...and now Sabre fires a shot across the bow. –
Press accounts now indicate that Sabre, whose GDS has thelargest subscriber base and which owns OTA Travelocity, will be raising fees on AMR and adjusting howAmerican's flights are displayed. Which fees will be increased and the exact amounts have not beenannounced. We view this as a weak shot across the bow, as Sabre, although announcing today, apparently isnot moving on this immediately, but rather waiting until August. This August date is one month before theend of the current agreement and before a new agreement is to be renegotiated.By announcing now with a quiet August effective date, Sabre gets the press and puts informal pressure onAMR. However, by not pulling all American listings, Sabre keeps Travelocity as the largest OTA that stilloffers full schedules for all airlines, including American's schedules.
An Interesting Observation:
In reviewing the various press accounts of these disputes, one European serviceprovider sums up the situation quite well: "So here we are in a world where technology is ready to beimplemented but progress and innovation are slowed down by political forces. It is as we have this brand-newairplane that produces 50% less atmospheric pollution, but you are not allowed to use it as the revenue streamof the oil lobby would be cut in half as well."We couldn't have said it better ourselves.
Beyond the fees, the changing marketplace is fueling AMR's push for change.
A second aspect to thedispute is AMR's desire to display its product in various unique ways to the consumer. The OTAs strive tocompare all the airlines on a single screen. With that, the fares, flights, etc. all need to be comparable. Thus,you see only the lowest fare for a coach seat.AMR wants flexibility in how it sells and prices seats with ancillary services. As Southwest Airlines sellsBusiness Select fares, combining the seat with early boarding, free drinks and extra frequent flyer credit,AMR would like the ability to package its fares with these or other services. Such bundling is not possiblethrough the OTAs or any other distribution outlets that flow transactions through the GDSs. AMR can offerthe bundled product on AA.com. However, less than 30% of AMR's customers buy through AA.comAMR's very vocal push to move OTAs to the AA.com Direct Connect, thereby bypassing the GDSs and theGDS fees, would give AMR the ability to create special packages and deals that could be displayed to thewide population of customers using the OTAs.
Some background, definitions and explanations. What's a GDS?
GDS systems, companies and contractshave evolved over the years from a time when:1.Every passenger had to have a paper ticket to board a plane.2.There was no internet to enable consumers' viewing of flight schedules, availability, or fares.3.The only way to provide access to fares, schedules, and availability to every travel agent office,corporate travel department, or other major user of the airlines was to connect special purpose terminalswhich travel agents leased from the GDSs. They could not use a PC, as the dedicated special purposeairline networks did not talk to PCs. This required huge investments in dedicated networks, anddedicated repair and support personnel, as these networks had thousands of terminals all over the world.American, United and TWA each created one of the current three GDS networks within their own ITdepartments. These operations, together with the related central main-frame systems housing the airlines' ownreservation and passenger service systems were separated from the airlines in a series of varying transactions.The Sabre GDS, once part of American Airlines, is now owned by Sabre Corp. Travelport owns the other twoand still operates them as two separate networks. Sabre, now private, is owned by Silver Lake and TPG.Travelport is owned by a group led by Blackstone.
Who still uses a travel agent? –
Travel agents once printed tickets and collected funds in every town,neighborhood and office building around the world. They did more of this than did the airlines themselves.Travel agents also assisted the travel management departments of major companies in accumulatinginformation supporting travel budgeting and cost control. Travel agents were paid commissions from 7% to10% of the ticket value for printing the ticket and serving the public.Those commissions were eliminated several years ago and most local mom-and-pop travel agents ceased to
AMR Corporation - January 6, 2011Avondale Partners, LLC