es, it would be better if the airlines
involved weren't in bankruptcy. And yes, there are some serious
preferred-supplier issues to be sorted out.
But on first blush, the airline/GDS/travel agency program called
Momentum represents a significant evolutionary leap in GDS pricing
initiatives, perhaps akin to the jump from great ape to early
Airlines want to reduce GDS costs. Until now, the GDSs were
insisting that they adhere to their schedule of ever-increasing
per-segment revenue. The two seemed to share a belief that the only
way to accomplish both goals was to start to pass on segment costs
to travel agents and their customers.
The earliest initiatives -- in this tortured Darwinian metaphor,
the equivalent to the tailless gibbon -- were offered by Worldspan
and Sabre/GetThere. These simply asked travel agents to pick up
costs, voluntarily, with the suggestion that the money could be
recouped with fees charged to clients. Needless to say, gibbons, to
this day, are quite rare.
In the next iteration -- American Airline's EveryFare -- there's
a dim awareness that agents need an incentive to take on costs. The
incentive on offer is access to American's Web fares in a manner
that allows agents to retain segment booking credits.
The problem is that the pool of agencies that can consider this
to be attractive is quite small, and the fine print in the proposal
goes on page after page.
What struck me as particularly uninviting about EveryFare is
that agents assume all the risk. The GDSs have nothing to lose if
agents sign up -- to the contrary, they gain, because they are able
to collect fees for fares that had not been in their systems
previously. And the only cost to American is in the development
(and marketing) of a technology that enables them to reduce
expenses. Ostensibly, agents can turn the Web fares into a profit
center if they attract new business in high enough volume to
collect additional fees, but it seems to me they assume a
disproportionate share of uncertainty.
Still, in recognizing that agents needed some incentive, it
moved the proposals from the realm of the lesser apes to
With Momentum, we've come down out of the trees. Every party
assumes some risk, and every party sees potential for real
In past proposals, the GDSs seemed to be the most timid of the
parties. But not in this initiative. Galileo, the presumed parent
of the proposal (the dateline on the press release is Parsippany,
N.J.), may in fact be taking the greatest risk -- it's willing to
actually lower segment fees -- and is also in the position to
realize the greatest upside. Or rather, its parent, Cendant, may
reap the greatest benefit.
Cendant needs to make a bold move. Despite a decade-long search
for synergies in travel, Cendant's stock currently is below its
closing price at the end of 1993. Hotel brands, car rental
companies, Internet travel agencies, time-share condos, a GDS -- it
must have looked awfully good on paper, but the company never
seemed to be able to leverage these segments into a significant
Momentum, however, has tremendous potential to give Galileo a
competitive boost that can't be matched easily by GDSs that don't
also own commissionable products to dangle (alongside Web fares) in
front of travel agents. These commissionable products also stand
poised to get some lift, as long as preferred-supplier
relationships don't get in the way.
That's a big if, and there are additional gaps that remain to be
bridged if the evolution of GDS pricing is to continue. More
airlines need to enroll. More travel agencies need to sign up and,
importantly, increase sales of Cendant products.
The road to civilization is long, but if Momentum gains
momentum, the other GDSs may begin to look a bit like Neanderthals,
scratching their heavy brows, wondering what it all means for