Airlines, GDSs slowly reach deals on ancillaries

By Kate Rice

After years of bickering and finger-pointing on both sides, airlines are slowly beginning to offer core ancillary services — such as preferred seating, prepaid baggage and lounge access — through GDSs.

Last week, Sabre announced that Air France-KLM had signed an agreement to offer its ancillary services through the GDS worldwide, including in the U.S., where airlines have been dragging their feet.

Travelport said Qantas had also signed a worldwide deal making its ancillary services — including premium seats — available to Galileo, Worldspan and Apollo users worldwide.

Additionally, Sabre said last week that US Airways Choice Seats would be available through Sabre in 60 days.

And Travelport said Delta's Economy Comfort seats would be bookable in its systems in the U.S. and Canada sometime in the fourth quarter.

It would be a major coup for GDSs to snag some of the key ancillary services and products of the two biggest U.S. carriers, Delta and United Airlines.

Bob OffuttUnited said last week it is working with GDSs to find ways to sell its Economy Plus seats through them. But United apparently will limit ancillary sales in GDSs to premium seating.

Bob Offutt, senior technology analyst with PhoCusWright, has dubbed that arrangement — i.e., including core extras that fit naturally with the booking of an airline ticket, but not all extras — as the bifurcation of ancillaries.

The U.S. has been the holdout market when it comes to making ancillary services such as premium seats, seat assignments and baggage fees available in the GDSs.

Airlines have dragged their feet, saying the GDSs not only represent an unnecessary expense but are technological dinosaurs whose legacy computer systems are ill-suited to providing airlines with the functionality they need to make money on ancillaries.

The GDSs have countered by saying the technology charges are nonsense and that they’re the only marketplace that gives consumers choices and maintains competition.

GDSs and consumer advocates say that because so much of what used to be included in the cost of an airline ticket is now an ancillary service with an extra fee, consumers can’t truly comparison shop across multiple carriers unless ancillaries are included in GDS content.

A look at GDS listings of which airlines each is working with and which GDSs have implemented ancillaries in their systems reveals a heavy international slant, with some smaller airlines operating in the U.S. included, as well.

Among all airlines that have ancillaries live in its systems or are close to being live, Sabre listed Aegean, Aeromexico, Air France, Air New Zealand, Alitalia, Brussels Airlines, KLM, Porter, Qantas, United, US Airways and WestJet.

But those that offer ancillaries in the U.S. are just Air New Zealand, offering prepaid bags; Alitalia, offering prepaid baggage and lounge access; and WestJet, which is selling premium seats. Air Ne Zealand and Alitalia plan to add more services.

Sabre said it has more airlines in the pipeline, including some U.S. carriers: Alaska Airlines, Frontier, JetBlue and Virgin America. It also claims to have more than a dozen international carriers in the pipeline.

In June, Amadeus had six carriers selling their ancillary services in its systems in 15 European markets: Air France, KLM, Iberia, Finnair, Qantas and Corsairfly.

Amadeus said its goal is to sell the ancillary services of 20 airlines via travel agents in 32 markets by the end of this year. It said the 32 markets in question represent 80% of bookings made in the GDS, and that 13 other carriers were planning to join the Amadeus ranks.

In August, Amadeus announced it expanded its commercial relationship with Delta to enable the sale of Delta’s Economy Comfort seating.

Travelport is currently distributing ancillary products for British Airways, Air Canada, EasyJet, KLM and Delta and has 20 other carriers that it said want to distribute content through the GDS. Travelport said it plans to implement these next year, once contracts are signed.

From a technology standpoint, Travelport said it could distribute these ancillaries worldwide, but what content is available where and when varies by carrier.

For example, Delta’s Economy Comfort seats will be available in the U.S. and Canada in the fourth quarter, said Steven Ratcliffe, Travelport’s product director for merchandising. Travelport expects to add more U.S. carriers early next year, he said.

While Ratcliffe woouldn't comment on Travelport’s pricing, Sabre is not charging airlines for the sales of ancillaries in its systems, and Amadeus said it charges a “small transactional fee” if an “airline earns additional revenue as the result of a sale or upsell” but does not charge if the airline does not make a sale or upsell.

Airlines and GDSs in the U.S. have been at such an impasse over ancillaries that the Department of Transportation (DOT) has been considering a rule that would require any airline with any content in the GDS to include ancillary services.

In August, airlines opposed that proposal in an acrimonious hearing before the DOT Advisory Committee for Aviation Consumer Protection, arguing that such a mandate would deprive them of negotiating leverage with GDSs.

It is not yet clear if these recent agreements will be enough to keep the DOT out of the debate. In an interesting coincidence, the DOT has again delayed by two months the target date for publishing a formal proposal and request for industry comment. The new target date is Jan. 29.

Some in the industry see the airlines’ recent agreements with GDSs as a response to the demands of the marketplace, particularly the corporate marketplace.

Kevin_MitchellKevin Mitchell, chairman of the Business Travel Coalition, an advocacy group, said, “Travel management companies, corporate travel departments and global distribution systems have been working vigorously for four years to make progress on getting ancillary fee data into travel agent displays and corporate automated booking tools.”

PhoCusWright’s Offutt observed that many of the airlines that currently are listing their ancillaries in the GDSs are global carriers that have to be in a GDS, given the nature of the global market, while U.S. carriers are competing against low-fare carriers.

However, some U.S. low-fare carriers are now in the pipeline with their ancillaries, including JetBlue (one of the first airlines to introduce seats with extra legroom) and Frontier Airlines. Both are working with Sabre.

Mitchell was unimpressed by the Air France-KLM and Qantas announcements, pointing out that the Official Airline Guide, a major aviation industry resource, lists more than 600 airlines, so the number of airlines adding their ancillary fees to the GDSs represent a tiny proportion of the total.

Moreover, he said, the pace of conversion is so slow that what he termed the “good actors” find themselves at a disadvantage because by putting ancillary fees in the GDSs their fares look more expensive than the fares of carriers that don’t.

The deals with Delta and US Airways both represent major developments — Delta because of its size and the US Airways-Sabre agreement because it has taken two years to execute, making it a flashpoint in the ongoing debate between airlines and GDSs over ancillary fees.

Airlines have said that the length of time that it is taking for Sabre to implement Choice seating proves that GDSs aren’t up to the ancillary challenge.

While Sabre wouldn’t comment on its US Airways contract, it demonstrated its Sabre Red desktop tool for agents at the August DOT hearing.

Shelly Terry, Sabre’s senior director of air merchandising, was able to set the parameters for the ancillaries she wanted for her purchase, and in a single click was able to display a lengthy list of airlines with departure times, fares and ancillary services she had indicated she wanted.

Follow Kate Rice on Twitter @krtravelweekly. 

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