The ongoing war of words between airlines and GDSs escalated this month with the publication of an article in Airlines International, the house magazine of IATA, that described GDSs as outdated and unable to handle ancillary bookings.
At the heart of the matter is a long-festering clash between the two sides: Do GDSs lack the technological ability to distribute airline ancillary products, or will the airlines just not let them?
The IATA article quoted Montie Brewer, the former CEO of Air Canada, accusing the GDSs of being a “bottleneck” between customers and airlines.
“Airlines are becoming increasingly sophisticated in the types of product they are offering, and consumers are becoming increasingly sophisticated in their purchase decisions,” he said. “The frustration is that these trends are being stymied by the outdated systems of the GDSs.”
Valuing ancillary revenue at $32.5 billion and describing it as “a crucial line of income,” the article asserts: “To make the most of the potential, airlines need an efficient distribution system.”
It continues: “Offering distinct products to the consumer directly via the airline website is one channel that is working well. But at least 50% of the world’s flights continue to be sold through travel agencies, which rely on [GDSs] to display and compare airline products. And the areas of comparison are limited to some very basic metrics, such as price, time and routing — just as they were four decades ago.”
The article goes on to assert that “a GDS screen today looks much like a screen from the 1970s. They are unable to handle the rapidly increasing range of product offerings from airlines.”
In response to the article’s characterization of GDS technology, Chris Kroeger, Sabre’s senior vice president of marketing, countered, “Nothing could be further from the truth. Our technology environment includes over 8,000 open-system servers with an average age of less than three years, processing over a billion Web services and XML transactions a day with sub-second response time.
“IATA suggests GDSs can’t handle the new ways airlines want to sell their products. ... Recently, Sabre was the first GDS to provide an end-to-end merchandising solution for airlines using industry technology standards.”
Kroeger, like other GDS spokesmen, pointed to “the growing number of airlines agreeing to sell their branded fares and ancillaries via the Sabre marketplace” as evidence of the value GDSs represent to carriers in the sale of ancillary products.
Amadeus said it currently sells airline ancillary services for several European airlines and further noted that EasyJet’s full range of flight-related services has been available since the airline launched in the GDS in 2007.
“We currently have agreements in place with 43 airlines to implement ancillary services in one or more of their sales channels including GDS, their website and/or their ticket offices,” said Dan Greaves, manager of airline distribution marketing for Amadeus. “In the GDS we have six airlines implemented and a total of 18 signed up. We are also in discussions with many other airlines around the world regarding their ancillary services.”
In the U.S., Amadeus said it had come to terms with United Airlines to integrate United’s Economy Plus seating in the coming year, an ability Sabre clients already have, and that it signed a multiyear agreement with Frontier Airlines to provide Amadeus with the airline’s ancillary services, such as extra-legroom seats.
“Amadeus has the technology available to effectively merchandise an airline’s products as well as serve the needs of travel agency subscribers,” Greaves said. “Amadeus is enabling booking access to the ancillary services of airlines to ensure travel agencies can compete effectively.”
For agents, what remains most important is streamlined access to all pertinent information and products.
Matthew DeGuire, co-owner of Travel Unlimited in Columbia, S.C., said, “Right now, we are forced to jockey back and forth between our GDS for pricing tickets and dozens of airline websites to calculate additional ancillary fees, mostly seat fees.”
He added: “When reservations and tickets were all that mattered, the system as it is in place now was not only fine but the most efficient way to communicate between air carriers. Now, it needs to expand to meet the increased complexity of ancillary charges. I don’t know whether it’s the airlines dragging their feet or the GDSs’ inability to master the technology that’s holding everything back. I suspect it’s a little of both.”
Industry analysts agree with DeGuire’s assessment, noting that beyond the rhetoric, both parties make valid points.
Bob Offut, a senior technology analyst with PhoCusWright, said that while, at its core, GDS technology does date back to the 1970s, it has also modernized.
For example, he said, back in 2009, when the airlines decided to distribute ancillary content through XML, a Web-based scripting language for business transactions, the GDSs accepted the technology and have been using it.
“Neither side has fully embraced it, but both are working on it,” Offut said.
Roughly 22 airlines are now distributing ancillary content through the Airline Tariff Publishing Co., he added, and the three main GDSs have all confirmed that they are receiving and using that information.
However, Offut said that some airlines are clearly reluctant to give the GDS the ability to book ancillary products because it is to their advantage to deal directly with their customers.
“The whole idea here is to move the support of the customer back to the airlines and away from the intermediary,” he said. “It’s about passenger-information control and the relationships with the customers. ... The trend here is that some airlines want to customize offers based on the identity of the traveler, so the point of sale has to always go back to the airlin
e to sell the ancillary.”
Helane Becker, an airline analyst with Dahlman, Rose & Co., said much of the dispute has to do with the airlines’ desire to keep as much revenue in-house as possible.
“They are working on very thin margins to begin with,” she said. “So I think the bottom line is that they just want to drive revenue to their own websites.”
Becker said the airlines are trying to change their historical position as an industry that has ceded much of its revenue to third-party intermediaries and distributors.
“From an airline perspective, they long ago gave up their revenue product to travel agents,” Becker said. “And, over time, they’ve tried to get that back. It’s a revenue stream they can keep for themselves, and why shouldn’t they?”
Follow Johanna Jainchill on Twitter @jjainchilltw.