US Airways, Expedia ink deal, Sabre speaks out on American
Even as American Airlines continues its battle against global distribution systems (GDS) and online travel agents (OTAs), US Airways seems to have answered a big question: what other airlines plan to do on the issue. Delta has terminated 12 OTAs, said CEO Richard Anderson last week.
In signing-on to a multi-year strategic partnership agreement to continue offering US Airways' full range of products and services, including all fares and inventory, through Expedia, Hotwire and Egencia sites around the world, US Airways and Expedia said it confirmed the current GDS model.
"This agreement demonstrates the significance of Expedia's marketplace for both our valued partners and our loyal customers,” said Expedia's Co-President, Partner Services Group Gary Fritz. “Expedia is committed to working collaboratively with our partners to offer customers the broadest range of opportunities at the guaranteed best prices."
Not so fast, reports indicate the deal would provide the ability for agents/passengers to book directly with the airline, which is what American says it is looking for. US Airways and Expedia will develop direct-connect technology for putting the airline’s Choice Seats – window or aisle in the forward coach cabin – product on Expedia.
The deal adds ancillary services such as Choice Seats to US Airways content, which is not now available to Expedia, once they are developed for GDSs, although does not say what the cut will be between the two. American is saying it is migrating to Direct Connect in order to capture those fees. The deal also calls for the development of targetted marketing opportunities.
"We are committed to making it as easy as possible for our customers to purchase tickets from US Airways through as many sources as possible,” said US Airways' Senior Vice President, Marketing and Planning Andrew Nocella, in a veiled criticism of American’s move. “More and more people want to book their own travel and they want to do it online. Expedia is the world's largest online travel company and we're pleased that they will continue to be one of our key points of distribution."
His words sounded just like Sabre’s arguments. In an interview with CAPA, Sabre Travel Network Senior Vice President Chris Kroeger said the view from the travel community is that American is just making it harder to compare prices and more costly to provide service.
“For us, its about value and offering buyers a low-cost way to comparison shop so they can look across all options to make a purchase decision,” he said. “The functionality for customised marketing is already available on Sabre.” However, he went on to say that it is working with airlines and airline entities to establish standards which would allow airlines to identify unique travellers and match them to a unique airline offering.
“We can do that today and we will be in the position to do even more in the future,” he told CAPA, rejecting assumptions that GDSs and OTAs have failed to evolve with the airline industry and changes to retailer marketing. “Nothing could be further from the truth. On the technical side we have developed an incredibly modern open system environment by investing hundreds of millions of dollars to keep pace with the growing complexity of the travel environment. The average age of our hardware is less than three years old. We have 750 million web services XML and API transactions every day. Our equipment is highly flexible and operates, from a global perspective on a scale no one else can match.”
Repeating criticisms of American that it has changed its reasoning for developing Direct Connect over the past year, Mr Kroeger said that the return on an airlines’ costs is huge. “From the cost side our view is a USD1 spent with Sabre is USD1 well spent,” he said. “For American over two-thirds of its revenues are derived from GDSs and represents only 1% of its costs while providing two-thirds of its revenue. And we have offered to sell ancillary services at no additional cost. So for every USD1 spent by American, it gets USD70 in return.”
Mr Kroeger also noted that the yield airlines get from GDSs and OTAs is higher than what they can achieve through their own websites. He pointed to the broad variety of suppliers including luxury and corporate travel buyers which boost the overall yield.
Interestingly, American has consistently said it wants to work with all players and is not trying to bypass GDSs or OTAs. However, Kroeger was quick to pick on a quote by American Director of Distribution Strategy Cory Garner who told The Street, American wanted to cut out the middle man.
“We certainly don’t see ourselves as a middle man to any airline,” said Mr Kroeger. “We are a travel marketplace that helps connect thousands of suppliers with millions of buyers. We created this marketplace to provide value to both sides of the equation. No other methodology creates the shopping comparison experience we do. No other marketplace can do that at the cost point we do.”