There are a handful of certainties in the
business world, and this is one of them: Nobody likes a price hike.
For manufacturers
and service providers, rising prices for raw materials and overhead
are a source of constant pressure. These costs have to be passed on
to price-sensitive consumers, often in a highly competitive
environment. As the airlines are demonstrating, it can be a severe
challenge.
But at some point,
prices have to rise and somebody has to face the music. And that
somebody has to be the consumer. We mean that in the imperative
sense: It has to be the consumer, rather than the employees, the
stockholders, the intermediaries or others in the value
chain.
From time to time,
one or more firms in that chain may have to suffer a loss and
inflict pain on its employees, shareholders or other stakeholders,
but eventually and over the long haul, every business has to make a
profit on the end-users' money or it goes out of
business.
We are witnessing
in the travel business today a complex debate about GDS costs, but
the underlying story line is relatively simple: The airlines aren't
going to pay as much as they have paid in the past, but the
marketplace hasn't figured out who's going to pick up the
rest.
It is likely that
in the short term, the GDSs and agents will share some pain.
Ultimately, however, the bill has to be paid by the consumer, and
it will be.
Everybody knows
this, but the airlines, GDSs and agents are so determined to make
it look like it's the other guy's fault that they have lost sight
of whatever common interests they may have.
Corporate
consumers, meanwhile, are not simply sitting on their hands waiting
for the bill. They're agitating.
Not long ago, a
handful of corporate travel managers called on their professional
association, the National Business Travel Association, to enter the
fray and put up some resistance.
Antitrust purists
might wince at the notion of a trade association getting involved
in a debate about the prices people pay, but the incident
demonstrates the degree of unrest among big buyers of air
transportation.
More recently, the
Business Travel Coalition produced another white paper that
essentially blames the airlines for the whole mess and calls upon
corporate travel managers to resist new fees and demand "full
content."
We're not surprised
that nobody wants this price hike, but it's here and, somehow or
other, a good bit of it has to come out of the pockets of air
travelers.
Some big
corporations have been the beneficiaries for decades of rebates,
kickbacks, discounts and revenue sharing from airlines, GDSs and
agents. Good for them.
But that was then.
Now it's time to face the music.
A foot in
the door
As
international airline routes go, New York-London has to be regarded
as a crown jewel. It is one of the world's most highly traveled
international routes. Notwithstanding the latest terrorist threats,
the underlying value of the New York-London market is so high that
we were surprised that United decided to sell it to Delta for
cash.
If U.S. and EU
negotiators can create an open-skies environment, access to London
and to Heathrow might soon be less valuable than it was in 1991
when United paid $400 million to get into the market.
Until then, hats
off to Delta. Even though it won't have access to Heathrow, it has
finally realized a long-sought corporate aspiration.