Is it the end of online travel agency CRS ?

[JF Mezei]

American airlines pulled it fares from Orbitz.
Now, expedia says it will give AA lower priority and force users to jump
through hoops to get those fare.s

Is this a sign of things to come in the industry, or will American
Airlines have to back down and re-instate those systrems as proper
distribution channels for its flights ?
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[John Levine]

Post by JF Mezei
Is this a sign of things to come in the industry, or will American
Airlines have to back down and re-instate those systrems as proper
distribution channels for its flights ?

This is a skirmish in a long running battle. Airlines hate paying
commissions to agents, agents won't sell tickets for free (although
they make a lot less than they used to.)

They'll work something out. The airlines and the agents need each
other too much.

The only large US airline that doesn't use agents is Southwest, and
their business model, point to point one-class domestic flights, is
rather unlike the rest of the majors.

R's,
John
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[Graham Harrison]

This spat isn't really anything to do with commission. The airlines
stopped paying commission to agencies years ago. There have been
"overrides" since but base commission has (mainly) gone away.

No, this is related to the cost of sale. Every time a reservation is made
via a CRS/GDS such as Galileo or Sabre that GDS charges the airline a fee.
The fee is usually per person per sector (so 2 people making a simple a-b-a
round trip = 4 fees). Not only that but the fee varies according to a
number of factors (which agency makes the booking and which method of
connectivity from the GDS to the airline to name but 2). And then they
charge the airline a fee for issuing the ticket. American have decided
they don't want to pay those fees so they have developed a method by which
online agencies should connect to them. They reckon that will be cheaper
for them than going via the GDS.

I believe they also have in mind that it will permit them to have more
control over the sales process and, in particular, which chargeable services
they can sell to the passenger. But it will also mean they can determine
precisely where the sale is coming from. That allows them to bias (there
is no other word for it but it may not be a negative) the offer. They
could offer different fares or offer (or not offer) seats according to the
specific transaction taking place.

So will it lead to the demise of the online CRS connected GDS? It could.
More importantly it could make comparison shopping more complex.
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[John Levine]

No, this is related to the cost of sale. Every time a reservation is
made via a CRS/GDS such as Galileo or Sabre that GDS charges the
airline a fee.

That's true, but it's hard to see how it could be relevant to this
particular dispute. Orbitz was founded by five of the majors,
including American, specifically to break the GDS' hold on the online
travel market. They've always had direct connect to any airline that
could support it, bypassing the GDS. Since then Orbitz has been sold
a couple of times, but I don't think their techonology has gone
backwards.

I believe they also have in mind that it will permit them to have
more control over the sales process and, in particular, which
chargeable services they can sell to the passenger.

That might be the problem. As part of the connection deal Orbitz has
a "most favored nation" rule in which they have access to all
non-opaque fares the airline offers to the public. Perhaps AA wants
to be able to do more sophisticated realtime price discrimination.

R's,
John
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[Jeff Hacker]

Post by JF Mezei
American airlines pulled it fares from Orbitz.
Now, expedia says it will give AA lower priority and force users to jump
through hoops to get those fare.s
Is this a sign of things to come in the industry, or will American
Airlines have to back down and re-instate those systrems as proper
distribution channels for its flights ?
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The following is what I saw on AA's website:

Expedia has chosen to no longer feature American Airlines fares on its
website. Customers looking to compare flights or fares online should visit
other travel sites such as Kayak.com or Priceline.com for the most accurate
and up-to-date information, or you can always find our Lowest Fares
Guaranteed and No Online Booking Fee at AA.com. American flights can also be
purchased from a wide range of accredited travel agencies across the globe.

Tickets for air travel on American remain available for purchase on Expedia,
however, owing to a commercial dispute, Expedia's discriminatory fare
display may mislead some customers to believe they have fewer choices, even
in situations where American's fares are lower than other airlines, or when
American offers superior schedules.

As of December 21, 2010 schedules and airfares for flights on American
Airlines and American Eagle are also no longer available on Orbitz.com or
websites powered by Orbitz.com

Rest confident that airline tickets already purchased through any of these
websites remain perfectly valid. In the event changes are required, you may
contact American Airlines reservations directly by calling 1-800-433-7300.

