I’m only going to touch lightly on the topic in this post, as it deserves a much longer post or even a series of posts at some point in the future. Most of this topic is less relevant for this blog as it involves indirect (travel agency) distribution, but it should still be followed by people working with airline direct sales.

When times were not quite so lean, “people would go to industry meetings to discuss these things,” he said, and consensus often took years to emerge. “When you take all these forces at play — the practicality, the lack of people on both sides of the fence, the turgid process of getting industry concurrence — nobody’s got time to deal with it. “If GDSs expect airlines to dance to their tune, that’s just not going to happen,” he added. “I empathize with their situation, but that’s life.”

This quote reminded me of a panel session at the November 2008 ARAC conference in Budapest, as one question from the audience was similar to the quote above when Amadeus, Sabre and Travelport were on the stage. But what some people find convenient to ignore is that the GDS distribution business invests in technology that airline’s are asking for, and in order to have an effective community system, a system where products are clearly defined, can be sold by different parties in different countries using different terminals and without additional manual backoffice reconciliation work,  some form of agreement between airlines is essential before any GDS will start doing development. Just take a look at this simple example of the bicycle and you can see how charging for additional services can get very complicated and confusing for travellers very quickly. Nobody wants to see that example become the norm for someone travelling on a complex itinerary on different carriers who may be carrying one extra bag, or with any other form of “ancillary service.” 

So why should this area be followed by people working in direct sales? The simple answer is that the travel agency channel is undoubtedly moving in this direction, but the web will be leading this innovation as it has always done.

  • It will cust costs for some costs for airline direct sales as filing of ancillary services via the GDS will better facilitate the revenue accounting function and reduce manual reconciliation work.  
  • It further differentiates the web channel from other channels as more and more ancillary services are added. It even speeds up the channel shift from call centre to website, as the cost in extra talk time, and extra staff training etc make selling ancillary services more difficult)
  • It allows better differention between fare families. This is very important if the website wants to take full advantage of the upsell capabilities of fare families, and avoid the example I referred to recently where 99% of buyers were not trading up to higher fare families, most probably because of a lack of perceived value from doing so. Apart from the clearly identifiable revenue benefits from selling ancillary services, the benefit listed here should not be underestimated, even though the result is not as transparently obvious as selling a rental car or hotel room on top of an airfare.

I think the topic of GDS involvement in facilitating ancillary services for airlines will be a very hot topic in 2009; but any mention I make of it here will be trying to tie its relevance back to the airline direct channel. Clearly it is largly an indirect distribution story, but not entirely so.