(To locate entries scroll down this page or through appropriate month shown under 'Blog Archive' on right hand column)
COMMENT
FEB A Travel Policy’s Biggest Barrier
JAN Low Cost Airlines - honeymoon Over?
JAN Travel Supply Chain Intelligence
JAN ASK me a QUESTION
DEC A Christmas Message
NOV A London Airport Solution?
SEP So Will Airlines go Direct Connect or Not?
SEP A Distribution Prediction
AUG Do we need another Industry Association?
JUL What the Customer Really Wants? – Part 1
JUL Who is the customer around here anyway?
APR Can TMC Brain Power Still Save Money?
MAR Combined Airline Deals – Good or Bad?
MAR Travel Evolution is not just about Technology – Right?
FEB Travel Services – Buying is just the beginning.
FEB Anybody Understand the Corporate Hotel Market?
FEB Getting back to basics with business travellers
JAN What happens when TMCs become GDS
JAN Better to never have something than see it taken away?
JAN The Evolution of Air Distribution – The Story so Far
JAN What does a hotel brand really mean?
JAN Direct Connect – The first significant skirmish in a long campaign.
DEC Loyalty Cards – What value?
DEC Christmas Distribution Story - 2
DEC A Christmas Distribution Story
DEC You don’t get ‘owt for nowt’ in travel distribution.
NOV BA dispute – Pride and promises
NOV GDS/Airline issue. Coming to a head?
OCT A Take on AA Distribution Issues
SEP Data Provision - Sounds Easy?
SEP Just how much would you Disclose?
AUG Can TMCs Really Influence Business?-Switch selling...
AUG Travel Compliance – So very easy.
AUG Can TMCs Really Influence Business? – Deals
AUG Can TMCs really influence business?
JUL Why small is becoming big in Business Travel.
JUN A different approach to TMC negotiations
JUN Global Travel Programmes – Delivering?
MAY Airlines and Travel Management Companies (TMC)
APR Airline marriages? Call for Jerry Springer.
APR Travel and the Environment
MAR Do academics understand the real world
MAR Is Government Buying Wisely?
MAR Who should buy travel? (Part two)
FEB Who should buy travel? (Part one)
Friday, January 13, 2012
Low Cost Airlines - Honeymoon Over?
The other day I spoke to a friend who had always been a massive supporter of European low cost/no frills airlines. He looked pretty annoyed and moaned about the fact that many of the deals that used to be around no longer exist. He also could not understand why he now has to do a lot of the work for them such as online check-in etc yet pay for almost every extra you can think of. Why, he said should I do all the work yet more often than not have to pay an administration fee.
It seems to me that more people than just my friend are falling out of love with these airlines. One person put it quite emotionally by saying he felt ‘betrayed by these so called ‘people's champions’. Having been in the business for many years I was surprised that folk could believe that these airlines were working in anything else but self interest but I guess if one looks at some of their past marketing and newspaper publicity one might understand.
I have my own views on this sector of the market and, as he asked my opinion I gave it. This is what I said:
OK, this is how I think the low cost airline model works:
They start a route on the stack them high and sell them cheap basis. They cut their costs to the bone and undercut the prices of any competition from the big boys. This works for a year or two until they have got hold of as many passengers they can on that route. Then their problems start.
You see, like all business they need to generate increased year on year profits but where is that increase going to come from? After all, their costs have already been stripped to the basics. They struggle to increase passenger numbers because they have already cornered their share of the market. Also this share is being attacked by the major carriers who have adjusted their prices to compete on the same ‘net plus extras’ model.
So the only way to please their investors is to enter new markets (they are already established in the best ones) and get more money from existing passengers. How do you get more money from them? Well you check your stats, booking patterns, peak flights and increase fares on those services that are popular (good timings etc) up to the highest level they think they can get away with. Then they look elsewhere amongst ancillary costs such as credit card fees, airport service 'frills' and start charging for them. When the authorities catch up with those they feel unacceptable they move these charges to a grey area described as 'admin fees'. On top of this they try to sell their customers non airline services like car hire and hotels and then go to these suppliers and negotiate special commissions for giving them business.
