American Airlines and Travelport -- already facing off in courtrooms in Chicago and Fort Worth, Texas -- traded charges today about who pays for flight and optional services access if travel agents hook up to the airline through direct-connects.
In a bold defense of the efficiency of the GDS distribution model, Travelport president and CEO Jeff Clarke said American Airlines wants travel agents to use AA Direct Connect and desires to charge them for access to the airline's content.
In the current GDS arrangement, agents generally don't have to pay for content. As a general rule, airlines pay GDSs segment fees, and the GDSs pass along incentive payments to agents.
Asked if American wants to charge agents for content, Cory Garner, the airline's director of merchandising strategy, said Travelport is trying to confuse the issue and intimidate agents.
In response to Clarke's statement, which came during Travelport's third quarter earnings call, Garner told Tnooz that American is not proposing that travel agents pay for content when using AA Direct Connect.
"The agencies that are accessing our direct connect now do so under mutually beneficial terms," Garner says. "Every agency is different. What is universally true is that remuneration to an agency from the GDS need not be part of a mutually beneficial equation.
"If Travelport's interests are truly to protect the travel agency community, they certainly should not attempt to intimidate or misinform agencies that could otherwise get a better deal elsewhere."
The backdrop to the issue is that American notified Orbitz that it would remove its flights from the online travel agency Dec. 1 because Orbitz refuses to tie into American's new direct-connect.
Travelport, which controls Orbitz Worldwide and gets about 14% of its total flight segments from Orbitz.com, alleges that an American pullout from Orbitz would violate Travelport's full content agreement with the airline.
During the conference call, Clarke launched into a heart-felt defense of the efficiency of the airline-GDS-travel agency business model, calling it a two-sided network and likening it to models used by eBay, credit card companies and HMOs (Health Maintenance Organizations), among others.
Arguing that GDSs prevent fragmentation and foster transparency for consumers, Clarke said: "I want to remind you that GDSs are not a unique animal."
He said GDSs drive value to both airlines and travel agents who, under American's idea of a new distribution system, would have to establish direct-connects with 500 or so airlines.
OK, a little hyperbole there.
Clarke said travel agents prefer one connection to a GDS instead of multiple connections to airlines, adding: "It just doesn't make sense."
Asked if Orbitz is being singled out by American, Clarke said, "I assume they [American] are in dialogue with many different OTAs and travel agents around the world."
Clarke added that the GDS model is a very efficient one "for perishable goods."
Americans and other airlines counter that the GDSs are inefficient and can't handle optional services currently readily available on airline websites.