Q: Is the airline ticket I purchased on Expedia or Orbitz to travel on
American Airlines still valid?
A: All airline tickets already purchased via Expedia or Orbitz are still
valid for travel and all original fare rules are still in effect. However if
you need to make a change to your existing ticket purchased on Orbitz, you
will need to contact AA Reservations at 1-800-433-7300.

Q: What if I need to make a change to my flight that was booked through
Orbitz?
A: You will need to contact AA Reservations at 1-800-433-7300 to make
changes to your itinerary that includes flights on American or American
Eagle. For changes other than American Airline or American Eagle flights -
contact Orbitz.com.

Q: Where can I shop, compare and buy airline tickets online for travel on
American Airlines?
A: There are many options to shop and compare, however www.aa.com, is the
best place to do business online with American Airlines. AA.com provides
numerous ways to conveniently search for the most accurate and up-to-date
information and to book low airfares and free award travel; select your
seats; make hotel, rental car and cruise reservations; get flight
arrival/departure information; request upgrades; sign up for flight status
notifications; and check in and print your boarding passes.

American also continues to provide its airfare content to thousands of
travel agency partners, both through global distribution systems and through
American's own direct connection technology that it is powered by Farelogix.

Q: Where can I get the best deal for travel on American Airlines?
A: You'll always get our lowest airfares, guaranteed on AA.com and pay no
online booking fees. Plus you can search by Price and Schedule to view up to
40 flights and prices for your travel dates. If your dates are flexible, you
can also see our lowest prices 3 days before and after your selected travel
dates. For details on our Lowest Airfare Guarantee, see the Lowest Fare
Guarantee Terms and Conditions. Or, to file a claim, go to the Lowest Fare
Guarantee Online Claim.

Q: Are American's fares still available on Expedia?
A: While tickets for air travel on American remain available for purchase on
Expedia, it is making it more difficult for consumers to find American
flights and fares on its website. This may lead consumers into believing
that they have fewer choices, even in situations where American's fares are
lower, and schedules are superior, than other airlines that are listed more
prominently.

Q: Is Egencia affected?
A: No.

Q: Why aren't American's fares available on Orbitz?
A: We were unable to reach a mutually beneficial agreement with Orbitz that
would provide customers with a full choice of American Airlines fares and
schedules. As a result, Orbitz is no longer authorized to display our
schedules or sell airline tickets for travel on American Airlines or
American Eagle.

Q: Is Orbitz For Business affected?
A: Yes. Customers with negotiated corporate contracts with American may use
another agency of record to access their discounted pricing with American.
Business ExtrAA members have the additional option of using AA.com.

Q: Is American going to cancel its participation in other online travel
agencies?
A: American is a strong supporter of customer choice and continues to
provide its airfare content to travel agency partners, both through
traditional global distribution systems and through American's own direct
connection technology that is powered by Farelogix.
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[Graham Harrison]

The holy grail of airline pricing is to know who the purchaser is (not just
the agency), who the passenger is (after all it's usually a Corporation
paying for a road warrior) and where the purchase is being made (which
agency, the airline or another airline) and which route the request is
following to get to the airline (e.g. GDS and therefore how much it's
costing the airline). That way they can tailor the offer very
specifically. For instance, it would not surprise me to find an airline
including lounge access for an economy passenger who regularly travels on a
flight which does not sell out and he pays one of the higher fares.
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[Roland Perry]

Post by Graham Harrison
The holy grail of airline pricing is to know who the purchaser is (not just
the agency), who the passenger is

I know it's not quite what you meant, but I find it very frustrating to
buy an airline ticket online, via a website I have an account with, and
for them to *still* ask me for all my "passenger" details including
passport number.

Clicking buttons to say things like "no, I don't want a hire car, I've
never bought one before, why would I start now", just goes with the
territory.

[JF Mezei]

How does Google fit in all of this ?

Is it possible that the shape of things to come is a whole bunch of
separate airline web sites, with Google providing a search engine for
schedules/fares, but you have to go book at the airline's web site to
make your booking ?