So the issue is that they have to keep growing in order to keep their share price up. Great in the old days but hard now they are established. The only good thing about this is that, as a result prices are finally becoming much more transparent so you can choose what you are going to get i.e. you can pick poor timings on less popular routes and still pay a low fare. As mentioned earlier these companies sell through big time marketing campaigns which mean they will still offer the occasional mega headline grabbing deals here and there.
The thing to remember is these airlines work on the basis that they do not want you to pay less than the maximum you are prepared to spend and they are finding out what that sum is in all sorts of clever ways. One could argue they are more pirates than charities!
It seems to me that more people than just my friend are falling out of love with these airlines. One person put it quite emotionally by saying he felt ‘betrayed by these so called ‘people's champions’. Having been in the business for many years I was surprised that folk could believe that these airlines were working in anything else but self interest but I guess if one looks at some of their past marketing and newspaper publicity one might understand.
I have my own views on this sector of the market and, as he asked my opinion I gave it. This is what I said:
OK, this is how I think the low cost airline model works:
They start a route on the stack them high and sell them cheap basis. They cut their costs to the bone and undercut the prices of any competition from the big boys. This works for a year or two until they have got hold of as many passengers they can on that route. Then their problems start.
You see, like all business they need to generate increased year on year profits but where is that increase going to come from? After all, their costs have already been stripped to the basics. They struggle to increase passenger numbers because they have already cornered their share of the market. Also this share is being attacked by the major carriers who have adjusted their prices to compete on the same ‘net plus extras’ model.
So the only way to please their investors is to enter new markets (they are already established in the best ones) and get more money from existing passengers. How do you get more money from them? Well you check your stats, booking patterns, peak flights and increase fares on those services that are popular (good timings etc) up to the highest level they think they can get away with. Then they look elsewhere amongst ancillary costs such as credit card fees, airport service 'frills' and start charging for them. When the authorities catch up with those they feel unacceptable they move these charges to a grey area described as 'admin fees'. On top of this they try to sell their customers non airline services like car hire and hotels and then go to these suppliers and negotiate special commissions for giving them business.
So the issue is that they have to keep growing in order to keep their share price up. Great in the old days but hard now they are established. The only good thing about this is that, as a result prices are finally becoming much more transparent so you can choose what you are going to get i.e. you can pick poor timings on less popular routes and still pay a low fare. As mentioned earlier these companies sell through big time marketing campaigns which mean they will still offer the occasional mega headline grabbing deals here and there.
The thing to remember is these airlines work on the basis that they do not want you to pay less than the maximum you are prepared to spend and they are finding out what that sum is in all sorts of clever ways. One could argue they are more pirates than charities!
Thursday, January 5, 2012
Travel Supply Chain Intelligence
It has never ceased to surprise me how little time the chain studies its partners, clients and perceived competitors. They are all intertwined in activities right the way from the traveller to the front end supplier yet history demonstrates that they do not understand the people they depend on or those they want to replace.
A good example would be say an airline that wants to replace a TMC or GDS which is quite topical at the moment. Now the black and white capability is there in the shape of enabling technology but the real world is in colour and of different shades and complexity. Technology systems are the beginning of the road not the end of it, an enabler not the solution. But some folks just plough on anyway and seem genuinely shocked at the push back
I am convinced this happens because the players have not set the right priorities into understanding all of the things the other components do. Instead they blindly follow their ‘ideal scenario’ strategy and attempt to bludgeon it into the marketplace. Sometimes this just might work in parts but the risk of fall-out is great with the potential of lasting commercial or competitive damage. They should also realise by now that the other members in the chain are anticipating their moves and building detours and opportunities around them.
