Steve Reynolds, Founder & CEO, Tripbam
American Airlines’ recent announcement to push 40 percent of
its airfares through NDC via the GDS by April 1 has created quite a stir. The
question for buyers is what does that mean for my company, my travelers and my travel
management company? Is AA unfairly using its power to force TMCs to use a lower
cost distribution channel that only benefits them? Or is it moving the industry
forward with a more efficient, lower cost and robust distribution model? I’m
thinking both.
Corporate buyers are heavily dependent on online booking
tools and TMCs to provide full airline content—fares, amenities, negotiated
discounts, etc. The current GDS distribution channel has been around for
decades and hasn’t changed much.
Why? Lack of competition comes to mind. GDSs and TMCs want a
standardized process that doesn’t change. Change causes work and work costs money.
A switch to support NDC will take time and expense. Legacy solutions typically
don’t evolve unless forced to by market pressures. AA is that pressure.
OBTs—particularly the most dominant market player among
them—must adjust their shopping process and user interfaces. How do you present
a mix of NDC and non-NDC content to the user without confusing the traveler? How
do you clearly display bundles and what they contain? How do you architect the
solution to stay nimble and support likely content changes in the future?
TMCs must modify their mid-office and back-office systems to
manage ticketing differences, refunds and exchanges, ARC reporting, etc. It
means updating processes that were built decades ago and have historically
required little maintenance.
To date, most TMCs and OBTs haven’t done the real work.
Whether due to Covid or lack of buyer need, it hasn’t been done. They’ve been caught
out by the AA announcement and it’s a wakeup call to get going.
Can TMCs and OBTs get it done by April 1? Not a chance.
When April rolls around, one of three things will happen.
Option one, travelers won’t be seeing the best fares available. Option two, AA
will show the fares in both channels past April. Option three, things will stay
the same. I’d lean toward the third option due to agency and OBT pressure.
Nevertheless, buyers should apply pressure now to make sure
the required modifications are being made to avoid longer-term issues. Everyone
has a lot of work to do. It’s time to see real progress.
At some point, AA will stop postponing the shift, which will
make this an even bigger issue—especially when other airlines match AA’s
approach. If the shift occurs and your OBT and TMC aren’t ready, travelers will
only see select lower fares on airline-direct websites and will question the
value of the TMC, the OBT and the corporate air program. We’ll see leakage
increase to the level seen in the hotel category. And once a traveler is
approved to go direct, it’s hard to get them back.
Is this change good for the industry? The current airline
distribution solution has been in place for decades. It’s shocking it’s
survived this long. Any change would be a step forward. We can’t continue to
rely on technology and requirements established in the 70s and 80s.
The legacy solution is so firmly established, it’s become
the No. 1 impediment to innovation.
We can’t support blockchain either because we can’t modify
the existing process to support it or the change would be too expensive. Bundled
fares, new amenities, detailed traveler information, inventory control, cost
reduction, advanced APIs, etc. They’re all potential benefits from a new and
more nimble distribution solution.
When was the last time the GDSs had a new competitor? Without
competition, companies lack incentive to innovate or reduce costs. We’re
starting to see a few new competitors less dependent upon the GDS.
If OBTs and TMCs don’t evolve due to pressure from the
airlines, losing business to a new competitor may do the trick.