Lets not forget Google is buying ITA Software.
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[Roland Perry]

Post by JF Mezei
How does Google fit in all of this ?
Is it possible that the shape of things to come is a whole bunch of
separate airline web sites, with Google providing a search engine for
schedules/fares, but you have to go book at the airline's web site to
make your booking ?

What the public wants is a price comparison site. It doesn't matter to
them if it's Google telling them which airline site to buy from[1], or a
site like Expedia being a faux-travel-agency.

[1] The Skyscanner site has done this for a long time. But you do need
quite a lot of input: such as dates, places and so on.

[Graham Harrison]

An AA take on part of the issue:

http://www.elliott.org/first-person/american-airlines-we-want-the-customer-t
o-know-what-the-total-cost-of-the-trip-is/
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[Graham Harrison]

Roland, I reckon BA are trying to get somewhere near this. I don’t believe
they are happy with their current methodology but, for instance I had WTP
out (daylight) and CW back (overnight) this summer. A few days before
departure I noticed the outbound flight was getting full, particularly in
economy but not in CW or First, and reckoned they’d be looking for upgrades
so I allowed myself to hope. However, bear in mind that despite the
classes I had purchased the cheapest fares in those classes and I am only a
“Blue” frequent flyer (I made Silver once but that’s not going to happen
again). We checked in online and turned up at LHR just as bag drop
opened. There were no phone calls from the desk simply took away the WTP
passes I had printed and gave me new ones for CW (with lounge access) so I’m
guessing they had already made the decision and reallocated the seats. If
I was BA I would have made me an offer during check in along the lines of
“would you like to upgrade today for £?”; I’ve seen them experiment along
those lines at Gatwick where I got Club Europe to Venice for a flat £50 on
top of a very cheap economy fare. In fact, their yield control is such
that I might even have expected an e-mail with an offer maybe a week before
departure. Based on comments I’ve heard BA people make in industry
meetings I know they’ve had thoughts along those lines but, from what I can
make out, it’s their CRM systems that don’t yet support that model. Once
you’ve got that level of CRM you can not only tailor your own product
offerings but also the product offerings of the ancillary products you’re
trying to sell. That doesn’t necessarily mean that when you go to (say)
Madrid and always turn down an hotel they will stop offering one; they may
decide that they simply aren’t offering what you need and try to determine
what you do want and refine their offer to meet your needs. If you then
pick a city centre hotel on more than one occasion they may recognise you
won’t need a self drive car but might start pushing pre booked taxi/limo
instead.

I reckon that means that for any journey you’re going to need two computers
– one that you use at home or in the office and sign into your account and
the other that you use from a different coffee (so they don’t associate the
IP with you quite apart from the account) shop each time so that you can
compare what they’re offering you with their base offer to people they don’t
know. Once they think they have you hooked I wouldn’t put it past any
company to try and screw you.

But, back closer to the topic I reckon this one has some way to run. It's
not just about the AA relationship with Orbitz, it's about the wider
relationship with Travelport. Any airline has some markets where it has
strong brand recognition and loyalty, often the home market. You also have
a situation these days where, in markets with strong internet penetration
and strong brand recognition, an airline can plan to remove dependency on
3rd party distribution and push everything to its' website. There are
exceptions - the sale of a package for instance but for individual
travellers getting them to use your website becomes increasingly possible.
However, in other markets (if you want to play in them) 3rd party
distribution remains the way to go. It then depends how important you
consider those markets to be. So the airlines and GDS companies are
continually playing a game where the GDS want the airline bookable in all
markets and want all fares useable in all markets while the airlines want
reduced booking fees so that the cost of sale is the same across a given
market. The solution so far has been differentials with fees reduced in
markets where the airline has the power to move people to the website and
maintained when the airline doesn't have the power.

