The legal and economic
landscape for users of GDSs continues to change, as recent events
illustrate. The news that six airlines are joining a
ticket-distribution network called G2 Switchworks presages a new
And now it is being
said that the agreements that have brought airline Web fares into
the GDS might not be renewed by all airlines when those contracts
expire in 2005 and 2006. Some traditional elements in subscriber
contracts are also changing.
Some of these older
contracts included many services and software that were free, based
upon achieving segment-threshold productivity. Probably the most
significant change relates to the a la carte service charges
imposed on travel agencies, meaning that segments must be produced
to pay for each use. It is akin to the older productivity-based
contracts but much more specifically usage-based.
It is, therefore,
necessary to verify the costs of each service your agency will
utilize going forward and delete the services you no longer use:
for example, microfiche charges. Unless you delete the services,
they are carried over (whether you use them or not), and you are
charged for them on a monthly basis.
In many new GDS
contracts, shortfall penalties no longer exist. However, shortfall
fees usually apply if a threshold is established based on the
incentives offered or amounts waived.
Depending on your segment
production numbers, a new option not available under the old rules
allows an agency owner to explore a promise to use the particular
GDS for 80% to 100% productivity and may eliminate any shortfall
provision. Depending on your size and GDS provider, a commitment to
utilize the GDS on a full-time basis may include a kicker of
additional incentive funds.
The lack of
shortfall assessment in most new contracts is a significant
development for travel agencies currently paying monthly shortfall
bills and should immediately be addressed. Depending on the GDS
company, your account executive often is not monitoring your
production, except when you miss a target with financial
and negotiability of contractual language depend upon volume,
loyalty, timing of the negotiation and conversion
more than 20,000 segments are advised to obtain an offer from other
GDS providers that are serious contenders. One question to ask is
the length and depth of any preferred airlines GDS
A new development
in this era of GDS deregulation is the ability to negotiate a
contract for one year or seven years. If your old reservations
hardware (including printers) was donated to you by the GDS
company, first verify that it will run the new software necessary
to efficiently and productively service clients and determine the
cost of the upgrade.
bonuses ranging from four to six figures still are available,
depending on the number of segments your agency
Check for the
latest legal language emphasizing that you pay it back pro rata if
you breach the agreement.
vary depending upon the GDS company and the size of your agency.
Co-terminus language protection was deleted from certain contracts
after the DOT deregulation last January.
It is recommended
you amend the contract addressing the issue of adding new services,
locations and/or equipment not extending the contract. Always check
for mirror indemnity language, confidentiality and loss of business
that would trigger an ability to renegotiate.
Loss of a
particular account may still be reason for tailoring a provision
just for you. Of course, there are more amendments, depending on
the GDS provider and your agencys particular situation.
have an ability to at least renegotiate, due to changes in the
Rose Hache is a
travel attorney based in Houston. She can be contacted at [email protected].