ASTA President and CEO Richard Copland offered a colorful metaphor
to describe American Airlines’ new EveryFare program: “The
EveryFare may be the proverbial pig in a poke.”
“It appears to give travel agencies access to American’s low Web
fares in exchange for paying American’s GDS costs, but it doesn’t
actually assure that American will offer any Web fares to justify
the agency taking on those costs,” Copland said in an ASTA press
release questioning the fairness of the AA endeavor.
Two large agencies, TQ3 Maritz and Corporate Travel Management
Group, signed five-year contracts to participate in EveryFare, but
Copland’s objections to the AA program seem more typical of many in
the industry that the deal would drive up an agency’s costs, with
the airline dictating all the terms in the process.
Another concern cited by Copland: AA could pull the plug on the
program or alter its conditions at any time, potentially leaving
agents with no choice but to continue paying the GDS fees as
dictated by AA’s mandatory five-year contract.
AA is offering credits to offset the fees over the course of the
contract, but the credits decrease in value from $4.13 after the
first year to $2.48 in year five. Inevitably, agencies will likely
pass the GDS costs on to their clients, according to Maryland-based
travel industry attorney Jeffrey Miller.
“If you’re a big agency and you can pass through some of those
costs, you can probably make yourself whole, but on its face, it
wouldn’t seem to work for virtually anybody,” Miller said.
Miller also noted that agencies can get the Web fares other
ways. He was referring to the search tools that have been rolled
out or are being developed by several GDSs to help agents find and
book Web fares. One GDS, Galileo, is even negotiating with several
carriers to offer Web fares directly in the GDS.
Miller also found the unilateral nature of the AA contract
troubling, but not surprising. “Their theory is, ‘What don’t you
understand about ‘drop dead’?” ARTA President John Hawks contended
that EveryFare forces agents to place higher priority on one
carrier and ultimately hampers their ability to find the best deals
for clients.
“Tying your agency to any single airline program nullifies the
biggest advantage of using a GDS-based booking system: comparison
shopping,” Hawks said. “Unless your agency is in a hub city for the
airline, then you’ll have lots more work on your hands going to
different Web sites comparing fares, instead of using the GDS for
one-stop shopping.”
An agent near American’s DFW hub said he would rather book
directly on the Web than through a program such as EveryFare.
“If I book my client on the Web, I do not risk getting a debit
memo,” said Steve Cosgrove, owner of Dynamic Travel & Cruises
in Southlake, Texas. “I do not risk getting a credit card
chargeback. I charge my client the same booking fee regardless of
which way I book it. Why would I book it in my CRS?”
Bob Kern, president of PNR Travel in Los Angeles, said he
quickly determined EveryFare wasn’t a good fit for his agency, even
though much of PNR’s $5 million in annual sales comes from
corporate travel and air.
“It just didn’t look appealing to me at all,” he said. “I didn’t
see any reason why any agency of our size would get involved. It
just seemed like such a cost factor.”
Kern, who already uses the Internet to book Web fares,
particularly with smaller carriers, predicted that other airlines
will create similar programs in an effort to get away from the
GDSs.
And within days of AA’s announcement, Northwest said it will
unveil a travel agency site later this month that features ARC
settlement and reporting for all of Northwest and partner KLM’s
published inventory, Web fares included.
Despite his agency’s large volume and emphasis on corporate
travel, Gus Vallejo, CFO and COO of Casto Travel in Santa Clara,
Calif., thinks EveryFare’s shift of AA booking fees to agencies
would affect all air tickets sold by the agency.
“The agency cannot charge a fee just to its AA customers for its
costs under this program,” said Vallejo, whose agency recorded
revenue of $235 million in 2001. “The agency must do so for all its
clients, for all airlines.
“By taking this position, an agency opting to place a cost to
doing business with AA is forced to spread out such cost to all
carriers, whether such carriers come up with a similar program or
not. Seems to me such a provision is undue interference in private
enterprise.”
ANALYST: AVOID EVERYFARE
From Jerry Pantalone’s perspective, American Airlines’ new
EveryFare initiative isn’t going to do much to ingratiate the
airline with travel agents.
“It’s simply unwise, in my opinion, for anyone to sign on to
this,” said the president of Strategies Unlimited, a Boxford,
Mass.-based travel industry consulting firm.
“There are some provisions in it that, from a travel agent’s
perspective, are seriously flawed,” he said.
Specifically, Pantalone said,agents shouldn’t lock themselves
into five-year contracts with AA. The carrier insists that to gain
access to its Web fares an agent must agree to a long-term pact
that doesn’t expire until Dec. 31, 2007.
“It’s simply unwise,” he insisted. “Conditions can change.”
There’s another catch, according to Pantalone: Under American’s
EveryFare initiative, agents would have to pay GDS booking fees not
just for clients who travel, but for those who cancel.
“Let’s face it, if American really wanted to do something that
was beneficial to travel agents, they wouldn’t tie someone into a
five-year onerous contract that is one-sided,” Pantalone said.
“They’d give them some out, some trial period. They’d allow some
area for negotiation.”
Jerry Chandler
