Gilliland says their GDS will be offering more flexible-pricing options in 2005. He says Sabre will "gear the value we are delivering to the characteristic of the airline, whether it is a long-haul or a short-haul carrier". While revealing the move to flexible-pricing, Sabre also says it expects booking fees to rise by an average 2.3% in 2005.

Gilliland adds that "we have talked a lot about flexibility in airline pricing models" and that the flexibility to be offered would go "well beyond the deals" in Sabre's Direct Connect Availability agreements with most of the US majors. The first of these deals, which are believed to feature discounts of around 15%, expires in October.

In other news involving distribution systems, Cendant Corp has paid £209 million ($400 million) to buy European online travel provider ebookers.

MARK PILLING LONDON/ DAVID FIELD WASHINGTON

Source: Airline Business