Mark Pestronk
Q: American Airlines is requiring that a large portion of our AA bookings must be made via NDC in order for our agency to remain a "preferred" agency, as many as 70% of bookings by April 30, 2025. We have virtually no bookings on NDC; we find the booking process cumbersome, lacking many important features and tough to integrate into the back office. But if we're not a "preferred" agency, our leisure and business clients without their own corporate agreements will not earn AAdvantage miles, and that would kill our business. Should we affiliate with a large agency likely to reach preferred status? If so, how should such a relationship be structured, and what should be in our agreement with them?
A: I certainly agree that you will need to have your American tickets issued by a preferred agency that meets AA's requirements. I know of no other way in which you can satisfy the needs of your clients.
Your relationship with the preferred agency can take several forms. In increasing complexity, they are as follows:
• You can have a ticketing agreement under which you continue to do substantially all of the work, and then you send the ticketing message to the preferred agency by email. You would have to manually enter the booking information into your back-office system.
• If your American volume is such that typing, sending and receiving emails would be a burden, you can have an agreement with the preferred agency under which it makes your agency an authorized location under its GDS agreement (but not its ARC agreement). In GDS parlance, you would have your own pseudo-city code under the preferred agency's GDS contract. Of course, this relationship requires that you and the agency have the same GDS.
• If American requires that your agency be under common control with the preferred agency before it will recognize tickets that originate with you, you can have an agreement under which the preferred agency makes you a branch or associate branch office under ARC rules. With this arrangement, you appear to the world of suppliers as though you were the same company as the preferred agency.
• Finally, the preferred agency could purchase the assets or stock of your business, making the two entities into one company. Your agreement could then provide that you operate your location or book of business for your own risk and benefit.
From the preferred agency's point of view, there are a couple of risks. Most importantly, it would be liable to suppliers for any fraud committed by your agency, so it must take steps to minimize the possibility of fraud. Second, it is conceivable that American will decide to prohibit all such affiliations except bona fide acquisitions by the preferred agency, in which case you would need to unwind the relationship, probably on short notice.