Momentum Starts With Little Among Agents

Web fare distribution program, apparently patterned after AA's EveryFare, draws mixed reactions from community

By: Jerry Chandler

In the breakneck quest to cut distribution costs, some major industry players have launched an effort dubbed Momentum.

Backers maintain the new program will offer agents access to sought-after Web fares while reducing distribution costs for suppliers.

Critics contend the payback doesn’t warrant the expense.

An intriguing group of bedfellows has created the program. Cendant subsidiary Galileo represents the GDS perspective; Rosenbluth International, the travel agency business. and Chapter 11 carriers United and US Airways round out the group.

Essentially, Momentum is a program that provides exclusive benefits to agencies and airlines that decide to enroll. Agents receive full access to a participating carrier’s publicly available airfares. Participating Galileo agencies receive special commission opportunities in exchange for reduced financial incentives.

And the airlines? They get to reduce distribution costs by 20 percent, while increasing fare distribution via the agency community.

“Everybody continues to talk about a need for change in travel distribution,” said Sam E. Galeotos, Galileo’s president and CEO. He contends Momentum provides a platform that participants can use to plan and grow their business. And growth, he said, is critical “in today’s uncertain economic and regulatory environment.”

Participation in Momentum is tied to a three-year contract.

What do agents have to give up to get access to UA and US Web fares? “Let me just offer the example of reducing a booking fee by $1,” said Galileo spokeswoman Deborah Bernstein. “We would put 50 cents into the equation, and the agency would put 50 cents into the equation. The airline then would get a dollar reduction in its GDS distribution costs.”

For airlines enrolled in Momentum and so far there are just the two the typical booking fee per ticket drops to between $8 and $11.

What kind of momentum is the plan gaining among rank-and-file travel agents?

“I have to be honest with you. I haven’t had a single agent even mention it,” said Pat Funk, vice president of operations for ARTA.

And, at press time, ASTA had yet to comment.

Despite what ARTA sees as a luke-warm response, Funk compared Momentum favorably to American Airlines’ EveryFare initiative. “[Momentum] has a little more to offer, inasmuch as they only request a three-year contract. That’s two year’s less than American’s,” she said.

Noting that most of ARTA’s members are small agencies, Funk isn’t crazy about “the idea of assuming costs for some of the GDS payments to get Web fares. A lot of agents are [already] booking those fares for their clients on the Internet. So why would you take on some of the costs of the GDS fees to get access to these Web fares?”

Using a bit of creativity, she said agents can readily book on the Internet. “Whether the airlines would consider it legal or not, that’s another question,” she said. “Because you use the client’s credit card.”

Another problem: agents lose any control over the reservation. That, however, is mitigated by the fact “that today you have so little control over the reservation anyway.”

Another industry player considers Momentum intriguing.

“It’s an interesting initiative,” said Bruce Bishins, president of United States Travel Agent Registry.

For some agents, he said it could be a good deal.

Those agents in places like Denver or San Francisco who book a lot of United could benefit. Perhaps those in Charlotte or Pittsburgh too, those who write a slew of US Airways tickets.

And travel agents anywhere who do a lot of business with Cendant brands such as Avis, Budget or the company’s numerous hotel brands stand to gain. They could get additional commissions.

But agents in cities such as Dallas, Houston or Albuquerque secondary markets on United and US Airways’ route maps are less likely to find Momentum means much, at least not yet.

“Not every deal is good for every travel agent,” said Bishins. “It depends on what the agent’s business is, and the meaningfulness of the products in that suite of services or offerings for that particular agent.”

Many observers see Momentum as a response to American Airlines’ EveryFare program, which debuted last September.

EveryFare makes American’s low Web fares available to brick-and-mortar agencies.

The quid pro quo: the cost of the GDS booking fee is shifted from American to the travel agency.

The carrier initially gives agencies a travel allowance credit of approximately $4 per flight coupon.

Agents then pay AA an amount equal to their own GDS fees, based on their choice of GDS services and products. The allowance gradually declines over the term of the contract.

The theory is that EveryFare participants will seek out lower GDS fees. Bishins, too, sees Momentum as a reaction to EveryFare but a reaction that that falls short.

“Frankly, I don’t think the response is enough,” he said. “I think this industry is just not waking up to the underlying problem. We have an industry that is in deep trouble when it comes to distribution costs. We are going to find ourselves with every supplier in town moving away from GDS distribution, and moving toward a Web solution, because they just cannot sustain or justify the high cost of segment fees.”

Ironically, he said that GDS systems are moving to increase segments fees, an indication that they “just haven’t gotten the message yet.”

The upshot, contends the USTAR chief: “You’re going to see other models evolve, and travel agents are going to be dragged into them if they want to sell [certain] products.”

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