Travel Industry Review

NEW GDS FEE DISCRIMINATES AGAINST AGENTS SAYS ASATA by Sarah Cornwell

AGENTS are searching for ways to combat the negative impact of new surcharges on GDS bookings.

A coalition of international trade associations has appealed to the European Union to intervene and examine the practice, which they say is a threat to the sustainability of their business. The group also want regulation to control future consolidation in the airline industry.

The outcry followed last month's announcement by British Airways and Iberia that a €9.50 fee per fare component would be applied to bookings via non-preferred channels starting November 1. Sales through direct and NDC-enabled channels or GDSs with NDC-enabled connections will be exempt.

Lufthansa introduced a similar scheme that it said was to get ahead of third-party booking engines, like Google, in 2015.

Iberia and British Airways’ parent company, IAG, said the new charge would also apply to certain routes operated by Vueling. Some markets could get special dispensation. Representatives for Iberia said China and Brazil were being considered for exemptions but a final decision was still pending.

Franchise carriers such as Comair have so far not been excluded.

Brian Kitchin, British Airways/Comair Executive Manager Sales, commented: “The news… did not come as a complete surprise as we know that negotiations had been ongoing for quite some time. At the moment we are consolidating all the information available to us and exploring our options. Once we have a plan on the way forward we will make an announcement.”

The fee, priced at US$10, £8, CHF10 and JPY1,100, will be collected through a Q charge on ticketing. BA and Iberia said the amount was subject to adjustment in future.

Lufthansa did not immediately respond to questions about the development, or reports it plans to add an additional GDS surcharge, this time for ancillary baggage services.

The introduction of piece-meal systems and other new fees by more carriers would make retailers’ back-end reporting far more complicated. Retailers say comparison shopping is negatively impacted when agents are forced to book outside of their preferred channel.

The Association of Southern African Travel Agents said it was disappointed IAG was unable to negotiate down its distribution costs to avoid passing on the “tax” and said agents were being unfairly discriminated against and that transparency would suffer.

Marco Ciocchetti, Chief Executive Officer of the XL Travel Group believes other airlines will follow. The group is developing technology to help combat the development, he revealed.

“These surcharges added to the point of sales restriction are making it essential to look beyond the traditional GDS option. The general feeling, however, is that only the traditional GDSs give the agent the control over the booking that is so important,” commented Richard Beadle, XL GSTA Corporate Travel Services.

While retailers initially threatened to boycott Lufthansa airlines when its charge was introduced, Mr. Beadle commented: “Diverting sales away from a carrier is a dangerous tactic, especially if it is not in the client's best interest. It must be a factor, however, when considering which airline to push.”

Travel Assignment Group Director Jonathan Gerber said TAG would challenge the introduction of these charges by any means possible.

“There are systems that can look at various booking platforms and make necessary choices,” he said. “Yes, we are really there...”

Mr. Gerber asserted: “In terms of concept, I think it points to the fact that airlines and agents are no longer partners. How else would you explain forcing a mechanism onto agents that will ultimately be harder for them to fulfil? I think that the GDS and the airlines need to sit down and discuss how the GDS impacts on them from a cost perspective. The GDS... remains a wonderful tool for inventory and I believe that this is a service that should be paid for. I would love to know what the development costs on all of these new booking platforms is. Bottom line is that airlines want to own the client. I think that it is all actually quite a sorry state of affairs. The wheel is turning where they used to own the GDS, sold them off and now want to develop an NDC to bypass the GDS effectively.

“I am not sure that there are actual cost savings [for airlines]. How much is it to develop these different systems? As an agent though I can tell you that it is impossible to have a different booking platform for every airline; it is ridiculous.”

Mr. Gerber said it would be “horrific” if every airline went the same route.

“There is no doubt this strategy hurt LH. We will continue to monitor and to do what is best for our clients. We cannot, however, have a situation where we are forced to book on various platforms; it just does not make sense. There is currently a central booking system; it is called the GDS. [I am] still not sure what’s wrong with that platform?

“Clients will be charged the fees as agents can’t pick these up,” he added.

Travelport said it regretted the development while Sabre suggested IAG had jumped the gun and it “will continue to seek an agreement that delivers value and meets the revenue needs of the IAG airlines – including looking at opportunities to integrate their NDC-based content – while balancing needs for choice, transparency and convenience demanded by travel agencies and consumers”.

Amadeus said it was working with IAG to find a solution to its distribution needs. It said the charge was not in the best interest of travellers.

The GDS maintained: “Travellers today are looking for consistency, transparency and choice and we as an industry can deliver that best by connecting and integrating all players with all content in all channels... Amadeus strongly believes that indirect distribution remains the most cost-efficient solution for all parties on a global scale.” And it warned airlines that high-yield business could be lost.

“TMCs provide a great value to both travellers and airlines. Indirect distribution channels represent an estimated 50 percent of all global airline bookings – including LCCs. In addition, indirect distribution represents a higher yield per passenger because many indirect bookings represent corporate travel, complex itineraries and long-haul travel.” Amadeus estimates 34 higher on average.

“The travel industry is a growing industry and we believe there is room for all players to grow within it. Travel and Tourism is expected to grow by four percent annually over the next 10 years and distribution providers have a space in that growth.

“In 2016, our travel agents bookings rose 5.9 percent to US$534-million…” it said.

BA did not comment beyond the written update it distributed to agents at the time of the announcement. BA said the charge would recover additional costs applied through the relevant channels and that there would be no change to current distribution agreements with retail partners.

A detailed guide was made available on the airlines’ trade websites: batraveltrade.com, speedbirdclub.com and iberiaagencies.com.