Sales of airline ancillaries through GDSs are on the decline, even as overall travel agency ticket sales through the GDSs are growing at a healthy clip.
ARC reported that in April it settled just $6.9 million in ancillary sales, a 12.5% decrease from 12 months earlier.
The decrease seems counterintuitive in light of the fact that the value of ticket sales that ARC settled in April was up nearly 10% year over year, to $8.6 billion. In addition, ancillary sales through all channels were up 22% worldwide in 2017, according to the airline consulting firm IdeaWorks.
ARC CEO Mike Premo offered a simple explanation for the decline in ancillary purchases through the GDSs: the 2017 rollout by American Airlines of domestic Basic Economy fares, which do not allow for the purchase of assigned seats.
The vast majority of the ancillary sales that ARC processes are on American, while the remainder are on Air Canada. And the lion's share of those transactions is for seat selection. Other airlines, Premo said, have not invested in adapting their legacy computer systems to be compatible with Electronic Miscellaneous Document (EMD), the platform used by GDSs to support ancillary sales and to generate an ancillary receipt.
Instead, agents purchasing ancillary products for their clients must find a workaround, which typically means going directly to an airline website.
Premo said that compatibility when it comes to ancillary sales through the GDSs has been a problem since 2008, when oil reached $140 per barrel and struggling air carriers hurriedly implemented baggage fees without developing their systems in line with an industry standard.
"They extended that same process as they began charging for seats and priority boarding," Premo said.
Ten years later, however, airlines in the U.S. and globally are earning billions of dollars.
Meanwhile, IATA's New Distribution Capability (NDC) — the XML-based messaging standard that enables airlines to sell all products, including ancillaries, through travel agencies — has gained traction. The major GDSs (Travelport, Amadeus and Sabre) have embraced NDC after initial reluctance. And 20 airlines, including American, United, JetBlue and the largest European legacy carriers have backed IATA's goal of having 20% of industry sales powered by NDC by 2020.
As for why ancillaries remain largely unavailable in the GDS channel, Premo said one reason is that the GDSs, especially Sabre, have only recently embraced NDC. Travelport remains the only GDS to have received IATA's highest NDC certification, Level 3, as an aggregator.
But Premo said some airlines are also trying to decide if it is even worth the investment to retrofit their systems to generate ancillary sales receipts through the GDSs. Driving that deliberation, he said, is the IATA initiative One Order, under which airlines will consolidate a passenger's personal information and purchases (fare and ancillaries) within a single record, doing away with EMDs. IATA hopes that widespread adoption of IATA One Order will take place between 2021 and 2025.
Jim Davidson, CEO of the airline merchandising provider Farelogix, said airlines aren't content to wait that long to upgrade their ability to sell ancillaries in the agent channel.
"Certainly the airlines that we talk to all have an interest in selling more and more through the GDS and don't intend to wait for One Order," Davidson said. "It doesn't mean every sale will have an EMD connected to it. I think we'll see more fare families that don't necessarily generate an EMD."
Phocuswright technology analyst Bob Offutt is more skeptical.
"I think we are going to wait for One Order now," he predicted.