Domestic US airfares for the February 2011 were at their highest for five years - meaning the amount of sales have climbed again.
Everyone should be happy, right?
Wait. Let's dig into the numbers a little. In analyzing the US travel agency numbers, courtesy of ARC, and also looking at the Hitwise statistics for the month of February, there is a dark side that might have some stock holders reaching for their broker's phone number.
The total number of transactions processed via the travel agency channel, as tracked by ARCCorp, actually fell for the second month in a row.
So, while those numbers look very nice in terms of yield and profit for the airlines, online agencies are probably not going to like what I am seeing.
The telling line is the green one in this chart from ARC.
In this chart the share of the respective channels shows that since October 2010, the rot set in and transactions in terms of comparative share have fallen for OTAs.
There is probably further bad news.
We are finally starting to see several elements emerging that shows that the famous full content agreements are now under pressure.
The GDSs have forced the airlines to sign full content contracts, but that doesn’t mean that the agencies are allowed to sell all the airline's products.
Furthermore, we are seeing a change that airlines are working with metasearch companies to ensure that searches for the lowest fares do not go to the OTAs, but to the airline directly.
And you can see it clearly.
Frequently, some airlines, such as American Airlines, have prices in the OTAs that are not the cheapest or matching the cheapest in the overall market (we all know that the battle between AA and Orbitz has resulted in OWW not showing any AA results on its site).
However, AA does still appear on the other US-based OWW site, Cheaptickets.
We also know that Delta has also been pulling some of its products from certain sites. Now we have the proof that the results are seeming to pay off. Traffic to Expedia is down. Traffic to Airline.coms and other sites like Priceline.com are up.
The loss of US travel agency transactions share is now entirely to be laid at the door of the declining market for OTA sourced transactions.
In February, we saw an absolute decline in the number of travel agency transactions. The surge in mega agency (Amex, Carlson, BCD, HRG et al) transactions in January y/y was not enough to counter act the overall decline in transactions in January, and now February.
Are we starting to see a fundamental shift in airline ticket distribution in the USA? I think there is a good chance we are.
We now have four months of behavior behind us since the big dust-up between AA and Orbitz and Expedia. The ARC numbers show that the share of the OTAs is declining relative to the other channels.
Anyway, it seems like one of Alex Bainbridge's predictionsfor 2011 is coming true. https://www.tnooz.com/2010/12/21/news/tnooz-predictions-2011-the-biggest-and-best-list-in-travel-tech/