Who blinked?

From the Window Seat

By Arnie Weissmann

ArnieIn the fog of the GDS-airline wars during the 2006 contract negotiating season, it was often difficult to conclude which side was getting what it wanted. In some of these staring contests, a few of the GDSs appeared to blink quickly, but in others, notably the final American-Sabre showdown, the deal points that ultimately became known certainly sounded closer to Sabre's goal (full content guarantees) than what American had said it was after (more distribution flexibility).

But even as those discussions between carriers and GDSs were ongoing, a new issue arose that  would redefine the future relationships between the parties: Air Canada's assertion that it had the right to publish Tango fares exclusively on its Web site because the GDSs were unable to display them as the airline deemed appropriate.

It was a turning point, and in hindsight it appears that, as a group, the airlines might have come out of the last round of negotiations with superior advantages, having won not only financial concessions but, just as importantly, time.

They can continue to take advantage of GDS participation even as they create revenue opportunities outside the GDS environment and openly strengthen strategies that exclude GDSs.

A panel that I moderated last week in Chicago at the TravelCom technology conference comprised two airline representatives and two GDS representatives. It was clear during the discussion that the airlines had taken control of the distribution agenda, while the GDS reps acknowledged that they had been unable to keep up with changes in airline products.

The airline participants were Marc Rosenberg, vice president of sales and product distribution for Air Canada, and Noreen Courtney-Wilds, vice president of sales for JetBlue. The GDS executives were Flo Lugli, senior vice president of Travelport, and Stewart Alvarez, vice president of strategic business development for Amadeus.

GDS shortcomings have become increasingly obvious in the burst of fare unbundling that has occurred over the past few months. Several (but not all) carriers began charging for a second checked bag. Air Canada instituted a fee for good customer service. JetBlue unbundled legroom.

The GDS execs on the panel said they were working to satisfy the airlines' unbundling needs, but they also acknowledged that they were behind. As Lugli said of Travelport, "We were a little slow coming to the starting line."

In an e-mail sent to me the week before the panel, Alvarez had written, "Change takes time."

But prior to the panel, I had also spoken to an airline executive I know to try to get a better understanding of the carriers' point of view. He doesn't believe the GDSs will ever be able to handle what the airlines want to offer. "You can't turn a black-and-white television into a color television," he said. "Their basic platform wasn't built to do this."

And the problems go deeper than simply enabling the purchase of unbundled options. GDSs sort results based on fare listings, and JetBlue's Courtney-Wilds is already unhappy with the GDSs' inability to differentiate between her airline's fares, which allow a second bag at no additional charge, and the fares of airlines that do charge for a second bag.

The GDS panelists acknowledged the validity of every shortcoming the airlines raised and asserted that they would work to get the airlines what they wanted.

But in the meantime, the airlines have integrated unbundled options into the booking process on their Web sites. And before the next round of airline-GDS negotiations begin, you can be sure that the airlines will work hard to incent customers to look no further than the carriers' own sites for bookings.

In a panel held earlier the same day, the CEOs of two online travel agencies -- Steve Barnhart of Orbitz and Farecast's Hugh Crean -- as well as Lynne Biggar, senior vice president and general manager of American Express' U.S. consumer travel network, discussed how complexity is the enemy of a booking interface.

In a speech that followed, Travelocity CEO Michelle Peluso introduced the term "elegance" to describe an interface that provides a good online customer experience.

It might be hard to imagine today how displaying the aggregated unbundled fares of multiple airlines can ever be simple and elegant. In the end, however, I think Alvarez is right: Change takes time.

In the short term, the airlines will likely succeed in bringing more passengers to their Web sites. But eventually, the GDSs (and OTAs) will figure out how to integrate complicated unbundled fares elegantly. And when that happens, customer behavior will again shift toward elegance.

The attraction to unified, rather than fragmented, solutions is simply part of human nature.

Contact Arnie Weissmann at aweissmann@travelweekly.com.


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