The stakes for distribution agreements between airlines and their GDS partners have been shifting in recent years.
Sometimes parties fall out with content removed from the GDS only for negotiations to resume and an agreement to be reached at a later stage.
This was the case with Finnair, which signed a new distribution agreement with Sabre in June. The pair had gone their separate ways in late 2019; however, reached a new agreement in June this year that saw Finnair’s content back in Sabre.
Similar negotiations with Lufthansa Group are ongoing although the content remains in the system currently despite a previous announcement that they would be pulled after June 30.
In a Q&A, Wade Jones, executive vice president, chief product officer, travel solutions, Sabre, talks about balanced deals, the importance of an open marketplace and why it’s not longer just about money.
Airline content deals are increasingly becoming contentious, how does Sabre continue to ensure agency customers have access to the best content?
This is a highly complex topic, behind which sit many hours of intricate negotiations, the goal being to reach a fair, equitable deal that works for the whole travel ecosystem – airlines, their technology providers, agencies and the travellers we serve.
Why has it become such a challenge to reach an agreement with some airlines?
It’s clear that, while the definition of equitable remains the same, the terms that constitute it have changed drastically. All parties are keen to reach a deal with the best possible financial implications for them. But, in the complex world of travel, it’s become about much more than that – it’s about the technological evolution of our industry.
Behind every distribution negotiation lies a web of complexity.
First, let’s look at the challenges airlines face in today’s world. High operating costs, fluctuating fuel prices and a volatile environment impacted by factors outside their control can make profitability difficult to sustain.
Airlines are also constantly compared to other consumer industries, criticised for their inability to offer their customers the same personalised and seamless shopping experiences.
Factor in Covid-19 – and the near halt of global travel – and you can see how crucial it is for airlines to lower their costs, while pushing boundaries in how they market and sell their content.
In parallel, a rapidly-evolving and increasingly fragmented travel industry means that travelers are faced with billions of fare combinations per ticket searched, and a huge variety of sources through which to compare these countless options.
Travelers need a trusted agency capability to help them shop and compare deals from multiple sources of content, but they need a way to aggregate this content, as finding the right deal has become a time-consuming challenge.
And from the agency point of view…?
For agencies, the GDSs are the most cost-effective way to obtain the transparency and functionality they need to serve cost conscious travelers. Alternative distribution technologies often add significant new costs and disruptions to existing agency workflows and processes.
To find the best options for their travelers, agencies want access to and the most robust and comparable content possible, and to avoid the inefficiencies, delay, and higher costs that come with multiple systems.
Our objective is to create a platform at the centre of the business of travel with the best tools and services to facilitate retailing, distribution and fulfillment across the travel ecosystem; therefore, giving travellers fair and transparent access to all content and the most relevant, tailored travel options.
What constitutes a fair deal in Sabre’s view?
Because of the rapidly-changing nature of travel, Sabre is fully supportive of airlines’ evolving distribution strategies; new and creative approaches to distribution are the new normal. In every negotiation, we explore a variety of possible solutions to achieve a balanced, sustainable outcome for everyone.
For airlines, the terms of what constitutes an equitable deal can vary. I’ll give a couple of examples.
Singapore Airlines wanted a deal that provided travel agents with scalable, NDC-enabled offerings under its KrisConnect programme. It wanted to offer a broader array of its fares through Sabre, as well as enabling access to KrisConnect-exclusive ancillary bundles and third-party content – providing a more tailored shopping experience.
And Qantas wanted a technology partner to help deliver its Qantas Channel, its new pathway to creating more personalised and seamless experiences for customers via agent booking channels.
These deals are a relatively new breed; they’re highly complex and bespoke, and all are pivotal in the evolution of travel. But they’re not unusual anymore – these are two of a-hundred-plus tailored airline distribution agreements Sabre concludes each year.
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Enhancing the value of the new distribution approach is a priority in negotiations; the transformative technology Sabre is investing in is proof that we firmly support a better enablement of modern retail capabilities. Delivering NDC-enabled retailing, distribution and fulfillment solutions requires input and collaboration from all players.
What’s the latest on an agreement with Lufthansa?
Negotiations of this complexity can take months of work, numerous creative proposals from both sides and various trade-offs.
Sabre and the Lufthansa Group have been engaging in this process for several months, striving to achieve a mutually beneficial agreement that helps LHG to achieve its specific objectives.
Sabre has presented a variety of commercial models and received a good level of engagement with LHG throughout the re-negotiations.
Every day, I receive numerous questions about this, and whether I think there’s a risk we may not come to an agreement with the airline, and LHG’s content would therefore disappear from Sabre.
I remain confident we’ll reach an equitable deal. Both parties recognize that a balanced agreement cannot be hurried, and neither party wants access to Lufthansa’s content to be interrupted. Therefore, we have agreed with LHG that we will maintain access to Lufthansa Group content in the Sabre marketplace while we continue to work towards conclusion of the final agreement, beyond June 30th.
This is significant – it shows the commitment from both parties, and proves the importance to Sabre, Lufthansa and the wider industry that we reach a dynamic, equitable deal.
Given the pressures on airlines caused by the pandemic, why is pursuing a direct strategy, versus an open marketplace, not the best option for them?
Naturally, agencies are concerned about the increasing fragmentation of air content and its impact on their business. We are strong advocates of a fair and open marketplace for agencies and the travelers they serve; creating a new marketplace for personalised travel is our goal, and one of our main value propositions through negotiations.
The monetary value of the indirect channel remains clear. Sabre provides agencies with the ability to compare the ever-increasingly numerous and complex fares in sub-second speeds to find the most appropriate itinerary for their customers.
Further, it provides many other critical services necessary in today’s world, such as the duty of care. At the same time, Sabre enables airlines to have a far broader reach and to access higher value bookings than is typically available through an airline's direct channels alone.
Airlines benefit from the value that reach and breadth brings to them at a highly competitive price, in particular taking into account all the costs of direct sales, including new customer acquisition and servicing costs (see, for example, the Infrata study).
However, negotiations are now based on much more than this; as a technology company that powers the global travel industry, we can demonstrate a much more holistic and strategic value, and there’s no one-size-fits-all answer to what constitutes an equitable deal.
Airlines want to earn ancillary revenue beyond seats and bags, is this something the travel agency community can deliver?
I believe more content leads to more value generation through the indirect channel.
I’m also convinced that the true value of the indirect channel for airlines remains under-explored.
Given the opportunity and the right content, travel agencies can sell ever more complex fares and ancillaries to their customers.
Sabre is focused on enabling its agency customers to do exactly that; we’ve taken important steps with the introduction of Sabre Red 360, which we’re constantly evolving with more sophisticated ways for airlines to present their offers.
Currently, a big priority at Sabre is the new airline storefront that solves how to display diverse offers – branded fares, a la carte ancillaries, bundling, and NDC offers – in an easily comparable way.
Can the conversation move beyond the cost of distribution?
We are committed to helping airlines make their approach to both direct and indirect distribution more efficient and effective.
I would caution, however, against making cost the only consideration.
As our CEO Sean Menke often says, there’s a real opportunity to grow the pie by offering travellers more personalised, creative travel packages. I’m certain that unlocking the full power of indirect channels will have a larger positive impact on an airline’s bottom line than a rigid focus on simply reducing distribution fees.
What we do know is that we all must keep working to find solutions that balance airlines’ immediate financial gains with long-term, strategic decisions – and we must all work together to transform.