In their battle to control distribution costs carriers are now eyeing up new options which could eventually bypass the traditional Global Distribution System (GDS). Not only is the industry exploring ways to go direct to customers online but also to connect direct to big corporate buyers.
"Are we going to give our whole content to the GDSs in future?" asks Lufthansa's senior vice-president sales Josef Bogdanski, posing a question echoing around the industry. He goes on to ask if airlines can win leverage against the GDS by withholding some of the juiciest fares. Although he is careful not to signal which way Lufthansa will go, the carrier is looking at taking fares out of the GDSs and having a certain portion of its content exclusively online. "It is a tough decision and would have to be done with travel chains like BTI to see how we could get content into them," says Bogdanski.
Plugging travel giants such as BTI, or corporations themselves, directly into an airline's fare inventory could also cut out the GDS middleman. SAS has already been doing this on a pilot basis with around 10 large corporations in Scandinavia since 2000 for business fares, says Christian Hylander, vice-president sales and distribution at the SAS central management unit. "We are discussing with the larger agency chains a generic solution for any type of ticket to encourage and develop a direct connection." SAS hopes to be able to provide a solution to agencies during this year with pricing schemes that share the savings with them in a transition period, says Hylander. But in the longer term, the kickback rebate has to disappear, he adds. The upfront investment is not heavy. "It's a very good business case," he says.
One major agency, Carlson Wagonlit Travel, has a web-based self-booking tool – CWT Symphonie – for major corporate clients that effectively bypasses the GDSs. In the USA, however, such agency-specific arrangements are not widespread and are usually limited to lower-yielding leisure-oriented agencies.
However, the biggest lever in the changing balance is the fact that airlines could simply take their business elsewhere as low-cost GDS alternatives appear. US carriers made this point during Northwest's frontal assault last year, when they announced they were co-operating with a new technology called G2 Switchworks, developed by alumni of online travel portal Orbitz, in co-operation with Continental, Northwest and four other US majors.
G2 was a weapon raised for all to see, although a move by United Airlines has proved a shot even closer to the bows. In late January, United called in top corporate and agency clients to discuss a shared-savings programme that would encourage alternative distribution systems. The meetings, which included among the guests both G2 Switchworks and ITA Software, were meant to explain the distribution imperative and the real opportunities of these emerging channels, says Graham Atkinson, United senior vice-president of worldwide sales and alliances.
The entrance of new GDS options into the market is welcome, says Henri Hourcade, vice-president distribution and internet at Air France, but he remains to be convinced about the cost and what functions they will offer. "A CRS is quite expensive to build – we know because we helped to build Amadeus," he says. Hourcade argues that a GDS bypass will still have to take content from major carriers, mix it to ensure customers can see all flights and fares, which means they will effectively have to create another GDS, albeit a supposedly cheaper one.
Whatever the GDS bypass method, as SAS's Hylander explains: "From a strategic perspective we are saying to the GDSs: if you don't change your business model we have an alternative."
Although the traditional GDSs were quick to point out the limits of the new technologies, they also made it clear that their attention was focused. They had to, says Norman Rose, the GDS consultant at PhoCusWright, who believes this will be a period of profound change. He says: "This is the opening shot in a war. This is the year in which a legacy carrier will adopt an alternative to the GDSs, and that changes all."
Source: Airline Business
