American Airlines a victor in settlement and Travelport deal

By Kate Rice
After single-handedly waging a battle for direct-connect distribution for years, American Airlines appears to have won a singular victory in the GDS wars, landing a new full-content agreement with Travelport that also ends the two companies’ court battle.

Under the agreement, American will use its XML-based direct-connect interface to bring American’s ancillaries to the desktops of Travelport’s agent subscribers. In announcing the deal, the companies also said they had resolved their legal differences. Thus, American appears to have skillfully used the courts as leverage in its long and solitary campaign for direct connect.

Nevertheless, as of late last week it was unclear whether the deal would benefit Travelport’s agent clients or simply offer them a way to work harder selling American’s ancillaries without remuneration.

Travelport was the logical GDS for this deal. In addition to its Universal API technology, it is the smallest of the three GDSs. Travelport does not have the benefit of a strong geographic base, as Sabre does with North American customers and Amadeus does in Europe.

Travelport has broken with tradition in the past, such as when it agreed to have its subscribers pay segment fees to Southwest Airlines. In that case, it upended the old commercial model of having GDSs pass on to agents the segment fees airlines pay them.

It also set a precedent for direct connect with its Air Canada agreement, which brought that airline’s fare families to the desktops of Travelport’s agency subscribers in Canada.

On the other side of the GDS wars, American scored a victory over Sabre when that GDS agreed last fall to pay an unspecified amount to American to settle their legal battles. That decision gave American additional leverage at the bargaining table with Travelport, since the airline’s antitrust suit against Travelport contained the same allegations American had made in its suit against Sabre.

In both cases, the GDSs countersued.

The announcement of the new deal did not specifically state that it was a settlement of the lawsuit, but it did state that American and Travelport had resolved their litigation.

“Read between the lines,” said Timothy O’Neil-Dunne, managing partner with T2Impact, who has worked for both airlines and GDSs.

Travelport did not say when it will be bringing American’s content to market. Besides collaborating on the technological aspects of enabling agents to sell American’s ancillary services, it must also get approval of the process from the bankruptcy court that is overseeing American’s Chapter 11 reorganization.

However, American and Travelport said the new agreement meant that Travelport would be the first GDS to offer access to American’s other products and services. That includes its Main Cabin Extra, which provides four to six inches of additional legroom and Group 1 boarding.

“All of our subscribers will continue to access American’s full content, while American can merchandise its full line of products through Travelport,” said Dan Westbrook, Travelport’s vice president and general manager of global distribution sales and service.

Farelogix, which already connects Air Canada and Travelport, will also connect American and Travelport. American also uses Farelogix to connect with Priceline, giving the online giant the capability of enabling its customers to book American’s preferred seats near the front of the cabin. It is the only online travel agency that can sell those seats.

Jim Davidson, president and CEO of Farelogix and a former GDS executive, said that the AA-Travelport deal holds opportunity for travel agents. He said it means airlines can get all their content to travel agencies by hooking into GDSs via a direct connection.

Even so, that additional content might not necessarily give Travelport a competitive advantage.

Bill Tech“There’s an advantage if we get paid for it, but we’re not,” said Bill Tech, president and CEO of Travel & Transport, a $2 billion travel management company based in Omaha, Neb., that also sells some leisure travel. “They want us to spend more time on the phone with a client to sell that product but not pay us for it. That doesn’t sound fair, does it?”

Someone will have to foot the bill for that time. Tech said that a client is not going to want to pay more to book a service the client is already paying more for.

“We’re more than happy to do it, but it’s going to reduce our productivity,” Tech said. “If we’re going to spend longer on the phone to offer these services, we need to get paid for [it].”

Therein lies the rub for most agents. The established commercial model on which full content agreements are based has airlines paying GDSs fees for each segment booked — i.e., a flight segment, a hotel, a car rental, etc. GDSs pass on those fees to travel agencies. But an agent doesn’t get paid extra for booking an ancillary.

A Travelport spokeswoman said the GDS did not discuss specific terms of agreements but added that Travelport does “not anticipate any changes for our travel agency partners.”

Other airlines have their ancillary fees in the GDSs. Sabre, for example, sells ancillary services for several airlines in its GDS. But the only major US carrier selling its ancillary services is US Airways, whose Choice seats went live last fall in Sabre. US Airways and American are in the process of merging and will determine which of the two airlines’ res systems the combined carrier will use.

When United Airlines and Continental Airlines merged, United changed res systems. After the migration, United pulled those seats from Travelport and Sabre, and both GDSs continue to work to reintroduce them.

Alaska Airlines has signed a distribution agreement with Sabre that would include selling its seats in the GDS, while Travelport has an agreement to sell Delta’s economy comfort seats.

And during the first quarter of 2013, Delta is conducting a beta test with Travelport of an ancillaries-sales solution that Travelport said it expects to launch it “more broadly” sometime in the second quarter.

The Travelport-AA settlement leaves just one GDS/airline court case pending in the GDS wars — that between Sabre and US Airways.

Follow Kate Rice on Twitter @krtravelweekly.
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