GDS and OTA: New Year, Not So New Conflicts

We all celebrated New Year’s Eve and hope for an exciting New Year. And I am confident that 2011 will have much to offer for us, but right now, we seem to deal with the same problems as in 2010.

The travel industry still centers on the conflict between the GDSs, OTAs and American Airlines and its direct connects. This time, two big players, namely Expedia and Sabre, have made their moves against American Airlines’ direct connect.

First, Expedia removed all the American Airlines flights from its sites after their contract expired on December 31th and they could not reach a new agreement. Only Expedia’s corporate travel agency Egencia will still have AA flights. Expedia did so, because it considers AA’s direct connects “anti-choice and anti-consumer”, i.e., direct connects will come along with higher costs and less transparency for the consumer.

Then Sabre announced that it wished to end its contract with AA one month earlier in August 2011 and immediately began biasing AA flights in its availability and shopping display. So together with the actions by Travelport AA is out of a big part of the GDS-market which still is a significant distribution channel for them. Additionally, Sabre has increased the GDS booking fee that AA has to pay to Sabre. Sabre’s move is supported by the American Society of Travel Agents, ASTA, and the Business Travel Coalition which both fear that direct connects could just increase distribution costs and add complexity without solving any problems.

American Airlines might react by charging agents a surcharge for bookings made in the Sabre GDS as a way to compensate for the increased GDS fees. But as a first reaction, American Airlines sued Sabre for biasing their search results and imposing higher fees and won a temporary restraining order preventing Sabre from downgrading AA in its search results.

Now, much is at stake for both sides and it seems that no one wants to back off and retreat. It also seems there is still much doubt concerning direct connects and it’s not sure that this will change within the next months. That’s why it is pretty interesting to hear what technology provider say about this. Tnooz has recently interviewed vendors of such technology and gained some interesting insights:

As we earn our money with connectivity to the GDSs, in this volatile market, it is challenging for us to promote direct connects — at least for so long until steam has settled down in this ‘battle’ between airlines and GDSs. Also our clients might have contracts that prevent them from doing so.

Strauss continues: “So here we are in a world where technology is ready to be implemented but progress and innovation are slowed down by political forces. It is as if have this brand-new airplane that produces 50% less atmospheric pollution, but you are not allowed to use it as the revenue stream of the oil lobby would be cut in half as well.”

As we can see, this whole situation puts technology companies into a difficult situation and companies doing business with both airlines and GDSs might be better off waiting for the end of this “battle” before they take a firm stand regarding this topic. Otherwise they might have to deal with retaliation by the GDSs. But I believe we won’t have to wait for too long for a decision: 2011 could just be the year when this battle about the future of flight distribution will be decided. Especially the new agreement between Travelport and Air Canada proves that the GDSs might actually be willing to embrace new technologies and allow airlines to exert more control over their own merchandising. Still we have to see to what extent this agreement influences other players in the industry.

Image by Peshkova

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