These thoughts are not here to try and dissuade the chain from evolving and diversifying, after all that is progress. What I am saying instead is that this industry needs to understand itself and its component parts a lot clearer. For example, has any airline ever taken the time (and at the right level) to examine what it’s ‘partners’ do in detail? To sit down and better evaluate the chain reaction of planned strategy and thereby have answers to the issues that will surely arise? They might even find ways that benefit, or at least soften the blow to the rest of the industry.
The way some current players go about change is simply not savvy. They know what they want and charge at it, usually with disappointing results. A bit more thought, understanding, broader knowledge and early dialogue just might form a better basis for progress. And for heavens sake remember that the world has multi markets, technologies languages and cultures. Head offices in their ‘ivory towers’ in the USA, UK, Germany and The Far East can pontificate and plan as much as they like but to little avail if their decisions simply are unworkable elsewhere. Instead they can do major damage.
So my plea is to stop, think, research a great deal, understand the players/competitors better and look way beyond the first hurdle and towards the end-game. I still maintain that the major industry bodies should be driving this understanding. Perhaps if they had less back slapping, money making, selling type conferences and more distribution, supply chain summits they would make a bigger contribution.
A good example would be say an airline that wants to replace a TMC or GDS which is quite topical at the moment. Now the black and white capability is there in the shape of enabling technology but the real world is in colour and of different shades and complexity. Technology systems are the beginning of the road not the end of it, an enabler not the solution. But some folks just plough on anyway and seem genuinely shocked at the push back
I am convinced this happens because the players have not set the right priorities into understanding all of the things the other components do. Instead they blindly follow their ‘ideal scenario’ strategy and attempt to bludgeon it into the marketplace. Sometimes this just might work in parts but the risk of fall-out is great with the potential of lasting commercial or competitive damage. They should also realise by now that the other members in the chain are anticipating their moves and building detours and opportunities around them.
These thoughts are not here to try and dissuade the chain from evolving and diversifying, after all that is progress. What I am saying instead is that this industry needs to understand itself and its component parts a lot clearer. For example, has any airline ever taken the time (and at the right level) to examine what it’s ‘partners’ do in detail? To sit down and better evaluate the chain reaction of planned strategy and thereby have answers to the issues that will surely arise? They might even find ways that benefit, or at least soften the blow to the rest of the industry.
The way some current players go about change is simply not savvy. They know what they want and charge at it, usually with disappointing results. A bit more thought, understanding, broader knowledge and early dialogue just might form a better basis for progress. And for heavens sake remember that the world has multi markets, technologies languages and cultures. Head offices in their ‘ivory towers’ in the USA, UK, Germany and The Far East can pontificate and plan as much as they like but to little avail if their decisions simply are unworkable elsewhere. Instead they can do major damage.
So my plea is to stop, think, research a great deal, understand the players/competitors better and look way beyond the first hurdle and towards the end-game. I still maintain that the major industry bodies should be driving this understanding. Perhaps if they had less back slapping, money making, selling type conferences and more distribution, supply chain summits they would make a bigger contribution.
Tuesday, January 3, 2012
ASK me a QUESTION
If any or all of you have any questions that you think I might be able to answer then do not hesitate to ask either via the response facility below or direct to me on mike.platt@mpaassociates.co.uk
If I can I will give an educated and useful response. If not then I will tell you so.
Should you not want to share a discussion then simply email me and mark it as confidential.
No snags, no advertising no nothing. I just love travel and still want to contribute something if I can.
If I can I will give an educated and useful response. If not then I will tell you so.
Should you not want to share a discussion then simply email me and mark it as confidential.
No snags, no advertising no nothing. I just love travel and still want to contribute something if I can.
Friday, December 23, 2011
A CHRISTMAS MESSAGE
To all my readers: Yes I know you are out there because I read the stats!
No, you are not the best at giving me feedback so please have a go in 2012 as I really miss what you have to say and it keeps me writing.
Christmas Wishes: Oh American Airlines will you please grow up and
stop being so self destructive.
