Wednesday, August 4, 2010

Airlines versus Global Distribution Systems: Welcome to the new Cold War

Posted by Timothy O'Neil-Dunne on 04 August 2010

So the gloves are coming off and the simmering dispute between the airlines and the GDSs over non-traditional content distribution is breaking out into war.

At first most international airlines have been watching the different positions taken by the traditional GDSs in the North American market.

The airlines generally regard ancillary services as a critical part of their future business model for profitability.

The GDSs, as they contend with ever increasing product complexity, don’t want to have to spend a large amount of money to re-develop the core architecture to accommodate this need.

Users do not want to change, they simply want a nice and easy way to compare products which they regard as a commodity. And they want it in the traditional channels in the traditional way.

The airlines believe it is critical to differentiate their products and services, and then distribute as they see fit. Conversely, the GDSs have been slow to develop solutions to accommodate the airlines in their needs.

Last year the legacy GDSs pointed to a lack of standards as a reason not to develop or support the distribution of unbundled product. And this is the core of the issue – the right to differentiate one’s product.

The airlines appear to be reluctant to wait for a GDS based standard for ancillaries and indeed in the USA formed their own organization to create a standard.

The idea behind OpenAxis Group is that their solution was formed because the OpenTravel Alliance and the traditional GDSs were perceived to be taking too long to develop a set of solutions.

The standoff between the players continues, although now they are starting to discuss it.

Many traditional airlines outside of the USA have been quiet on the issue – but the gloves have certainly come off in Asia-Pacific.

Specifically two airlines based in the region are vocal in their frustration. From Jetstar (a wholly owned subsidiary of Qantas), executive manager for commercial, David Koczkar, was blunt in his assessment of the problem.

“The GDS’s can’t sell half our products.” And then he was more specific: “ …[they] can’t keep up with the LCCs in terms of product development.”

Further north, in what has become a very competitive market, Amin Khan, senior general manager network, revenue management and distribution for Malaysia Airlines, describing his frustration with the GDSs, said: “We are not able to display to the end customer what we would like them to see…”

He added that GDSs are “too expensive”. There is a subtext to the issue and that is how airlines feel a growing discontent with the highly restrictive GDS full content contracts, which in some cases are now tying their hands in their distribution of any content.

But the GDSs are fighting back. Responding to a reporter’s question directly, Amadeus retiring CEO David Jones responded by pushing the blame bucket back across to the airlines. He pointed the finger at the airlines by saying they should have agreed on a universal set of standards for their own systems.

Sticking to the GDS standard line, he said: “The fact is that different airlines around the world have not yet agreed on any set standards to do this.”

This is going to be a long running saga. Now there is a standard set available in the OpenAxis Group which is not just a paper standard but has actually been deployed in markets, and not just in the USA.

The GDSs don’t have this argument to hang onto much longer.

Where Jones is right is that there are still issues on financial fulfillment to be resolved. But the airlines are not waiting – this is critical to their success, they are putting in solutions today and working with distributers to ensure that the customers can buy their products through their preferred channels which of course includes travel agents.

The impact of this fundamental change of the airline product clearly extends beyond the GDSs.

The OTAs and indeed anyone selling airline products – either standalone or bundled – will have to start working quickly to deploy these solutions.

Standards or not – avoiding the issue is not an option.

Note: The author is acting CEO of LUTE Technologies, which is an allied member of Open Axis Group

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