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AIRLINES STILL HAVE LOTS OF LEEWAY
GDS pacts clarify definitions of ‘full content’
Continued from Page 1 Although the GDSs, under deregulation,
by 2011, when most of the agreements have the right to bias airline displays, as
expire. major online agencies do today, the airlines
The prospect of declining revenue could won protection against such bias in the new
set the stage for GDSs to further reduce agreements. Although airlines will be able
agency incentives beyond the current 80- to purchase advertisements for fare sales,
cent hit, but that appears to be unlikely. they will not be able to pay for positioning
Galileo said last week that the in GDS displays.
80-cent fee for agencies in its So, with the yearlong round of
Content Continuity Program airline-GDS content negotiations
will not increase during the term nearly concluded, it is clear that
of its agreements. Travel attor- the carriers and their chief distri-ney Mark Pestronk said Galileo’s bution partners reached a broad
agency contracts actually bar it accommodation, with both sides
from increasing the 80-cent fee. getting a lot of what they needed.
Sabre said it doesn’t have any Travel agencies didn’t fare as
plans to change the economic Henry Harteveldt well.
terms of its Efficient Access Solu- Travel Analyst Agencies generally, and there
tion program for agencies. The Forrester Research are many exceptions, have to pay,
company said EAS “takes into on average, a $2 fee per trip ( 2. 5
consideration the economics/booking fees segments at 80 cents per segment). Agencies
of the participating airlines over the full did avoid massive content fragmentation,
term of those agreements.” which was good for airlines as well as agen-
According to Pestronk, Sabre contractu- cies, said Tom Klein, executive vice presi-ally can increase the agents’ fee if Sabre’s dent and group president of Sabre Travel
economics “materially decrease.” He said Network and Sabre Airline Solutions.
Worldspan can modify incentives after 30 “The game wasn’t to whipsaw the airlines
days’ notice. into giving us something,” said Klein. “The
game was to get the airlines to understand
that having all the fares in one place was
good for them. We didn’t think it was good
for the airlines to be so fragmented.”
Klein said Sabre’s new airline agreements
were more comprehensive than prior pacts,
and that “we closed some gaps.”
‘Full content’
The agreements clarified and tightened
previously ambiguous definitions of full
content, including language about published, Web and bulk fares. The agreements
also secured, for the first time, parity among
the GDSs regarding negotiated fares.
But the agreements also continue to allow airlines to offer exclusive promotions
on their consumer Web sites. The carriers
can’t offer across-the-board fare sales to
Web shoppers unless the GDSs have access
to them, as well. But the airlines can continue to offer exclusive
promotions on their Web
sites to what one official
termed “a subset of a subset” of travelers. For example, airlines could offer
promotions to Chicago-based passengers who
have flown to Los Angeles or have achieved
a certain frequent-flyer status.
Airlines can continue to develop their
travel clubs without providing similar perks
through the GDSs. For example, United offers membership in its Silver Wings Plus
club to travelers age 55 and older and can
continue to offer exclusive membership
benefits to these travelers without making
them available through the GDSs.
The airlines can offer exclusive mileage
credits, upgrades and airport club passes
when corporations book directly through
the carriers’ corporate portals. These incentives can be offered above and beyond the
framework of the negotiated agreement between the airline and the corporation.
Some airlines won what might be called
an Air Canada clause: They have the right,
with certain limitations, to offer exclusive
products and fares on their Web sites if the
GDSs lack the technology to display and
sell this inventory in a manner the airlines
desire.
sure to settle, and they announced an agreement midday on Sept. 1. Sabre had faced the
disruption of not having the world’s largest
airline in EAS, and American got hit with
exorbitant GDS fees and had rival airlines
tossing around huge signing bonuses and
packages as they wooed American’s largest
corporate clients.
Most industry observers said American
and Sabre compromised and got what they
needed, although both parties fell short of
getting everything on their wish lists.
“AA, like every airline, and consistent
with what airlines have done traditionally,
wanted the ability to come out with some
promotions outside the GDS, and we’ve
granted them some flexibility to do so,”
Klein said. “That said, EAS has tighter definitions of full content than any in the history of the industry, and we think that’s good
value for travel agents and corporations.”
Given the rancor of the public dispute
with Sabre, American declined to comment
for this article.
“Unfortunately, the emotions of negotiations drove a much more public debate
than either of us would have liked,” Klein
said. “In the end, we’re very much aligned
on principles about privacy. I’ll use this forum to say we’re aligned that data security
and data privacy are both high priorities
and in our best interest.”
Who blinked?
The impasse between the industry’s two
titans, Sabre and American, captured much
of the industry’s focus in late summer.
American balked at joining Sabre’s EAS
program, withstood weeks of paying inflat-
Rational compromise
Regarding Sabre and American, Henry
Harteveldt, Forrester Research’s principal
travel analyst, said, “I don’t think either
party blinked. A rational compromise was
reached that was beneficial to the discussions.” As a result of that compromise, Sabre got about 98% of the content it sought,
American secured the right to continue to
‘Unfortunately, the emotions of negotiations drove a much more public debate
than either of us would have liked. In the end, we’re very much aligned on
principles about privacy.’ — Sabre’s Tom Klein, on hammering out a deal with American Airlines
ed GDS fees after their contract had expired
and leveled charges that a Sabre joint venture had actively sought to sell passenger
data to airlines.
Travel Weekly learned that Daniel Garton, executive vice president of marketing
at American Airlines, made a phone call to
a top Sabre official to get the stalled talks
rolling just days before the Sept. 1 deadline that Sabre gave agents to decide on
EAS participation. Until then, David Cush,
American’s senior vice president of global
sales, had spearheaded the negotiations for
American.
Klein wouldn’t name names.
“I won’t say who made the first call, but it
was a senior-level call, and we both thought
we should take a fresh run,” Klein said. “We
weren’t sure on either side if it would lead
to a resolution, but both of us thought
resolution was the best thing. I know that
sounds wishy-washy, but sometimes that’s
how deals get done.”
Both sides were under tremendous pres-
attract consumers to direct channels and
both sides got economics they could live
with, Harteveldt said.
The economic terms “still aren’t low
enough for airlines to get to that sweet
spot of $6 per booking,” but the savings are
substantial enough to dampen the carriers’
prior interest in developing direct-connects
with non-GDS distributors, Harteveldt
added.
However, Harteveldt said he expected
that the airlines would continue to work
with new-entrant distributors like G2
Switch Works, ITA Software and Farelogix
and that the carriers would “maintain whatever kind of leverage they have because it is
in their economic interest.”
“American and Sabre were the ones that
brought things to the state of a nuclear distribution war. But it is my understanding
that cooler, calmer heads prevailed,” he said.
Travel Weekly Editor in Chief Arnie Weissmann contributed to this report.
