AA 'Direct Connect' is a walking corpse

By Jay Campbell

JAY CAMPBELLTech pundits like to label as "dead" things that merely are as good as dead, like American Airlines' Direct Connect initiative.

Not to be confused with the generic industry terms "direct connect" or "direct connection," I'm specifically talking about the AA program known as Direct Connect, which the airline three years ago tipped as eventually handling all its indirect distribution.

In my opinion, AA's decision to list its new Choice Essential and Choice Plus fare bundles in the GDSs via ATPCo removed so much of the unique potential value in its Direct Connect program that it's now a walking corpse. This assumes AA has sincere plans to clear up the remaining challenges to providing access to negotiated bundles through booking tools and GDSs.

The Direct Connect program is not officially dead only because AA itself has not confirmed its demise, perhaps in the hopes of exhuming it before the next contract deadline with Sabre.

AA declined to provide an executive for us to interview by phone so, uncharacteristically, we agreed to submit questions by email. Prepared answers like this should make a program look as healthy as possible, but in this case I think they fail. Before your diagnosis, give AA the benefit of the doubt.

The Beat: Cory Garner in 2009 said AA's goal was to provide 100% of indirect distribution through Direct Connect. Has that changed, and why?

AA:
Our plans are unchanged. Our product line will continually become more varied, personalized and dynamic, and our connections will need to be upgraded in order to accommodate them. The American Airlines Direct Connect is the advanced form of connectivity that will be able to deliver the full range of products to global distribution systems and non-GDS systems.

The Beat: What AA content is available to Direct Connect subscribers that is not available through GDSs?

AA:
In addition to presenting the most transparent and intuitive display of American's new Choice Essential and Choice Plus product offerings, the American Airlines Direct Connect provides exclusive access to certain a la carte optional services.

These products, which currently include Preferred Seats, Main Cabin Extra and Load Factor Based Upgrades, are sold using industry standard Electronic Miscellaneous Documents (EMDs) that support robust reporting on travel spend. (Incidentally, we understand that the American Airlines Direct Connect has been responsible for issuing nearly all EMDs via ARC in the U.S.)

We will continue to find ways to make more customer-friendly product options available via our Direct Connect technology. We are hopeful that the GDSs and/or booking tools will work to integrate with our technology so that all of our customers and channel partners can enjoy the broadest and best travel options from American Airlines.

the beatThe Beat: Can AA spell out the exclusive benefits that Direct Connect can deliver to travel agency subscribers?

AA:
Beyond the content advantages described above, the American Airlines Direct Connect is the only technology capable of carrying dynamic content -- i.e., products that are priced and/or assembled in real time when the customer makes a shopping request. Dynamic content will become available once there is a critical mass of distribution channels capable of receiving it. We are now in the process of planning how to equip our third-party distribution channels, GDS and non-GDS, with the ability to receive this new type of content from the American Airlines Direct Connect.

The Beat: AA stated it would not use ATPCo for merchandising/ancillaries because it could not make personalized offers to travelers that way. Now AA is using ATPCo for its fare bundles in the GDSs. Has the desire for such personalized marketing changed, and if so, why?

AA:
The Choice Essential and Choice Plus options are an extension of the simplified distribution methodology we used for the Boarding and Flexibility Package starting in 2010. The primary difference is that we are now offering two full-featured product options instead of one limited product option. Simple, static product offerings such as these can fit through our existing connections with the GDSs. We will continue to work on building out the American Airlines Direct Connect to deliver higher quality, more personalized content to GDS and non-GDS systems.

The Beat: Does AA's current deal with Sabre include "full content"?

AA:
At the time of our settlement with Sabre, we extended our pre-existing distribution agreement for multiple years. The 2006 agreement included full content.

The Beat: What kinds of financial incentives will AA offer Direct Connect subscribers?

AA:
Depending upon the needs of the travel agency, we make financial incentives available, but we cannot comment as to specific amounts or structures.

The Beat: What steps will AA take this year to market Direct Connect?

