Analysis: Can leisure agents afford a new GDS model?

Analysis: Can leisure agents afford a new GDS model?

Ian Taylor, executive editor, TWgroupLeading travel management companies accept that a change in the relationship between airlines, global distribution systems (GDSs) and agents is inevitable.

At least, that was the view at the recent Guild of Travel Management Companies (GTMC) conference - and GTMC members handle about 80% of UK corporate travel business.

No one thinks the GDSs are about to disappear, but neither does anyone believe direct connections via the web to airline’s own systems – or ‘direct connect’ – will disappear. American Airlines’ spat with Travelport over the former’s drive to divert bookings via its own system, helpfully named Direct Connect, is only the tip of an emerging iceberg.

The question is how will the current relations be reconfigured, how soon might that happen and can it be handled in a broadly cooperative and collective manner – at least to the extent permissible by law?

The imminence of the change seems hardly to have dawned on much of the leisure sector. But a leading TMC executive insists it is just a matter of time before agents have to pay the GDSs for content rather than airlines pay to appear on the GDSs.

For him, the key to this will be full access to content: “If I’m paying, I want everything.” Indeed, GTMC chief executive Anne Godfrey told her members last week: “The legacy systems will change [and] the industry has to change.” As she pointed out, what other industry is there where companies do not pay for their IT?

The TMCs hope the GDSs and carriers can work together on the transition. They point out first that the GDS model works and second that only the GDSs have the size, structure and finance to develop the new generation of technology that is necessary.

They recognise only the GDSs can meet the demands of their clients. But they also say the GDSs need to change - and more rapidly than up to now – to take account of the realities of unbundled airfares and the carriers’ ability to bypass the current systems if they do not.

The focus up to now has been on the US, where American Airlines and Travelport are poised for a court clash over the former’s antitrust lawsuit and where US Airways has sued Sabre.

The collateral damage in the UK has so far been light. But British Airways head of UK sales Richard Tams did not mask the airline’s intentions when he used the GTMC conference as a platform to declare: “The GDS model is broken . . . [and] we’re open to new ideas on a new model.”

BA’s existing GDS agreements run to March 2013 and negotiations will began next year on replacement deals.

So the existing state of airline-GDS-agency relations is merely a stop on the way to somewhere else, a fact the corporate travel sector appears to understand. The TMCs expect ultimately, albeit reluctantly, to pass on the costs of distribution to their clients.

But it is the carriers’ low margins on volume leisure sales that is driving the change – after all, it was Travelport’s rejection of American’s demand that online retailer Orbitz access fares via Direct Connect that triggered the meltdown in relations between the pair in the first place.

UK leisure retailers won’t escape the fallout. The question will be whether they feel as able to pass on the resulting costs to consumers.

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