Now throw in ancillary fees. There's a big argument going on about
transparency. If the airlines take up the various applications that ATPCO
and IATA have been working on fees will be distributed in much the same way
as fares. I reckon that the airlines have realised that actually they can
make more money by taking much more control of the distribution. No longer
will they simply file them for everyone to look up and use. They will get
the user to come to them with a trip request so that they can tailor the
offer and we're back to where I started - CRM etc.
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[Roland Perry]

I’ve seen them experiment along those lines at Gatwick where I got
Club Europe to Venice for a flat £50 on top of a very cheap economy
fare. In fact, their yield control is such that I might even have
expected an e-mail with an offer maybe a week before departure.

Emirates did that to me this summer, but only on the onwards leg from
Dubai. Although the main practical benefit was being able to use their
Business Class lounge for the layover (I always seem to get huge
layovers on the way out, and about an hour on the way back, must be a
time-zone thing].

[JF Mezei]

Roland, I reckon BA are trying to get somewhere near this. I don’t believe
they are happy with their current methodology
departure. Based on comments I’ve heard BA people make in industry
meetings I know they’ve had thoughts along those lines but, from what I can
make out, it’s their CRM systems that don’t yet support that model.

It is one thing to dream up such scenarios (which is what airline
strategiests are paid to do and come up with ideas such as charging for
baggage, reclining seats, use of toilets etc), and another thing
completely to actually be able to implement them.

One also has to look at the cost/benefit of such customised solutions.
Will it really generate more revenus if, after booking the flight, the
airline's web site only offers you option they think you will like
instead of offering all options available ? And how much will they have
to spend in IT development costs to develop this tailoring ?

They could simply have one web page with a buch of options you could
check (car rental, taxi/limo coupons, rapid transit), downtown hotel,
subruban hotel, hotel near airport) etc. And the user could then select
when he needs in one page and press "submit" and then get a customised
solution based on the prefeneces he put into that one page.

Perhaps they could offer to save those preferences, so next time, the
boxes are pre-checked, but the user still has the option to change the
preferences for that trip before pressing "submit".




There is one big danger though with such scemes. They may be good to
retain existing customers, but they will work against acquiring new
customers. Similarly, a customer of another airline may have a one time
travel need that would be best served by your airline, but he won't know
about it because your airline isn't part of GDS systems. And this is a
missed opportunity because your airline might have had a chance to show
that new customer how much better they are versus that customer's
current prefered airline. (This is especially true of airlines who were
in sad sad shape at one time and got seriously better).

So while such schemes may be good to retain existing customers with
better services on the airline's own web site, it will not make it easiy
for non customers to learn about the airline's service.

If I live near JFK, then I may see billboards telling me how great AA's
services out of JFK are. But if I live in Montreal, and I need to find a
way to travel from new york to anytown-USA, I won't know about those
billboards AA has in the new york city area and the GDS won't tell me
that AA has a non stop at affordable price and I will choose another
airline.


The problem is that with convoluted pricing schemes where you need to
pre-pay at ticket purchase time for a toilet flush, if you just
advertise basic fares on GDS, you will have angry customers who weren't
told about all those hidden charges you need to pay at airport and
during flight.


If airlines returned to simpler fares, it might solve many problems.
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[Roland Perry]

Post by JF Mezei
The problem is that with convoluted pricing schemes where you need to
pre-pay at ticket purchase time for a toilet flush, if you just
advertise basic fares on GDS, you will have angry customers who weren't
told about all those hidden charges you need to pay at airport and
during flight.
If airlines returned to simpler fares, it might solve many problems.

In Europe the airlines who charge extra for things like checked baggage,
choice of seat, use of business lounge etc, do have a simple fare
structure. There's just one price for the seat, even if it varies from
day to day. But you need to understand what degree of "unbundling" you
want to go for. Some people complain about having to pay for foos on
board, but my experience is that the food you buy is better than the
free (economy class) food in most short-haul full-fare airlines, and
with a choice as well - not "dry cheese and ham sandwich, or nothing".

Traditional airlines, where most things are free at the point of
delivery, have much more complicated fare structures with dozens of very
poorly-explained "codes". Here's a 3rd party link to AA's codes, for no
better reason that that's one I bookmarked some time ago:
http://www.cwsi.net/aa.htm

[Graham Harrison]

<quote>
There's just one price for the seat, even if it varies from day to day.
<quote\>

It doesn't matter if you're talking locos like easyJet or traditional
carriers like BA the speed of fare change is MUCH more frequent than daily
at times. And (taking my cue from the financial ads in the UK) "your fare
may go up, or down."