Can members of the travel supply chain think of better
and possibly easier ways of making bigger profits than over the
bleeding bodies of their partners and customers.
Finally? Have a great Christmas and New Year and I look forward
To trying to keep you interested and amused next year.
One last ‘story? I flew to New York last weekend and found myself in Club Class and directly facing one of the most attractive woman I have ever seen. We got talking and I asked her what she was doing.
She explained that she was going to speak at a very large womens society the next day about the sexes and planned to debunk a number of fallacies that people had about certain nationalities. “Give me some examples” I asked and she did.
It is not true that French men make the best lovers. It is the Greeks.
The most well endowed men are not African Americans they are native Indian Americans.
Finally the men most likely to talk women into sleeping with them are not Italian they are the Irish.
“Fascinating” I said. “What is your name” she asked.
“Tonto Papadopolous” I replied. “But my friends call me Paddy”
No, you are not the best at giving me feedback so please have a go in 2012 as I really miss what you have to say and it keeps me writing.
Christmas Wishes: Oh American Airlines will you please grow up and
stop being so self destructive.
Can members of the travel supply chain think of better
and possibly easier ways of making bigger profits than over the
bleeding bodies of their partners and customers.
Finally? Have a great Christmas and New Year and I look forward
To trying to keep you interested and amused next year.
One last ‘story? I flew to New York last weekend and found myself in Club Class and directly facing one of the most attractive woman I have ever seen. We got talking and I asked her what she was doing.
She explained that she was going to speak at a very large womens society the next day about the sexes and planned to debunk a number of fallacies that people had about certain nationalities. “Give me some examples” I asked and she did.
It is not true that French men make the best lovers. It is the Greeks.
The most well endowed men are not African Americans they are native Indian Americans.
Finally the men most likely to talk women into sleeping with them are not Italian they are the Irish.
“Fascinating” I said. “What is your name” she asked.
“Tonto Papadopolous” I replied. “But my friends call me Paddy”
Monday, November 21, 2011
A London Airport Solution?
I wonder if we will ever get one. Recent discussions gyrate rather like a manic tango. You know how it goes, striding forward only to come to a dramatic halt, a frenzied shake of the head, and then lunging back again.
Everyone with a brain in their head knows a solution has to be found. In truth many also realise that it is nearly already too late to stop the UK slipping down the major trading nations success chart. One thing for certain is the UK should be ashamed of its current airport infrastructure and the inefficiency, inconvenience and downright embarrassment of it all.
Can you honestly see it happening anywhere else in world? I can’t. Even in the most heavily populated countries they still prioritise and act on making sure their airport infrastructure is prepared for the future. Some simply take the flack and build more runways at existing airports whilst some construct huge islands with fast city links. What do we do? We find solutions, discuss them, semi-commit and then back off for socio, environmental and/or political reasons.
Of course solving our air infrastructure crisis (yes it is one) will upset someone be they people, birds, voles or snails, that’s obvious. And of course it will take time which we are just about run out of but goodness me it has to happen. We all know that don’t we. Or there is the other option and that is give up our place as a major global, political and trading nation. Do we want to give that up and resign ourselves to being a second world nation?
So what are the options available to us? There won’t be any more new ones cropping up so, if we do anything it will be one of the following:
Island in the estuary. Great idea and it has been done before in places like Hong Kong. Remember them? They had this overcrowded airport in the city (sounds familiar?) so they started from scratch far enough away to get the lowest resistance and then built a superb city link by road and rail. It cost them mega money but hey it provided jobs, appeased the majority and ensures they have few problems in future.
Expand one of the existing London airports. I guess it would work…in the short term. But look at the charade that was the last attempt to put that much needed extra runway at Heathrow. What a waste of time and money that was. A ‘no brainer’ that turned out to be nothing of the sort. We can be so darn democratic in this country that we stifle the life out of ourselves.
The third option is the one I favour. Why? Because I think it is the only one that could possibly drag itself through the mire of politics and protest. This solution is to turn the airports of Heathrow, Stanstead and Gatwick into one mega hub. I have been advocating this for years but let me remind you.
