14 November 2007 - Three big European airlines last week provided perspectives on global distribution systems--the main booking channels on which travel agencies and their corporate customers rely. Those perspectives inform the business travel community about how suitable these carriers are for managed travel programs, how much access to their inventory may cost and how European airline distribution is evolving.
Last week, a KLM Royal Dutch Airlines distribution executive shed light on the carrier's approach to next year's GDS negotiations, clearly indicating both an intention to participate in major systems and ruminations on possible user fees to subsidize that participation. Surly no-frills Irish carrier Ryanair continued to shun travel agents, calling them "parasites." Already one of Europe's largest airlines with nearly 50 million annual passengers, Ryanair has shown zero interest in providing content to GDS channels. Somewhere between KLM and Ryanair--in terms of product attributes and corporate travel orientation--"low-fare" carrier easyJet last week announced its first GDS deals, saying they removed "the last barrier to the corporate travel market."
After high-profile negotiations between GDS operators and U.S. carriers in 2006 produced new, long-term agreements, the focus shifted to Europe--where U.S. and European carriers have been assessing future distribution needs. British Airways, for example, this past spring signed deals to provide "full content" to all four GDSs, and told travel agents they would pay for access to that content through "opt-in" arrangements.
Separately, the
European Commission this week is scheduled to publish a revised Code of Conduct on Computerized Reservations Systems, according to the Coalition for Fair Access to Reservations in Europe. Interest in those revisions stem from continued ownership by Air France, Iberia and Lufthansa in the holding company that owns GDS operator Amadeus.
Ahead of any such changes to the CRS code, easyJet last week said agreements with Amadeus and Travelport's Galileo would help it tap into "the $90 billion European corporate travel market" and "grow its proportion of business passengers, currently around 20 percent, through the managed business travel segment."
EasyJet expects Galileo to offer its content to U.K. agencies by year-end, and to subscribers in the rest of Europe in 2008. Amadeus this month in Germany, France, Spain and the United Kingdom is piloting a "tailor-made solution [that] connects the GDS directly to the inventory of ticketless carriers." A "worldwide" rollout would follow.
EasyJet said it would apply "a point-of-sale fee" on travel agency bookings through Amadeus and Galileo--similar to reservations made through such other "non-Internet" channels as telephone call centers and airport counters--to "ensure" its Web site offers the cheapest fares. Those fees are €5 (US$7.34) to €7.5 (US$11) per sector, depending on how many sectors are booked. "The point-of-sale fee per sector is variable, incentivizing corporate travel agents to book more sectors," according to easyJet.
Despite the inclusion of what he characterized as excessive fees, Guild of Travel Management Companies executive director Philip Carlisle supported easyJet's decision to join the GDS channel because GTMC's members would "rather have product on the GDS even if we had to cover the cost than chase it on the Internet, in terms of simplicity of procedures."
To further encourage travel agencies to access its fares and inventory via Amadeus and Galileo, easyJet has threatened legal action against those agencies that "scrape" fares from its Web site. As displayed on its Web site, easyJet's "acceptable use policy" informs users "not to reproduce material from this Web site for commercial purposes, including by featuring prices of any easyJet flights on any other Web site or other online service, nor gather such material by the use of spiders or other techniques."
An easyJet spokesperson told
The Beat that screen scraping dismisses other services the airline offers to consumers, including hotel and car rental reservations. The decision also "was due to the consumer paying more than needed for their flights than if they booked direct with easyJet.com after commission was added," the spokesperson added.
A Sabre Holdings spokesperson called the easyJet fees "prohibitive" but did not comment on whether they are an element of any discussions between Sabre Travel Network and easyJet. "We're pleased that they acknowledged the GDS channel and put their content in it," the official said. "But we do have concerns about this particular model. If it's a model our customers say they want to pursue, we'll take a look at it." Sabre Travel Network ranks third among GDSs in European market share.
EasyJet opted to participate in the Amadeus and Galileo GDSs rather than build individual links to travel management companies. The airline in 2005 announced plans for Web-based bookings by Business Travel International via an application programming interface. But that development did not come to fruition before BTI split into BCD Travel and HRG in early 2006.
"If I was an easyJet, I probably would not want to deal with just one [TMC]," said David Herrick, head of American Express Business Travel in Europe. "If I am going to get into this, I am not going to tie myself down to limited distribution. From all the things they are doing, they clearly want to play in a bigger space."
But by charging GDS users, easyJet becomes a "high fares airline" according to rival Ryanair. The combative carrier labeled travel agents "rip off middlemen," and described them as "the greatest dead wood" in the travel industry. Instead, the highly profitable (after-tax profits of €408 million in the six months through September 2007) and fiercely no-frills airline is happy to have business travelers come to it rather than using GDSs to go to them.
Despite the "hate" being "mutual," GTMC's Carlisle said, "Our side of the industry will still give Ryanair business if our clients want their service."
A Ryanair spokesperson claimed the airline, like easyJet, has a passenger mix with 20 percent business travelers. It operates on more than 550 European routes.
At the other end of the spectrum, business travel-minded KLM seemingly has no intentions of ending its GDS participation but may ask travel agencies (and therefore agents' corporate clients) to foot part of the bill. EasyJet's new Amadeus and Galileo deals "could trigger for us a review of the current full-content deals that we have running with all the major global distribution systems," according to KLM distribution strategy director Rob Westerman, speaking last week during an
EyeForTravel podcast. "It is not unfair competition, but they are able to promote their products to the corporate market and can levy a fee for the distribution in the indirect channel, whereas we do not and still compete with them. It was kind of a shock, although it also gives us food for thought for that model."
Westerman added that KLM is considering whether to "play around with surcharges and fees as compensation for distribution costs." With its GDS deals scheduled to end at the end of 2008, the airline also will rely on the clout it enjoys from a partnership with and ownership by Air France. "I am sure the right leverages are available to us ... to renegotiate with the GDSs a full-content deal," he said.
Northwest Airlines vice president of distribution and e-commerce Al Lenza
speaking this week at the PhoCusWright conference in Orlando, suggested that GDSs "appear to have concluded its worth subsidizing or facilitating" easyJet's entry to their systems by supporting a model in which users pay for access. "That's nice," he said, "but I am going to want that deal. All the other carriers that compete with those guys are going to want that deal. This is a pretty dangerous precedent that is being set."