AA:
One of the biggest differences this year will likely be the proliferation of American Airlines Direct Connect volume in conjunction with third-party partnerships. We have recently completed integrations with a number of non-GDS content aggregation systems that are already in use by, or may appeal to, certain segments of the travel agency market. We also would not rule out the possibility of integrating with one or more GDSs this year.

By the end of this year, it will become clearer that the American Airlines Direct Connect is both a distribution channel alternative as well as the infrastructure necessary to deliver advanced forms of content through other distribution channels, including GDSs. And, ultimately, the quality of the content coming through our direct connect is what will drive volume.

•••  

So, AA said Direct Connect has a cooler display. Preferred seating, extra legroom and load-factor-based upgrades (some of which are available anyway to loyalty program members) are features that through Direct Connect can be added individually to restricted fares. Within the GDSs, those features are available only by buying fully flexible fares. AA's website also mentions this benefit for Direct Connect-using travel agencies: the ability to make same-day changes for customers who purchased the bundles.

Twenty months ago I picked on a couple of organizations for publicly backing the program after they had previously slammed it. It was a heady time for AA's Direct Connect, as American Express and HRG followed Expedia in issuing press statements acknowledging talks with AA to use it. But none of those agreements came to pass, as far as the companies have said, and among significant players, the Direct Connect program's only participant is Priceline. The original gaggle of tech firms that said they stood ready to integrate with Direct Connect if it got users never reported an engagement (though AA now predicts a "likely proliferation" among them).

Even when Direct Connect held the promise of significant content and "personalization" advantages over the GDSs, the program got no takers in corporate travel. Financial incentives and terms of AA's offer did not compete with what agencies get from the GDSs. Yet, it had seemed like AA earnestly wanted Direct Connect to happen and would make it so as the infection in its relationship with Sabre cleared up.

But now Direct Connect's value proposition is weaker, with even fewer content advantages and still only a promise of personalization.

Never say never, because AA could yet provide meaningful financial or content incentives to push agencies to its preferred channel. Might the likes of Concur, Expedia or even Travelport join Priceline in accessing AA via its application programming interface (API)? Wouldn't surprise me. Nor would it mean Direct Connect was living up to promises.

"No time soon" seems to be a perfectly generous description of when 100% of AA's indirect channel content will flow through Direct Connect.

Take the money and run

All of this is not over, of course.

The U.S. departments of Transportation and Justice still need to weigh in or get out of the way, and the Sabre-US Airways and AA-Travelport legal entanglements remain unresolved.

But now may be the perfect time for AA to stop harassing the corporate travel distribution chain that has been such a close partner over the years.

Why not just take the money and run? And by that I mean the undisclosed millions in payments and transaction discounts owed to AA by Sabre following their court settlement. For the fourth quarter, AA parent AMR announced it recorded a $280 million benefit "from settlement of a commercial dispute." AA declined to elaborate on what entity paid it or whether the payment was a one-time event; the settlement called for Sabre to make one payment in the fourth quarter and another within about a year.

AA's tech partner, Farelogix, would have preferred a similarly immediate payoff. The company provides different technologies to airlines, but its "biggest horse" is in direct connections, CEO Jim Davidson said.

Davidson admitted "travel agencies are not kicking down the door" and that the "hoopla" over AA's program is gone. Nevertheless, direct connections -- as in, APIs possibly using technology provided by a third party, possibly matching an industry standard and possibly connecting to GDSs but perhaps skipping them -- are not dead.

Davidson claimed there's "tremendous" interest in XML-based APIs among airlines that were "waiting and seeing" how the AA drama played out. But, he concluded, direct connections "will be a bit of a slog" due to the long-term commitments between travel agencies and GDSs.

Will an aggressive AA-style Direct Connect program get a new advocate? Davidson didn't think so.

Jay Campbell is the editorial director of the BTN Group, publisher of The Beat, a sister publication, and this Comment originally was appeared on The Beat on Jan. 22. The article has been modified to conform to Travel Weekly's style. For more, visit www.thebeat.travel. 

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