Q: We are looking at renewing our GDS contract for another five years. In your Legal Briefs columns, I have read that the GDS vendors' standard contracts contain loopholes allowing the vendors to cut incentives, raise fees or impose new fees. Given the major airlines' multiyear efforts to lower the fees that they pay to the GDS vendors, is there anything new that I should be looking out for?
A: This year's standard Sabre contract has a new clause that gives Sabre unlimited rights to cut incentives with 30 days' notice. The loophole is hard to find because it is buried in the definitions section near the end of the contract.
Under the standard Sabre contract in effect for many years, Sabre offered no segment incentives for what it called "Sabre BBR Bookings." The term meant "a Sabre booking for an air carrier participant that either participates in the Sabre System at, or for which payment is made at, (i) the Basic Booking Request (BBR) level, BasicConnect level or any other level or rate below the StandardConnect level, or (ii) the FlexConnect level."
The terms Basic Booking Request, BasicConnect and FlexConnect were not defined in the contract, but the concept was that, if a carrier didn't offer its full content and functionality through the GDS, it fell into one of those participant levels, paid Sabre lower fees and Sabre did not pay segment incentives for bookings on that carrier. The most common kind of Sabre BBR Bookings were those on Southwest Airlines, on which Sabre generally pays no incentives.
Starting at about the middle of 2019, Sabre made a key change. Instead of Sabre BBR Bookings, the contract now has a term called, "Sabre LC Booking." The latter means "a Sabre Booking for an air carrier participant that either participates in the Sabre System at, or for which payment is made at, (i) the Basic Booking Request level, BasicConnect level or any other level or rate below the StandardConnect level, (ii) the FlexConnect level or (iii) any segment type for a participant listed on AgencyeServices.sabre.com or its successor site (subject to change on 30 days' notice)."
It's clause (iii) that's the killer. The letters "LC" are undefined, so Sabre can add any carrier at all to the list on its password-protected webpage -- even major U.S. carriers. Any carrier thus added then has only Sabre LC Bookings.
The new, standard Sabre contract clearly states that the segment incentives do not apply to Sabre LC Bookings. So Sabre has built a sneaky trap for unwary agencies that are being presented with new contracts this year.
Agencies negotiating new Sabre contracts, including renewals, need to try to avoid the trap by limiting Sabre's rights to cut incentives in this and other ways.
The best way to get the leverage needed to force any GDS to make a change is to create a credible threat of conversion to a competitor. Make clear that you are in a position to convert if you don't get what you want.