A move by American Airlines to load global distribution system fees onto the shoulders of travel agencies around the world could spread to multiple airlines and multiple GDS providers; this is a warning from David McCaig, President and COO of the Association of Canadian Travel Agencies. If this happens, the basic travel distribution system of the future will be a "dumbed-down” one that will take air travel back in time to give world travelers less convenience, less choice and higher costs.
In a statement on the ACTA website and issued as an advisory to ACTA members across Canada, Mr. McCaig says he thinks American Airlines has a short term plan to drive apart travel agencies and one of the major global distribution systems, Travelport, but a long term plan to destroy the sophisticated system that enables interline flight bookings. "I am afraid this could be a direct attack on the travel agency’s ability to sell a single comprehensive ticket,” Mr. McCaig comments.
The simple issue is the imposition of a fee by American Airlines on non-U.S. and non-Caribbean travel agents. Industry watchers agree this is part of current warfare between American Airlines and global distribution system provider Travelport. A Travelport affiliate owns 48 percent of stock in Orbitz Worldwide Inc., an online travel agency. Orbitz is one of Travelport’s largest customers. Travelport has sued to stop American Airlines from denying Orbitz’ the right to sell tickets on AA’s flights. American may stop giving fare data to Orbitz which could breach American’s contract with Travelport.
American Airlines says it will levy surcharges against travel agencies in the U.S. and certain international markets outside the U.S. and Caribbean because Travelport has notified the airline of ‘dramatic booking fee increases’ for use of Travelport’s Galileo and Worldspan Global Distribution Systems.
In Canada, travel agencies using Galileo to book American Airlines flights will be charged USD$2 per segment. The fee per segment applies to all AA and AA Eagle marketed segments when booked and not canceled as of Dec. 20, 2010 on Galileo. The fee of USD$2 per segment will be billed by debit memos through IATA’s Billing and Settlement Plan (BSP).
American Airlines’ so-called Booking Source Premium would be set at different amounts in various countries. China’s agencies apparently will be hurt most with hikes of USD$21.50 per segment for a Galileo booking.
"In our opinion,” said Mr. McCaig, "this is a short-term attempt by American Airlines to drive a wedge between agencies and Travelport because of the Orbitz lawsuit.” Agencies can book through Amadeus, Sabre and other GDS without paying the surcharge. "More serious by far,” warns Mr. McCaig, "is the possible long term goal of American Airlines to move travel agents to American Airlines Direct Connect.”
"In ACTA’s opinion, American Airlines had this long term objective in mind when it informed Orbitz that American would cut it off from the airlines’ inventory at the first of the month,” says Mr. McCaig. "We believe Orbitz was the smallest online agency and was the first target for American in a campaign that will continue for a long time and eventually encompass all major GDS providers and multiple airlines.”A degraded system for selling tickets could be very lucrative for airlines like American.
American Airlines says it has talked with many travel agencies trying to persuade them to use Direct Connect. "American claims it is making some headway but we doubt it,” says ACTA’s president. "This is going to be a long, hard fight and Orbitz is just the opening shot,” Mr. McCaig believes.
"We believe American Airlines may be on a slippery slope that has been the ruin of other airlines,” Mr. McCaig is telling his members. "Other airlines have gone broke trying to sell direct,” he cautioned American Airlines. "You are hurting the very people who are best at selling your product, the travel agencies around the world.”
Travelport’s president and CEO, Gordon Wilson, states added charges by American Airlines will be paid by consumers who may move to other carriers because of the cost.
"This does drive up the cost of flying and, therefore, is an immediate bad move on the part of American Airlines. Every travel agency should be concerned about this issue because it will spread. And, once again, the consumer is the innocent victim of a dispute that has nothing to do with him or her.”
Mr. McCaig and other ACTA representatives are talking with Travelport which has said it is committed to resolving the issues. Mr. McCaig says ACTA will try to deter American Airlines from its path to push Direct Connect at travel agencies. "Hopefully, American Airlines will listen to reason,” he says, "but the airline seems hell-bent on hurting the travel agencies who provide the bulk of its revenues. American Airlines long range plan would bring on a very inferior distribution system.”
He added the damage will be felt by both corporate and leisure travel agencies if American Airlines succeeds in driving agencies away from Travelport and then other GDS’. Other systems are years away from providing comparable or better service and direct selling by airlines could destroy interline ticketing, making more money for carriers but producing a relative ‘Stone Age’ system that will drastically reduce convenience and choice for passengers while causing agencies to raise service fees.
Mr. McCaig summarizes: "ACTA believes the American Airlines Direct Connect plans will bring about inefficiencies and associated costs that would be detrimental to consumers, travel agencies, and other airlines.”