The key fact that will never change under the current structure is that the vast majority of people want to fly out of Heathrow. This is because of its proximity to London, its interlining capability and its catchment area. Gatwick and worse Stanstead will never match it, unless they link up to form one big seamless interlinking airport. This would need superfast links from each location and its terminals to the other parts of the hub.
Is such a solution practical and what good would it do? Yes, I think it could work. I am not an engineer but looking at what has been done with superfast rail links and channel tunnel connections to London I think it can. What it will allow is the efficient usage of existing runway space plus a spreading of the Heathrow load across a bigger base. The customer will be able to transfer airports as though they were moving from one terminal to another. With minimal hassle and maximum speed. In effect each of the three airports become a ‘terminal’ of the new ‘Super Airport’.
I put this forward again as a compromise not a solution. The solution is obvious and would involve building an airport in the Thames Estuary. The compromise solves a short/medium term problem but will ultimately require new runways being built. Although we could do nothing I suppose. Or is that really an option?
Think I am nuts? Well tell me why and I will publish it. Same goes if you agree.
Everyone with a brain in their head knows a solution has to be found. In truth many also realise that it is nearly already too late to stop the UK slipping down the major trading nations success chart. One thing for certain is the UK should be ashamed of its current airport infrastructure and the inefficiency, inconvenience and downright embarrassment of it all.
Can you honestly see it happening anywhere else in world? I can’t. Even in the most heavily populated countries they still prioritise and act on making sure their airport infrastructure is prepared for the future. Some simply take the flack and build more runways at existing airports whilst some construct huge islands with fast city links. What do we do? We find solutions, discuss them, semi-commit and then back off for socio, environmental and/or political reasons.
Of course solving our air infrastructure crisis (yes it is one) will upset someone be they people, birds, voles or snails, that’s obvious. And of course it will take time which we are just about run out of but goodness me it has to happen. We all know that don’t we. Or there is the other option and that is give up our place as a major global, political and trading nation. Do we want to give that up and resign ourselves to being a second world nation?
So what are the options available to us? There won’t be any more new ones cropping up so, if we do anything it will be one of the following:
Island in the estuary. Great idea and it has been done before in places like Hong Kong. Remember them? They had this overcrowded airport in the city (sounds familiar?) so they started from scratch far enough away to get the lowest resistance and then built a superb city link by road and rail. It cost them mega money but hey it provided jobs, appeased the majority and ensures they have few problems in future.
Expand one of the existing London airports. I guess it would work…in the short term. But look at the charade that was the last attempt to put that much needed extra runway at Heathrow. What a waste of time and money that was. A ‘no brainer’ that turned out to be nothing of the sort. We can be so darn democratic in this country that we stifle the life out of ourselves.
The third option is the one I favour. Why? Because I think it is the only one that could possibly drag itself through the mire of politics and protest. This solution is to turn the airports of Heathrow, Stanstead and Gatwick into one mega hub. I have been advocating this for years but let me remind you.
The key fact that will never change under the current structure is that the vast majority of people want to fly out of Heathrow. This is because of its proximity to London, its interlining capability and its catchment area. Gatwick and worse Stanstead will never match it, unless they link up to form one big seamless interlinking airport. This would need superfast links from each location and its terminals to the other parts of the hub.
Is such a solution practical and what good would it do? Yes, I think it could work. I am not an engineer but looking at what has been done with superfast rail links and channel tunnel connections to London I think it can. What it will allow is the efficient usage of existing runway space plus a spreading of the Heathrow load across a bigger base. The customer will be able to transfer airports as though they were moving from one terminal to another. With minimal hassle and maximum speed. In effect each of the three airports become a ‘terminal’ of the new ‘Super Airport’.
I put this forward again as a compromise not a solution. The solution is obvious and would involve building an airport in the Thames Estuary. The compromise solves a short/medium term problem but will ultimately require new runways being built. Although we could do nothing I suppose. Or is that really an option?
