The issue stems from multiple CRS charges racked up on a single flight booking. For example, a passenger may book a flight direct with an airline over the telephone, but later use a local travel agent to collect the ticket. Unless the correct codes are then used by the agent, further passive fees will be charged each time that same booking is accessed, either to issue the ticket or check details such as itinerary, pricing, or meal arrangements. Such bookings are more common for leisure and group travel, particularly where bookings were made with the travel agent but ticketed by the consolidator.
For business travel, a similar problem surrounds duplicate bookings. When a passenger wants to stay flexible over travel times, multiple bookings can be made on more than one flight throughout the day. The passenger will only pay for a single journey, but the airline can be charged a fee by the global distribution system (GDS)for each reservation.
For their part, the CRS providers are quick to remind their airline customers that such bookings are a legitimate industry creation, adding flexibility and convenience for the traveller. The GDS have come a long way in the last couple of years in making it easier for carriers to reject unnecessary passive bookings and minimise charges even where they are warranted. But despite the good intentions of the GDS fraternity, the controversy refuses to die down, with many airlines continuing to complain that they are often mischarged.
The real problem lies with airline fears that the system is too easily open to misuse by the travel agent, either through deliberate abuse or lax booking practices. "New travel agents can be banging all day long and making passive bookings on you," says Alan Provda, senior vice-president business development at Radixx solutions International, a US software house pioneering the booking systems for low-cost operations.
CRS contracts and airline commission structures can themselves provide incentives for agents to generate extra bookings. CRS leasing deals, for example, frequently promise the agent free or heavily discounted use of equipment when a certain volume of booking fees are generated. Airlines too pay a higher level of commission when certain thresholds are reached. While some airlines feel that fraud is still a major cause of passive bookings, others disagree. "The bulk of it is just poor booking practice," says Ian Oliver, executive vice-president with leading travel distribution software provider Lanyon.
While GDS are tackling the problem, some airlines feel they are unfairly bearing the brunt of the costly effort to detect passive bookings. Some 110 airlines worldwide now analyse on a routine basis CRS billing information data tapes (BIDT), sold to them by the GDSs for a few hundred dollars a month, and some software providers have grown up to respond to the demand.
However, Sabre's vice- president marketing and sales, Scott Alvis, who went through this process in the USA some two years ago, barely disguises his irritation with many of the third party companies that try to match up CRS bookings with airline inventories and claim to detect fraud. "We spent hundreds of hours in passenger name record (PNR) level detail with carriers. When you get into it, you see that the travel agent is trying to service a passenger. The systems that audit bookings just aren't very good yet . The number of disputed bookings is virtually nil," he claims.
But Sabre, like many of the CRS providers, has cleaned up its act in North America since winning a legal battle over a year ago against some of its US customers, including America West. When a group of US airlines refused to pay for passive bookings on Sabre, the US system served notice of the termination of their participating carrier agreements. The airlines then took out an injunction to prevent this and the whole messy process ended with a US judge ruling that the airlines could not unilaterally change the rules of their participation in Sabre.
In North America all the GDSs have since moved to a system whereby they do not charge for non-ticketed passive bookings. Sabre, for instance, uses a particular code which agents must use for passive bookings if they do not plan to ticket. In practice, many will compensate for the revenue they may be losing on unticketed passives through transaction-based pricing, a method of charging which is unique to North America.
Elsewhere, net booking pricing is used whereby, when a booking is made and cancelled, the booking fee is effectively refunded minus a nominal charge. In contrast, transaction-based pricing involves a lower booking fee initially but charges incrementally for cancellations. In the USA, where fare wars encourage a high churn, transaction-based pricing can be much more expensive. "Cancellations can be as high as 80% of all bookings," says Ian Tunicliffe, managing director at Vela Consulting.
Sabre is virtually the only system in the US to have opted to stay with net booking in the North American market. On the other hand, one rival GDS says that Sabre still has one of the highest levels of passive booking segments outside North America.
