Airlines Eye GDS Costs

Airline execs attack GDS system, want changes

By: David Jones

DALLAS The chief executives of Continental Airlines and Northwest Airlines launched a broadside attack on the existing global distribution systems and signaled that the airline industry would push for technologies to directly link the airlines with corporate customers and travel agencies.

Continental CEO Gordon Bethune, speaking along with Northwest CEO Richard Anderson, told attendees at the National Business Travel Association convention here last week, that the market is not interested in paying for services, like GDS booking fees, that “do not add value to us.”

“I have yet to find anybody that’s interested in paying that fee,” said Bethune, whose airline participates in an international marketing alliance with Northwest.

The airline industry in 2002 was expected to pay more than $2 billion per year in booking fees to the major travel reservation companies, according to a study last year by Global Aviation Associates.

However, most of those fees are paid by the major carriers such as Continental, Northwest, Delta and American, which still sell the vast majority of their tickets though travel agencies.

Discount airlines like Southwest and JetBlue have developed Web-based systems that allow customers to book tickets directly through those airline reservations systems, giving them a significant cost advantage over the major carriers.

The major carriers have argued that to remain competitive with the low-cost airlines, they must use the Internet to bring their distribution costs in line. “CRS fees have the wrong sort of incentives,” Anderson said. “The agency pushes a button and never sees the bill and we get the bill. And that really doesn’t work.”

Northwest executives are actively promoting a direct connection tool for corporate travel customers, called CorpNet Direct. The system saves Northwest money by bypassing traditional GDSs and saves companies money by cutting out travel agency transaction fees.

Northwest is also offering the CorpNet Direct fares through Orbitz for Business, the online agency’s new Web-based corporate travel site, and Worldspan’s TripManager, a self-booking tool for corporate travelers.

Anderson and Bethune’s comments come at a time when the Department of Transportation is considering whether to deregulate airline participation in the four major GDS systems, which would allow airlines to individually negotiate GDS booking fees and also allow them to withdraw their fares from the existing systems.

Such a move threatens agency access, as the current regulations require airlines to provide equal-fare access through the major GDS companies, which include Worldspan, Sabre, Galileo and Apollo.

Agency executives defended the traditional GDS companies, arguing that GDS systems still represent the most efficient way to distribute corporate travel.

“Our position is that the GDS should be the highest value provider of supplier content,” said Richard Spradling, chief information officer of TQ3 Travel Solutions.

In September 2002, TQ3 was the first major corporate agency to sign up with the American Airlines EveryFare program, which allowed agencies to access that airline’s full array of published and Web-only fares, in return for an agreement to absorb the carrier’s booking fees over time.

Maritz officials said the EveryFare program has helped clients save on unrestricted tickets, while helping reduce the number of travelers booking outside corporate policy.

Spradling said the problem with the current GDS distribution model is not technology. He said the airline industry is capable of loading Web fares into the existing GDS systems if the economics can be worked out.