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 considering 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 the 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
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 airlines 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 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
"I think we are going to wait for One Order now,"