Continental Airlines has gone even further and adopted its own solution to passives. It refuses to pay agents any commission on unticketed passives and pays only a flat $15 fee when travel agents claim the PNR in order to issue a ticket for a reservation that has already been made with the airline. "The concept that they need passives does not apply in a claim environment," says Continental's senior director distribution planning, Steve Cossette. Continental has also developed its own automated systems to analyse booking data and make sure agents do not try to use passives to raise volume.
Outside North America the fight over unticketed passives rages on and passives can represent anything between 15% and 55% of total bookings at an airline. Alvis agrees that passive bookings "are fairly high in Europe and even higher in Asia".
The view on which GDS charges for the most unticketed passive segments varies according to who you ask. Generally, most GDSs are accused of charging for far more of these bookings than they publicly admit. The result is a tense relationship between airlines and their main distribution providers. However Oliver at Lanyon confirms that the claims against GDSs are falling, however, and that the focus is now on the travel agents.
Nearly all the GDS providers have now put in place tools to help cut the number of passive bookings. Amadeus has the lowest number at just over 5% at the latest count for two main reasons. First, some 109 airlines are directly hosted in Amadeus, so that reservations at these airline offices are made straight into the system. Agents can then retrieve the real booking, rather than having to claim the PNR and incur another fee. Second, Amadeus has a worldwide non-billable ghosting capability. This means that, provided the agent enters the correct code, any function other than ticketing can be carried out free of charge.
Amadeus has a programme that checks these and will send them out to the airline "for queue", says Hans Jorgensen, vice-president partners and provider strategy. "This needs to be investigated with the private details of the PNR. We don't want the responsibility for cancelling someone's reservation, the onus should be on the airline," he adds. Where there are bookings on more than one airline, Amadeus is waiting for the carriers to decide whether the data should be sent to both or the one holding the last booking, says Jorgensen.
Galileo has also taken a number of initiatives to help airlines control costs says director of airline sales and account management, Andrew Winterton. These include the validation of flight segments to detect invalid flight itineraries, the detection of illogical bookings, the prevention of duplicate bookings by agents within the same file, passive segment notification to enable the airline to reject the booking, class validation and a dynamic table of fictitious names for which airlines are not charged. "If we believe it to be an abusive booking we are very positive in crediting the airline," says Winterton.
Considerable rewards lie in store for airlines that manage to cut down on passive booking fees. Oliver gives the example of a major airline which identified savings of $2 million with just six months data using Lanyon's software. A medium-sized carrier saved over $50,000 annually per GDS by controlling passives well in advance of flight. "Controlling advance passives helps clean inventory and prevent revenue dilution," says Oliver. He adds that the accuracy of the results obtained depends on the airline itself having accurate schedule data.
Alitalia has invested $500,000 in developing its own software to detect duplicate bookings and unproductive passives, says head of distribution services Vittorino Edoardo Capobianco. An initial warning to agents specifies the segments isolated and the kind of malpractice detected. Agents who offend a second time are then debited for the total amount, says Capobianco. Alitalia says the measures are saving roughly 5% of total CRS costs due to the amounts recovered from agents, a decrease in malpractices as a result of the verifications, educating the travel agents about such bookings and the corresponding improvement in its yield management.
The Italian carrier has fought hard against the CRS charges for passives not cancelled by the travel agent. Typically, the CRS sends a passive notification to the airline. If the passive does not match a genuine booking taken by the airline, it is rejected and, crucially, then passed back to the travel agent, who is expected to cancel. If it is not cancelled, leaving the airline has to decide whether to claim back from the GDS or the agent.
Alitalia argues that the CRS providers should credit rejected passives automatically, an issue which has been taken up by the European Commission (EC) and the US Department of Transportation. A new CRS code of conduct being worked up by the EC at the end of 1998 was expected to introduce compulsory non-charging for passive bookings rejected by carriers.
In the meantime, the GDSs are unlikely to drop charges for passive bookings entirely. That would be to admit that they were not sometimes valuable.
"I don't believe that," says Winterton.
Source: Airline Business
