July 13 2006
The shoe falls

For some time now I have been saying that the Supply Chain model was unsustainable in its current form. AA finally announced the other half of what its former offspring Sabre has been saying for some time. This time unlike when NW tried to do this – AA will make the charge stick. If anyone can get a copy of the agency agreements I would be very interested in reading them.

Do note that this is not the first time that actually an airline has imposed GDS fees. There are indeed fees in place in certain markets. Some are zero rated but will definitely have charges in the next contract year. Since the beginning of this year both Norwegian Air Shuttle and Sterling Airways have charged fees for Segments booked via a GDS. In one case the number is over 3 Euros/segment.

Remember too that this is the US market. The model will spread to Europe very quickly.

These optional programs or Opt in are really the final acknowledgement of the total supply chain cost. Sadly there is still a certain degree of rearranging the deck chairs going on. The global goal of the Airlines is to push the cost of distribution to the distributors rather than for them to continue to bankroll the distribution system. Frankly I think there is still an unrealistic expectation by the airlines that they are able to totally achieve success when the applications from the new entrant players are not fully developed.

Finally – and this is a warning – be careful for what you wish. It may just happen. Clearly the airlines have not learned the lesson of the Online Travel Agency oligopoly who now rule that market.

If I was in the credit card business I would be very afraid. They are next.

Cheers

Timothy

American Airlines to charge agents fees on GDS bookings (07/12/2006)

By Dennis Schaal

American Airlines revealed that on Sept. 1 it will begin charging agencies a "booking source premium" of $3.50 per segment for all bookings made through Sabre and Amadeus as well as through certain programs offered by Worldspan and Galileo/Apollo. American won't charge agencies for bookings made through "competitive booking sources," including G2 SwitchWorks, Farelogix, an until-now undisclosed Galileo/Apollo optional program and Worldspan "Optional Product 1." American's David Cush, senior vice president of global sales, sent a letter to agencies explaining the new policy, and referred them to www.aa.com/agency for the details. The details on the airline's agency Web site, which were obtained by TravelWeekly.com, revealed for the first time that Galileo/Apollo's so-called full content agreement with American includes an optional program. "Travel agencies that use competitive booking sources to create bookings will have guaranteed access to American's content," Cush wrote. "At present, American intends to make full content available through other sources in order to preserve a wide range of agency choice in distribution channels," the Cush letter said.

Timothy J O'Neil-Dunne
Managing Partner - T2Impact Ltd
Global Travel eBusiness
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