And even your base proposition isn't true. Many years ago, I had access to
what is known as staff travel. I had so called "confirmed" staff travel
seats on a flight but I knew that if the flight filled I could get bumped so
I was watching the availability with some interest. The number of seats on
sale had been in single digits for a couple of days with different numbers
in different fare buckets. Then about 3 days before departure the number
of seats suddenly stabilised at 4 in all the buckets on offer which included
both economy and business. I tried an experiment. I booked a seat in one
of the economy buckets - number in all buckets on sale went down to three.
I released that seat, all went back to 4. I tried booking a seat in a
business bucket - again they all went down to 3. So those 4 seats could
have been sold in either business or economy significantly affecting the
fare so a seat doesn't just have one price (occasionally).
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[Roland Perry]

Post by Graham Harrison
<quote>
There's just one price for the seat, even if it varies from day to day.
<quote\>
It doesn't matter if you're talking locos like easyJet or traditional
carriers like BA the speed of fare change is MUCH more frequent than daily
at times.

My use of the word "daily" is to indicate a change in fare that's more
often then (say) "monthly". Having said that, I don't often observe
low-cost fares changing during a day - and sometimes they stay the same
for much longer. I know this because I look up fares to estimate the
cost of a trip, and maybe don't get approval, or decide to travel, until
a few days later. The fare has rarely changed.

Post by Graham Harrison
And even your base proposition isn't true. Many years ago, I had access to
what is known as staff travel. I had so called "confirmed" staff travel
seats on a flight but I knew that if the flight filled I could get bumped so
I was watching the availability with some interest. The number of seats on
sale had been in single digits for a couple of days with different numbers
in different fare buckets. Then about 3 days before departure the number
of seats suddenly stabilised at 4 in all the buckets on offer which included
both economy and business. I tried an experiment. I booked a seat in one
of the economy buckets - number in all buckets on sale went down to three.
I released that seat, all went back to 4. I tried booking a seat in a
business bucket - again they all went down to 3. So those 4 seats could
have been sold in either business or economy significantly affecting the
fare so a seat doesn't just have one price (occasionally).

What low-cost airline was this - which had both economy and business
seats?

[John Levine]

Post by Roland Perry
What low-cost airline was this - which had both economy and business
seats?

Quite a few in North America. Airtran does, or will until Southwest
absorbs them and reconfigures the planes. Spirit, the closest thing
the US has to Ryanair, has bone crushing 28" seat pitch, with a row or
two of extra cost "big front seat" with 36" pitch and four rather than
six abreast. Sun Country has what they call first class, which is a
typical US first, 39" pitch and four abreast. Air Transat, the
Canadian mostly vacation carrier, has club class with 34" pitch and
slightly bigger seats.

No North American carrier does the European thing of calling seats
business class that are physically identical to coach with a beer
and a sandwich.

R's,
John
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[Roland Perry]

Post by John Levine

Post by Roland Perry
What low-cost airline was this - which had both economy and business
seats?

Quite a few in North America.

We are drifting off topic in that case - I was talking about airlines in
Europe. And it wasn't about the seats literally, but "passenger carrying
units".

[JF Mezei]

First, Expedia decided to de-prioritize American Airlines fares in an
apparent show of support for Orbitz being dumped by AA.

On January 2, Expedia announced it was no lopnger selling tickets for AA
flights.


##
In a statement e-mailed to Reuters on Sunday, Expedia said it had been
unable to reach an agreement with American "due to American Airlines'
new commercial strategy that we believe is anti-consumer and anti-choice.

"American Airlines is attempting to introduce a new direct connect model
that will result in higher costs and reduced transparency for consumers,
making it difficult to compare American Airlines' ticket prices and
options with offerings by other airlines."

##


I guess AA's bluff was called and the GDSs aren't bending over as AA had
expected.

Whether AA or Orbitz/Expedia will be hurt most, I don't know.
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