So Will Airlines go Direct Connect or Not?

Of course some will, but not completely and many will not at all for competitive, budgetary or capability reasons. Will all TMCs link direct to those that do? Definitely not. The customer ultimately will decide and they will have a choice… at a price.

Let’s get down to basics shall we? Firstly there is nothing wrong with the GDS model we have at present as far as the whole chain (excluding the supplier) is concerned. For the supplier it is a frustrating cost of sale that they have failed to negotiate down sufficiently and one they are not willing to pay for any more. In simplistic terms they cannot see why they should pay to enable customers and intermediaries to have a ‘one stop shop’ and besides it distances them from their customers.

So airlines like American have decided that it is time for a change in model. A bit like Lufthansa did in Europe. Enabling technology capability is perceived to be there now so they have thrown down the challenge to the GDSs of negotiating or risk market attrition. However what they seem to have failed to grasp is that maybe the rest of the supply chain is either not capable or unwilling to embrace the direct connect model. Some have too much to lose and definitely little to gain by doing so.

The current dynamics and rationales are both fascinating and disturbing and worth analysis. The market is enormous and with many players in various shapes and sizes. It is also bound up in a ‘cats cradle’ of payment incentives, global market variations and cultural ways of doing business. There are still places on the globe who are transacting business two steps back from what the so called driver markets discarded years ago.

The above does not appear to concern the main drivers of change like American and Lufthansa but they need to remember that they aspire to be global entities yet seem to be applying their local majority market strategies on ultimately all of us. I am certain that, in the current environment this will not work but equally convinced they will be able to do it where they have critical mass. So this means that the world will have to handle air transactions on a more complex multi-tier basis.

So I for one accept that it is going to happen in parallel with the current booking methodology. This means that one can either book direct or through someone else at an additional cost. Cost, of course is the operative word. To book ‘direct’ you will either have to go straight through the airline or through a TMC who has a non GDS link. This will cost the TMC in money and resource as they will need to radically change their systems and they will not do it for free. The airlines will have to pay them instead of the GDS although not so much. The corporations will also want their cut or at least compensation for extra TMC cost.

I do not believe for one second that any volume spending corporation will decide to bypass the TMC because of this new model. What airlines choose not to understand is that a booking (and the cost of it) is not the be all and end all of travel management. In my days in travel management the actual booking itself was just the tip of the iceberg of travel management activity. Will corporations accept the fooling around of their programme just because an airline wants to save their own distribution costs?

To me it is logical that not all airlines are going to follow this path. It is also logical that some (i.e. American) will do so but with a much smaller impact than they might hope for and then only in certain market areas. I think others will watch them succeed or fail before rejecting it or taking into account the mistakes they make. It will become just another option which will bypass the GDS, give further power/income to the TMC and pass a potentially higher tab to the end user. I have said it before but what it will do is turn the big TMCs into mini GDS who will want incentivising while having greater control over airline share.

Finally one needs to ask what the smaller and less endowed airlines and TMCs are going to do. Those that do not have the capability or infrastructure to operate two different main booking methodologies. Sure as anything, they are not going to sit still.
Neither is the GDS. I suspect both will do all they can to bypass American and anyone else who tries it and invent alternative value adds.

As for the large TMCs I expect them to eke out every competitive and financial advantage out of the chaos that will ensue. They should be able to both have their cake and eat it by managing the different options in different regions and using their superior technology. Mind you they too are under a degree of pressure as they are less able than most to turn around to a mega supplier partner and say they won’t play. That could get very messy so I am not surprised they are ‘working’ with American.

I will watch with interest and a high degree of scepticism over what American might achieve. I wonder whether they will see the savings made from GDS bypass fading away in TMC and corporate incentives and market share loss. Maybe they will remember that they used to get a higher yield using the other model. Who knows, but it will give everyone in the industry a wake-up call at least!

COMMENT
I still don't think we've even scratched the surface of how bad direct connect will be for airlines, tmcs and customers Martin

Good Evening Count – Do Come In!

Without insinuating they are all a load of blood suckers I believe that inviting the press to listen to you is akin to inviting Count Dracula around for a nightcap. You want the experience to be worthwhile and enjoyable but there is a chance you will have a pain in your neck and the need for a transfusion afterwards.

Never could this more true than in the corporate travel business as recent events at an ACTE conference testify. They willingly invited journalists in to their sessions, tried to slap down an ‘off the record’ mandate and then were mortified when the press did their job. You cannot hold a very public and very large conference and then say everything (bar what we tell you) is a secret.

Reading about this furore got me thinking about my career as a senior in a travel management company and the experiences I had with the press. They were many and varied and I think they highlighted some of the things that are right and wrong in this particular industry. As a result, here are a few thoughts to ponder on.

Who in the travel industry needs the press? We all do yet we go about fulfilling this need in strange ways. You can take it as a given that unless you deal with them right you can get into trouble. Deal with them properly and you will get all that you desire. Bullshit, dictate or threaten them and you get what you richly deserve. Ignore them and you can start wondering why nobody knows about you.

On the other side the press needs you or they have nothing to write about. Simplistic I know but this is something often forgotten. So if you want to be a player in this industry you have to help them and not throw obstacles, smokescreens and dictates in their way. You also need to tell them something useful, not just the samey releases and platitudes that make you yawn let alone them!

I have never known an industry so selectively secret than our own. Many corporations won’t tell you what TMC they use let alone anything about their travel profile or philosophy. Suppliers only want to talk in sanitised clichés about new products and services but become very reticent when it comes to evidence and case studies. Hardly surprising as very often such products are in their early stages or even a hurried reaction to a competitor’s announcement. Hence the so called ‘smoke and mirrors’ syndrome we have encountered over recent years, Just ask yourself how many of those super duper announcements five years past have ultimately turned into anything worth having.

My own experiences with the press were many and varied and I must admit some of them gave our PR departments kittens. But I can honestly say they were both useful and rewarding to me and the companies I worked for. Why? Because I told them’ like it is’ but in a way that gave us credibility and, hopefully, respect. There is nobody better to have on you side than a journalist who believes in you and nobody worse than one who feels patronised and used.

What advice would I give? The following might help:

Never give a journalist a story and expect him not to use it. It is not in his nature.
Never give them something unsubstantiated and boring and expect publication.
Treat them as the valuable marketing tool they are not as a company stooge.
Stop being so darn secretive. If you got it then flaunt it.
Never treat them or their readers as idiots (American Airlines take note).
If you invite them around do not let them bite your neck! I suggest you try providing high quality ‘blood bags’ of information that are digestible and tasty!