(Feb 13, 2013) Farelogix, New Distribution: From Concept to Reality, Airlines for America Senior Vice President Sharon Pinkerton covers an in-depth look at the relationship between the airline industry, Global Distribution Systems and how it affects passengers and consumers.
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Airline Industry and Global Distribution Systems (GDS)
1. Airline-GDS Relationship
» Majority of tickets still distributed via GDS-powered agency network
» Airlines want to present offers in manner they choose at a competitive cost
so they can make the best offers to individual customers
» Overall GDS related costs have gone up since the GDSs consolidated, and
remain multiple times higher than GDS alternatives
» Airlines see an opportunity to reduce $7B in annual cost and avoid the
potential of $1B in additional fees on ancillary products
» If bilateral negotiations between airlines and GDSs are replaced by a
government mandate, GDS costs will only increase further
» GDSs and airlines are identifying opportunities to work together – do not
need a mandate to achieve this cooperation.
» Mandate likely to retard new consumer technology benefits/increase costs
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2. Today’s Consumer Reality
Air travel is no longer a commodity- there are choices
» Fares with differing rights or » Onboard food service
restrictions » Travel insurance
» Changeable tickets – fee/no fee » Inflight telephones
» Refundable tickets – fee/no fee » Inflight entertainment
» Service classes on board » Inflight internet access
» First Class, Economy Plus » Flight status notifications
» Advance seat selection » Checked bags with or without fees
» Upgrade options » Same day standby fee/no fee
» Priority boarding » Airport lounge access
» Priority passage through security » Frequent flyer mileage awards and
lanes bonuses.
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3. What Consumers Should Expect
» A choice of competitive services related to air travel
» To know the choices and services available to them
» To know the cost TO THEM of each choice
» To be presented with offers that are designed to meet their particular needs
» The ability to choose the services they want and not pay for what they do
not want
» To know the cost of the entire trip BEFORE they purchase the ticket
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4. Comparability is not the Issue-
The GDS Middleman Is
» GDSs don’t show all airlines
» No DOT mandate there
» GDS-owned online travel agencies
» Don’t disclose which airlines are not shown
» Don’t use the data they have for comparison
» When disputes arise, GDSs remove airlines
» Airlines are investing in new technologies and supporting new entrants
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5. Proposed Mandate vs. The Consumer
» A static set of “Core” services is anti-consumer
IF YOU WANT TO COMPARE
» Limits choice of services APPLES TO APPLES….
» Confusion comparing personalized offers
» Helps preserve suspect GDS business model ALL YOU CAN GET ARE
» Gives GDSs leverage in negotiations with APPLES
airlines
» Locks in high costs
» Fails to open market to new innovation
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6. Conclusion
» Consumers are served by choice and lower costs
» GDS policies limit choice, inhibit transparency, and increase costs
» Airlines invest to present robust fare and service choices
» Directly
» And through travel agents
» Markets are not working because of GDS practices
» Few new entrants, struggling
» Some Airline-GDS deals, but not very robust
» Availability of consumer choice still constrained
» Proposed DOT mandate will make matters worse, not better, for the consumer
» What’s needed is to eliminate GDS imposed barriers to adoption of new
technology and innovation – and then let the market work.
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