Think I am nuts? Well tell me why and I will publish it. Same goes if you agree.
Saturday, October 22, 2011
So Will Airlines go Direct Connect or Not?
Of course some will, but not completely and many will not at all for competitive, budgetary or capability reasons. Will all TMCs link direct to those that do? Definitely not. The customer ultimately will decide and they will have a choice… at a price.
Let’s get down to basics shall we? Firstly there is nothing wrong with the GDS model we have at present as far as the whole chain (excluding the supplier) is concerned. For the supplier it is a frustrating cost of sale that they have failed to negotiate down sufficiently and one they are not willing to pay for any more. In simplistic terms they cannot see why they should pay to enable customers and intermediaries to have a ‘one stop shop’ and besides it distances them from their customers.
So airlines like American have decided that it is time for a change in model. A bit like Lufthansa did in Europe. Enabling technology capability is perceived to be there now so they have thrown down the challenge to the GDSs of negotiating or risk market attrition. However what they seem to have failed to grasp is that maybe the rest of the supply chain is either not capable or unwilling to embrace the direct connect model. Some have too much to lose and definitely little to gain by doing so.
The current dynamics and rationales are both fascinating and disturbing and worth analysis. The market is enormous and with many players in various shapes and sizes. It is also bound up in a ‘cats cradle’ of payment incentives, global market variations and cultural ways of doing business. There are still places on the globe who are transacting business two steps back from what the so called driver markets discarded years ago.
The above does not appear to concern the main drivers of change like American and Lufthansa but they need to remember that they aspire to be global entities yet seem to be applying their local majority market strategies on ultimately all of us. I am certain that, in the current environment this will not work but equally convinced they will be able to do it where they have critical mass. So this means that the world will have to handle air transactions on a more complex multi-tier basis.
So I for one accept that it is going to happen in parallel with the current booking methodology. This means that one can either book direct or through someone else at an additional cost. Cost, of course is the operative word. To book ‘direct’ you will either have to go straight through the airline or through a TMC who has a non GDS link. This will cost the TMC in money and resource as they will need to radically change their systems and they will not do it for free. The airlines will have to pay them instead of the GDS although not so much. The corporations will also want their cut or at least compensation for extra TMC cost.
I do not believe for one second that any volume spending corporation will decide to bypass the TMC because of this new model. What airlines choose not to understand is that a booking (and the cost of it) is not the be all and end all of travel management. In my days in travel management the actual booking itself was just the tip of the iceberg of travel management activity. Will corporations accept the fooling around of their programme just because an airline wants to save their own distribution costs?
To me it is logical that not all airlines are going to follow this path. It is also logical that some (i.e. American) will do so but with a much smaller impact than they might hope for and then only in certain market areas. I think others will watch them succeed or fail before rejecting it or taking into account the mistakes they make. It will become just another option which will bypass the GDS, give further power/income to the TMC and pass a potentially higher tab to the end user. I have said it before but what it will do is turn the big TMCs into mini GDS who will want incentivising while having greater control over airline share.
Finally one needs to ask what the smaller and less endowed airlines and TMCs are going to do. Those that do not have the capability or infrastructure to operate two different main booking methodologies. Sure as anything, they are not going to sit still.
Neither is the GDS. I suspect both will do all they can to bypass American and anyone else who tries it and invent alternative value adds.
As for the large TMCs I expect them to eke out every competitive and financial advantage out of the chaos that will ensue. They should be able to both have their cake and eat it by managing the different options in different regions and using their superior technology. Mind you they too are under a degree of pressure as they are less able than most to turn around to a mega supplier partner and say they won’t play. That could get very messy so I am not surprised they are ‘working’ with American.
I will watch with interest and a high degree of scepticism over what American might achieve. I wonder whether they will see the savings made from GDS bypass fading away in TMC and corporate incentives and market share loss. Maybe they will remember that they used to get a higher yield using the other model. Who knows, but it will give everyone in the industry a wake-up call at least!
