Q: Our agency's GDS contract is nearing its end, and our vendor has presented us with a proposal for a new contract, which contains a penalty that I have never seen before. Aside from a small penalty for having fewer annual segments than an annual goal, there is a penalty of $2.40 per segment for each segment that is not on the vendor's GDS. Have you seen this penalty before? Does the penalty apply only if we have another traditional GDS, or does it also apply if we book directly on a supplier website? What if we book through a big wholesaler's multi-supplier system, such as Mark Travel's VAX?
A: Share quotas such as the one you describe have been in use for a decade, since Sabre pioneered them using the term "Booking Share Threshold." Except for large, multi-GDS agencies that refuse to accept a share quota, Sabre has required them in nearly every agency contract that I have seen.
However, not all of Sabre's share quotas require 100% compliance. They more typically allow 5% or 10% of bookings to be on other systems, meaning that the penalty applies only to bookings in excess of that percentage allowance.
According to my records, Travelport copied the Sabre system, including the $2.40 penalty, about 2008, and Amadeus followed suit a few years later, with a penalty of $2. Unlike Sabre and Travelport, only a minority of Amadeus contracts have share clauses.
What kinds of segments or bookings (the words can be synonymous depending on the wording of your contract) you are allowed to do outside your vendor's system depends on the exact wording of the contract's share-quota clause. Even if you violate the clause, it is often not clear how the violations could be detected or the penalties can be enforced.
The latest Sabre contracts are the clearest, stating that no penalty applies if "Customer processes at least ninety-five percent (95%) of its total global GDS bookings through the Sabre System during the contract year ('Booking Share Threshold')." So you will get penalized only if your agency has Travelport or Amadeus bookings using an agency identifier belonging to you.
Travelport's most recent contract is less clear: "Subscriber agrees to generate 90% of its total travel reservations in the Travelport GDS in each Contract Year ('Annual Target'). If Subscriber does not achieve the Annual Target during the applicable Contract Year, Subscriber will pay to Travelport an amount equal to $2.40 ('Shortfall Fee') multiplied by the difference between the Annual Target and the actual number of Segments generated by Subscriber." The first sentence appears to imply that all "travel reservations" outside Travelport will count toward the penalty, so it may be important to try to get Travelport to change the clause to specify that only non-Travelport GDS bookings count.
Amadeus' share-quota clause states: "Customer agrees to produce a percent ('Percent') of its total net GDS air segments through the System ... ('Annual System Use Goal') as described below." So it is clear that Amadeus is not going to penalize you unless you use Sabre or Travelport.
Depending on your agency's size, you may be able to get the amount of the $2.40 or $2 penalty reduced. As with all GDS legal issues, your contract might be different, and you need to review it carefully.
Mark Pestronk is a Washington-based lawyer specializing in travel law. To submit a question for Legal Briefs, email him at [email protected].