US Airways deal with Sabre puts Web fares in GDS

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SOUTHLAKE, Texas -- US Airways' Internet specials are "Web only" no longer: They are in the Sabre GDS, where agents can access and book them at no extra charge.

In what could be a breakthrough deal, Sabre reduced US Airways' booking fees about 10% and froze the price for three years in exchange for full access to the carrier's published inventory for all Sabre-powered outlets, including retail travel agency subscribers Travelocity and GetThere.

The new Sabre program is called Direct Connect Availability-Three-Year Option and requires the participating airline to commit to Sabre's highest level of participation for three years. Usually, those commitments are made for periods as short as 30 days.

The deal kicked in on Oct. 21, when Sabre gained access to the full range of US Airways' published fares, including Web fares like its E-Savers.

The only Web fares Sabre is not getting are opaque fares in which the airline is not named until the ticket is booked, as is done on sites such as Priceline and Hotwire. US Airways and other carriers with U.S. points of sale that may decide to participate also agree to pay the same commissions, if any, that they pay for sales on their own or other Web sites.

Clients booked by Sabre agencies also are guaranteed the same "perks and amenities" as passengers booked via other GDSs or Web sites.

Scott Alvis, Sabre's senior vice president of enterprise marketing, said it goes beyond fares to include "all the things that surround the product," such as waivers of fare rules and mileage.

Assuming other airlines sign up, a likely effect of the program may be to "dampen" the growth of incentive payments to agents, according to a Sabre Securities and Exchange Commission disclosure.

Travel Weekly asked Alvis if the booking fee freeze is one of the things that might "throttle" growth in agency incentives, a prospect raised by CEO William Hannigan.

Alvis said agents are going to receive "an efficiency in their operations with significant value ... so, yes, this is one of those elements."

"We will have discussions with [travel agencies] about managing our business model," he added. "The carriers have an issue with incentives to travel agencies" because they believe incentives are driving up GDS costs, he said.

The Web fare plan originated with US Airways, which is trying to restructure under Chapter 11 protection. Alvis said the carrier brought a proposal to Sabre "a couple of weeks ago."

Asked if Sabre shopped the new program to other carriers, Alvis said nobody knew of the plan before it was revealed Oct. 21. Sabre began discussing the plan with all the major U.S. airlines that evening, he said.

US Airways is talking to other GDSs about similar deals, said Ben Baldanza, the airline's senior vice president for marketing and planning.

Asked why US Airways decided to do this now, Baldanza said the use of Web fares no longer makes sense as the Internet has grown from a niche market to a mainline distribution channel.

He said US Airways concluded the industry needed "a more stable, economic, consumer-friendly pricing structure." He called the Sabre deal one step, but not the only step, to that end.

Unlike American's EveryFare, Baldanza said, "we're not charging anything to the travel agent for this. This goes to the source of the expense, which is Sabre."

US Airways spends $125 million a year on GDS fees, more than half of it on Sabre, Baldanza said.

The DCA Three-Year Option sets Sabre's booking fees in the U.S. at $3.85 per segment, which is an 8% to 10% reduction, depending on the carrier.

The 14-cent cancellation fee is unchanged.

Sabre believes the plan will "slow the channel shift toward reservations made directly with suppliers," according to its SEC filing.

The GDS estimated it will take a $4 million to $5 million hit from lost US Airways revenue in 2003. If all airlines join, the impact would be $30 million to $40 million in 2003.

Like Baldanza, Sabre's Alvis cautioned that the new Sabre plan "is not the answer. It's part of the answer." He said Sabre anticipates further revisions in its pricing.

Although the agency community responded favorably to the plan, it won no immediate endorsements from other major airlines.

And while other GDS companies aren't matching, they took note.

Henry Silverman, the chief executive of Cendant, which owns Galileo, termed the Sabre-US Airways plan "very constructive" for the industry.

Cendant is evaluating the plan and discussing it with customers.

Worldspan CEO Paul Blackney called Sabre's move "interesting," but downplayed its long-term impact, suggesting it was not the start of a revolution.

Worldspan will evaluate the Sabre plan but also will proceed with its own pricing plans, he added.

Amadeus said it will announce its 2003 pricing initiative later this year.

Andrew Compart contributed to this report.

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