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Airline Industry and Global Distribution Systems (GDS)


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(Feb 13, 2013) Farelogix, New Distribution: From Concept to Reality, Airlines for America Senior Vice President Sharon Pinkerton covers an in-depth look at the relationship between the airline industry, Global Distribution Systems and how it affects passengers and consumers.

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Airline Industry and Global Distribution Systems (GDS)

  1. 1. Airline-GDS Relationship» Majority of tickets still distributed via GDS-powered agency network» Airlines want to present offers in manner they choose at a competitive cost so they can make the best offers to individual customers» Overall GDS related costs have gone up since the GDSs consolidated, and remain multiple times higher than GDS alternatives» Airlines see an opportunity to reduce $7B in annual cost and avoid the potential of $1B in additional fees on ancillary products» If bilateral negotiations between airlines and GDSs are replaced by a government mandate, GDS costs will only increase further» GDSs and airlines are identifying opportunities to work together – do not need a mandate to achieve this cooperation.» Mandate likely to retard new consumer technology benefits/increase costs 0
  2. 2. Today’s Consumer RealityAir travel is no longer a commodity- there are choices» Fares with differing rights or » Onboard food service restrictions » Travel insurance » Changeable tickets – fee/no fee » Inflight telephones » Refundable tickets – fee/no fee » Inflight entertainment» Service classes on board » Inflight internet access » First Class, Economy Plus » Flight status notifications» Advance seat selection » Checked bags with or without fees» Upgrade options » Same day standby fee/no fee» Priority boarding » Airport lounge access» Priority passage through security » Frequent flyer mileage awards and lanes bonuses. 1
  3. 3. What Consumers Should Expect» A choice of competitive services related to air travel» To know the choices and services available to them» To know the cost TO THEM of each choice» To be presented with offers that are designed to meet their particular needs» The ability to choose the services they want and not pay for what they do not want» To know the cost of the entire trip BEFORE they purchase the ticket 2
  4. 4. Comparability is not the Issue-The GDS Middleman Is » GDSs don’t show all airlines » No DOT mandate there » GDS-owned online travel agencies » Don’t disclose which airlines are not shown » Don’t use the data they have for comparison » When disputes arise, GDSs remove airlines » Airlines are investing in new technologies and supporting new entrants 3
  5. 5. Proposed Mandate vs. The Consumer» A static set of “Core” services is anti-consumer IF YOU WANT TO COMPARE » Limits choice of services APPLES TO APPLES…. » Confusion comparing personalized offers» Helps preserve suspect GDS business model ALL YOU CAN GET ARE » Gives GDSs leverage in negotiations with APPLES airlines » Locks in high costs » Fails to open market to new innovation 4
  6. 6. Conclusion» Consumers are served by choice and lower costs» GDS policies limit choice, inhibit transparency, and increase costs» Airlines invest to present robust fare and service choices » Directly » And through travel agents» Markets are not working because of GDS practices » Few new entrants, struggling » Some Airline-GDS deals, but not very robust » Availability of consumer choice still constrained» Proposed DOT mandate will make matters worse, not better, for the consumer» What’s needed is to eliminate GDS imposed barriers to adoption of new technology and innovation – and then let the market work. 5