UAL Urges Agents To Use GDS Alternatives JANUARY 21, 2005 -- United Airlines this week presented to top corporate and agency clients a new shared-savings program encouraging alternative distribution systems. FareLogix, G2 Switchworks, ITA Software, Outtask and TRX participated in two days of meetings that helped "explain the distribution imperative and the very real opportunities of these emerging channels," said Graham Atkinson, United senior vice president of worldwide sales and alliances. In exchange for travel agencies shifting bookings from legacy global distribution systems to newer systems, "we might share up to $5 of our savings on a per-ticket basis to help offset other incentives they may receive," Atkinson said, referring to GDS payments to system users. "We are not going to war with the GDSs but there is a value/price disconnect. We are simply fostering competition." He said feedback from the group--including more than 20 of the carrier's largest corporate clients and as many agencies "from all segments"--was very positive, corroborating sentiments from sources. On the travel agency side, "a number of significant players are ready to move," he said. United will not be offering such deals to all travel agents, "but there is benefit for early adopters if they think this technology is going to be real," Atkinson added. "We have to look at ways to encourage adoption to an industry which has a different remuneration model than the one we are trying to develop." United's overall distribution strategy centers on supporting new systems, taking advantage of such available low-cost channels as Orbitz Supplier Link, creating new direct corporate booking options and renegotiating agreements with traditional GDSs. It currently pays GDS per-ticket fees of between $10 and $13. Developers of new distribution systems claim their products would charge fees of a few dollars, or less. Considering the cost-cutting mindset pervasive in the industry, other major carriers have similar intentions as United. "The three main legs of the stool--the airlines, the corporations and the agency intermediaries--have a vested interest in striving for efficiency and having the cost borne fairly. Obviously, at the heart of the dispute is the flow of the money," said Tim Griffin, Northwest Airlines executive vice president of marketing and sales, referring to GDS payments, rebates and agency incentives. "I have advised agencies and travel managers that I would not build my business getting hooked on inducements because it is just not sustainable." "It will be very interesting as to what transpires during the countdown to 2006 when the content deals go away," he added. Those deals--in place between the major GDS companies and several major U.S. airlines--provide booking-fee discounts to suppliers and comprehensive content to end users. GDS executives have claimed such arrangements help to curtail channel shift to online distribution outlets such as airline Web sites and other online travel agencies, though carriers are reporting increased direct traffic (BTNonline, Jan. 20). Industry dialogue on GDS alternatives grew louder during 2004 as federal regulations on legacy GDSs expired (BTN, Aug. 16, 2004) and many regarded Northwest's attempt in August to add fees to GDS-booked tickets as a telling development in the evolution of corporate travel distribution (BTNonline, Aug. 24, 2004). "Since Northwest went to shared fees, we have been doing nothing but looking at the alternatives," said a travel buyer familiar with United's plans. G2 Switchworks and ITA Software have said that testing is underway (BTNonline, Aug. 25, 2004), though neither was prepared to announce specific travel agency clients. "We are in production with five airlines in end-to-end transactions," said Ellen Lee, G2 vice president of business development. "We also have agency customers, including some among the top ten." Toronto-based FareLogix, perhaps lesser known in some corporate travel circles, also delivers rate and inventory technology to the travel industry. Atkinson referred to the systems developed by these new companies as GNEs, or GDS new entrants on the distribution landscape. He also defined corporate booking tool providers TRX and Outtask "essentially as integrators" that already have built connections to GNEs. Sabre Holdings' GetThere was not represented at United's meetings and Atkinson noted the "ownership conflict." He suggested corporate booking tool providers "would take notice" as United's corporate and agency customers decide on the most appropriate system for their needs. Atkinson acknowledged United "undoubtedly will face some resistance" and specific questions on scalability and such functionality as international points of sale. He also said that content-for-discount agreements between GDS operators and United, as well as existing arrangements between travel agencies and GDSs "in no way foreclose our ability to begin the implementation of these solutions." Nevertheless, travel agencies may have tough decisions to make. While the per-ticket payment United is offering may help to offset the loss of per-ticket GDS incentives, volume targets associated with an agency's GDS agreements would be jeopardized. Furthermore, "the degree to which United's new program would be connected to other compensation programs--overrides and the like--is a distinct concern," added one travel agency executive who had attended the meeting. Moreover, traditional GDS operators are seeking opportunities to improve efficiency, leverage their distribution portfolios, develop an array of new supplier tools and maintain key positions in the market. Though their dominance has eroded in recent years, primary GDSs in aggregate still account for more airline bookings than any other distribution channel and retain significant influence. "We will work with the airlines to redefine distribution in many respects," said Sabre chairman and CEO Sam Gilliland in a recent BTN interview, "and it is more than just distribution." __________________________________________________ Do You Yahoo!? Tired of spam? Yahoo! Mail has the best spam protection around http://mail.yahoo.com