Industry players last week expressed skepticism that U.S.
travel agents would take advantage of the alternative booking channels that
British Airways (BA) and Iberia will offer when they implement a $10 one-way
fee on GDS bookings beginning Nov. 1.
Meanwhile, the adoption of a GDS booking fee by the two
carriers, both subsidiaries of International Airlines Group (IAG), could
presage more attempts by airlines to redirect distribution into their own
channels through the use of IATA's New Distribution Capability (NDC).
"I think there is going to be more fragmentation in
terms of connectivity using NDC connections," said Bob Offutt, senior
technology analyst at Phocuswright. In March, Offutt authored a report titled "New
Distribution Capability: It's Only Just Begun."
BA and Iberia announced plans late last month to implement
the surcharge, which followed the $18 GDS distribution charge that Lufthansa
put in place in September 2015.
IAG said it was implementing the fee to make up for the
extra costs of merchandising through the GDSs, which typically charge between
$3.50 and $4 per flight segment, according to travel lawyer Mark Pestronk, who
writes Travel Weekly's Legal Briefs column.
IAG emphasized that over the last few years it has invested
substantially in NDC. Agents who wish to book BA and Iberia tickets without the
surcharge can use direct channels, such as the airlines' websites and call
centers. They can also use NDC direct connections, NDC connections via ticket
aggregators and self-booking tools with a direct connect to BA or Iberia.
A new IAG booking portal will be available shortly. IAG also
emphasized that it wishes to draw customers to direct channels and NDC-enabled
channels, where they can more easily display bundled packages and ancillary
Still, Mike Estill, COO of the Western Association of Travel
Agencies (Westa), said that he does not expect Westa agents to spend much time
shopping BA or Iberia outside the GDS channel. In addition, he said, agents won't
eat the costs of the GDS fee and will instead pass it on to customers.
"I think the trend is not beneficial for the consumers,
but I'm not sure that the trend is beneficial to the foreign carriers, either,"
Estill said. "In a time when foreign airlines are gaining as an
alternative to U.S. carriers, to cede pricing parity over this issue seems
surprisingly one-issue focused."
Travel agency lobbyists, including ASTA and the Business
Travel Coalition (BTC), also said the move by IAG will harm consumers by making
it less efficient for agents to comparison shop.
"It's about harming comparison shopping, about forcing
customers to the airline site, where there is no shopping," BTC chairman
Kevin Mitchell said.
Carriers, however, have a different take.
In a statement, Iberia argued that, "Our new
distribution model will make the costs of different booking channels more
transparent to travel agencies and to consumers, and we will be able to offer
lower-cost options to consumers using lower-cost channels."
The move by IAG has spawned speculation that other airlines
will follow, potentially including Air France/KLM, which along with Lufthansa
and IAG comprise the Big Three legacy airline groups in Europe.
Meanwhile, American, which partners with BA and Iberia,
issued a statement last week saying that, at least for now, a GDS surcharge is
not on the table.
"American does not charge travel agencies for bookings
made through a GDS, and it is not something we are planning to implement at
this time," spokesman Josh Freed said.
Offutt said that implementing a GDS fee remains a dicey
proposition for airlines. If the carrier dominates a region, it has more
ability to set the terms on how people shop, he said. But in regions outside
their home base, carriers like Iberia, BA and Lufthansa are likely to lose
market share. Still, he said he expects growing sales-channel fragmentation,
especially as more airlines and technology companies become adept at using NDC
to support their product display APIs.
In statements last week, the Amadeus and Travelport GDSs
said they are working with IAG to integrate the company's API into their
systems. Amadeus added that its vision is to use NDC to develop an integrated
marketplace for product displays that can be widely adopted by both travel
agencies and airlines.
Pestronk said he was not sure an idea like that, which would
still be costlier to airlines than direct sales, will solve the dispute between
airlines and the GDSs.
"The same battle has been going on for many years, and
I would have to say there is no sign that the carriers are winning yet,"
Offutt said that non-GDS, NDC-based marketplaces, such as JR
Technologies and OpenJaw, have already begun to emerge. They work effectively,
he said, but only for simple bookings.
Travel agencies, Offutt said, could end up subscribing to such
marketplaces for simple bookings while continuing to use the GDSs for complex