Agents expected to stick with GDS despite British Airways' surcharge

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Agents expected to stick with GDS despite British Airways' surcharge
Photo Credit: Vytautas Kielaitis/Shutterstock.com

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 products. 

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," he said.

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 itineraries.

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