Editorials Battles raging August 30, 2004 Share 1 -- After some months of relative calm, the travel distribution business seems to be entering another one of our occasional periods of disarray, confusion and resentment as suppliers and intermediaries wrestle loudly with the process of change. In hotel distribution, we have a global giant, InterContinental Hotels Group, in a messy divorce from Expedia, the largest travel seller in cyberspace. On the cruise side, we have the industrys top brands sniping at their agents over rebating and the advertising of discounts.And on the airline side, Northwest has brought the long-smoldering GDS wars back to center stage.In rolling out its new fees, Northwest said it has to be competitive with low-cost carriers that have lower distribution costs. Thats a fair statement as far as it goes, but we would suggest to Northwest that the gap between its distribution costs and those of JetBlue and AirTran is not the gap to worry about.According to the second-quarter earnings reports, it took a bit more than 7% of Northwests total operating revenue to cover its marketing and selling costs. At AirTran, marketing and distribution are also 7% of revenue.But more than a third of Northwests operating revenue goes to pay salaries, wages and benefits. For Airtran, the corresponding number is 24%.AirTrans operating cost per available seat mile is 8.46 cents. For Northwest, its 10.61 cents. We suspect that the reason for this gap has very little to do with distribution costs. As we have said before, the distribution system has made its contribution to airline cost reduction.Still, from the airlines perspective, GDS fees must seem like low-hanging fruit. Northwest claims that it pays an average of $12.50 to make a sale through a GDS, and, like many airlines, Northwest believes this is too high in todays era of cheap data processing. Thats a fair point, and one that other airlines have tried to address.American, for example, found a way to push some of those costs onto travel agents with its EveryFare program, so Northwest can hardly be blamed for trying something similar. But Americans program at least had the advantage of being voluntary and somewhat reciprocal. The airline essentially told agents, You do this for us, and well do that for you.Northwest, however, made a take-it-or-leave-it proposition, and its short-notice adoption of the $7.50 shared GDS fee is a significant economic hit for thousands of the airlines corporate customers and intermediaries, not to mention an administrative burden.And thats what we like least about Northwests plan. There are no innovations or new efficiencies here, merely an effort to push its costs onto third parties, without risking anything or giving them anything in return.Northwest could play hardball with the GDSs by simply dropping out of one or more of them. It could reduce the cost of its call centers by closing them or making them even more efficient.Or it could just dodge the bullets, live with the inefficiencies and make some other sap pay its costs.