Air Distribution War Threatens Travel Industry

Battle between Travelport and American on different fronts has reverberations.

The ongoing dispute between Travelport and American Airlines could have serious consequences for travel management and corporate buyers. Like other arguments between airlines and GDSs in recent years, it could eventually end in agreement. But the reverberations are already being felt. As reported over the last few weeks in TTG Nordic, travel agents are facing an additional fee per booking when arranging American Airlines flights through Travelport reservation systems, including Galileo and Worldspan, unless they are based in the USA.

The assumption is that the airline is trying to drive agents away from major GDSs in favour of its own direct online booking system. The airline wants to cut costs and get closer to customers by tailoring offers to them via its own channels. At the same time, a US court is the scene of a battle between the airline and Orbitz, in which Travelport has a large minority stake.

In the latest development, American Airlines announced that a number of agreements between it and Orbitz would be terminated from 1 December. However, courts have issued a temporary restraining order that prevents the move until each party’s rights are determined. Insight into the airline’s motives can be drawn from a blog on its website: “Airlines are limited in their ability to receive and consider customer insight through the current messaging process of the travel agency/GDS channel.

“Airlines have been successful in personalizing the customer experience through their Web sites and other direct channels. Now is the time to extend these benefits out through travel agencies that represent more than half of airline tickets sold in the US today. “For example, the agency may know that the customer is flying to a destination for a meeting that starts shortly after the scheduled arrival.

With this information the agency can request that the airline provide an offer that includes a seat in the front of the cabin and priority baggage handling so that the customer can quickly move from the flight to their meeting.” Airlines are keen to be able to sell “the right product to the right customer in the right place at the right time,” according to one airline industry expert.

“GDSs and OTAs have not shown that they can actually sell the products the way the airlines want to sell them.” Until now, GDSs have used the richness of their advanced technology to reach all markets with different products simultaneously. Now some airlines are realising that they can become more competitive against rival carriers by implementing similar technology themselves.

Nevertheless, the AA-Orbitz dispute is significant in that Orbitz “generates more airline revenues for Travelport than any other travel agent,” according to Travelport’s court filing. Moreover, Travelport argues that the airline’s moves don’t make economic sense, since “travel agent customers, at least every single one we’ve spoken to, would prefer to deal with one connection into the GDS than, in this case, 500 connections to the airlines.”

It argues that it is a myth to suggest that directly connecting with airlines makes economic sense for agents, since any “short-term incentives” given to them by an airline won’t overcome “the long-term loss of an agency’s financial assistance through the GDS for all of its AA bookings.”

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