COMMENT
I still don't think we've even scratched the surface of how bad direct connect will be for airlines, tmcs and customers Martin
Let’s get down to basics shall we? Firstly there is nothing wrong with the GDS model we have at present as far as the whole chain (excluding the supplier) is concerned. For the supplier it is a frustrating cost of sale that they have failed to negotiate down sufficiently and one they are not willing to pay for any more. In simplistic terms they cannot see why they should pay to enable customers and intermediaries to have a ‘one stop shop’ and besides it distances them from their customers.
So airlines like American have decided that it is time for a change in model. A bit like Lufthansa did in Europe. Enabling technology capability is perceived to be there now so they have thrown down the challenge to the GDSs of negotiating or risk market attrition. However what they seem to have failed to grasp is that maybe the rest of the supply chain is either not capable or unwilling to embrace the direct connect model. Some have too much to lose and definitely little to gain by doing so.
The current dynamics and rationales are both fascinating and disturbing and worth analysis. The market is enormous and with many players in various shapes and sizes. It is also bound up in a ‘cats cradle’ of payment incentives, global market variations and cultural ways of doing business. There are still places on the globe who are transacting business two steps back from what the so called driver markets discarded years ago.
The above does not appear to concern the main drivers of change like American and Lufthansa but they need to remember that they aspire to be global entities yet seem to be applying their local majority market strategies on ultimately all of us. I am certain that, in the current environment this will not work but equally convinced they will be able to do it where they have critical mass. So this means that the world will have to handle air transactions on a more complex multi-tier basis.
So I for one accept that it is going to happen in parallel with the current booking methodology. This means that one can either book direct or through someone else at an additional cost. Cost, of course is the operative word. To book ‘direct’ you will either have to go straight through the airline or through a TMC who has a non GDS link. This will cost the TMC in money and resource as they will need to radically change their systems and they will not do it for free. The airlines will have to pay them instead of the GDS although not so much. The corporations will also want their cut or at least compensation for extra TMC cost.
I do not believe for one second that any volume spending corporation will decide to bypass the TMC because of this new model. What airlines choose not to understand is that a booking (and the cost of it) is not the be all and end all of travel management. In my days in travel management the actual booking itself was just the tip of the iceberg of travel management activity. Will corporations accept the fooling around of their programme just because an airline wants to save their own distribution costs?
To me it is logical that not all airlines are going to follow this path. It is also logical that some (i.e. American) will do so but with a much smaller impact than they might hope for and then only in certain market areas. I think others will watch them succeed or fail before rejecting it or taking into account the mistakes they make. It will become just another option which will bypass the GDS, give further power/income to the TMC and pass a potentially higher tab to the end user. I have said it before but what it will do is turn the big TMCs into mini GDS who will want incentivising while having greater control over airline share.
Finally one needs to ask what the smaller and less endowed airlines and TMCs are going to do. Those that do not have the capability or infrastructure to operate two different main booking methodologies. Sure as anything, they are not going to sit still.
Neither is the GDS. I suspect both will do all they can to bypass American and anyone else who tries it and invent alternative value adds.
As for the large TMCs I expect them to eke out every competitive and financial advantage out of the chaos that will ensue. They should be able to both have their cake and eat it by managing the different options in different regions and using their superior technology. Mind you they too are under a degree of pressure as they are less able than most to turn around to a mega supplier partner and say they won’t play. That could get very messy so I am not surprised they are ‘working’ with American.
I will watch with interest and a high degree of scepticism over what American might achieve. I wonder whether they will see the savings made from GDS bypass fading away in TMC and corporate incentives and market share loss. Maybe they will remember that they used to get a higher yield using the other model. Who knows, but it will give everyone in the industry a wake-up call at least!
COMMENT
I still don't think we've even scratched the surface of how bad direct connect will be for airlines, tmcs and customers Martin