Sabre has notified American Airlines that it intends to terminate their contract a month early, in August, and immediately began biasing the airline’s flights in availability and shopping displays.
The actions impact points of sale globally, with the exceptions of the European Union and Canada because of regulations in those markets which bar such an action, Sabre says.
The Sabre-American contract was to expire in September and would terminate instead in early August 2011.
Essentially because of Sabre's actions today and Travelport's initiatives Dec. 20, American Airlines finds its flights virtually out -- or biased down into the netherworld of availability and shopping displays -- of a good chunk of the global GDS market.
Sabre has de-preferenced American flights globally except for Canada and Europe, and Travelport took a similar action globally, with the exception of the U.S.
Amadeus, which operates a major global GDS, has yet to take such actions.
In an email from Sabre Travel Network to its customers, Sabre also indicated that it increased the booking fees it charges American Airlines as part of their full-content agreement.
“Based on AA’s actions … “we have also given notice that we are eliminating the substantial price discounts AA has enjoyed consistent with its prior long-term commitments to provide full content and support efficient comparison shopping for our agency and corporate customers," stated the email, from Chris Kroeger, Sabre Travel Network's, vice president, marketing.
Kroeger wrote that Sabre took the various actions in a bid to reach a new agreement with American Airlines "that provides our customers long-term assurances of efficient comparison shopping."
The GDS provider and the airline which created it were to negotiate a new agreement which expires later in 2011.
Sabre's actions penalize American Airlines in two ways: The airline's inventory will appear lower in availability and shopping displays, meaning flights can be booked, but with difficulty. In addition, Sabre has jacked up the GDS booking fees that American pays to Sabre.
It is very likely that American will begin charging agents a surcharge for bookings made in the Sabre GDS, which is what the airline is doing in the wake of Travelport GDS hiking American's fees because of the airline's direct-connect strategy and dispute with Orbitz.
"AA's stated plans regarding its 'Direct Connect strategy,' backed up by its recent actions, are an attempt to impose a costly, unproven and unnecessary system that would make it harder and more costly for you to operate your business and for your customers to comparison shop based on full and transparent fare information," Kroeger wrote.
Kroeger urged travel agent and corporate customers of the Sabre GDS to "continue making your voice heard directly and through the industry groups you support."
If 2011 was shaping up to be a bellweather year for travel distribution, as American faces contract negotiations with all three major GDSs, it certainly got off to a wild start -- with the fireworks being ignited much sooner than many observers anticipated.
American removed its flights from Orbitz Dec. 20 and Expedia erased the airline's flights Jan. 1, 2011, in a dispute over distribution costs, merchandising and American's push for AA Direct Connect. The American-Expedia contract expired Dec. 31, 2010.
Within less than an hour of Sabre's email to travel agents, the Business Travel Coalition and the American Society of Travel Agents issued statements Wednesday morning backing Sabre's actions.
ASTA stated, in part:
The underlying concerns that have led to the open conflict between American and the online agencies thus appear to be valid and very serious. It was probably inevitable that the next logical step would be the extension of the conflict to regular travel agents. Travel distribution is not a spectator sport, and no one will be spared if an appropriate resolution is not reached that recognizes the burden that this so-called innovation in distribution will produce.
Travel agents generally have benefited from technological innovation over the years, and ASTA squarely supports innovation that produces true efficiencies. But technological change that simply moves costs from one party to another is just a solution looking for a problem to solve. Any firm that would reverse the beneficial process of information integration and comparative pricing for consumers has a huge burden of persuasion. While much rhetoric has been expended in promoting Direct Connect in the media, ASTA has seen no convincing evidence that it will contribute to more optimal buying by consumers. We hope that other airlines will think very carefully before going down a similar path.
And, Business Travel Coalition chairman Kevin Mitchell stated:
The stakes in this conflict are clear: either an improved airline industry and distribution marketplace centered around the consumer, or one that subordinates consumer interests to the self-serving motivations of individual airlines endeavoring to shift costs and impose their wills on consumers and the other participants in the travel industry. Single-supplier direct connect proposals, like the one advanced by American Airlines, can significantly increase costs for all distribution participants and cause massive fragmentation of airfares and ancillary fees depriving consumers of the ability to compare the total cost of air travel options across all airlines.
These developments took place one day after the airline XML standards body, the Open AXIS Group, called for industry dialogue on the distribution issue instead of a winner-take-all strategy.
Jim Young, the Open AXIS Group executive director, stated:
We need immediate action on this issue and I call upon the industry to resume a reasonable discourse on a matter as important as this one. We have reduced ourselves to nasty sound bites in the media and ugly disputes in the courts. It is time for everyone to get back in a room and honestly debate the topic in order to reach a resonable conclusion that benefits all parties concerned in the best interests of our customers. Open AXIS Group remains committed and willing to work with the entire industry in this area.
Young, speaking for the group's allied and airline members -- including American Airlines, Delta Air Lines, United Airlines, Continental Airlines, Air Canada Frontier and US Airways -- sought to separate myth from fact about the current conflict.
Among, the "facts" cited, the group argues that direct connect does not necessarily mean GDS bypass.
Open AXIS Group stated:
All member airlines have communicated to the GDS providers that they would consider selling optional products and services through indirect distribution channels under the right commercial terms. This includes the ability to differentiate their products and services in a way appropriate for each individual carrier. This gives the airlines access to customers who choose to purchase air travel from accredited third party travel agencies who represent a large incremental revenue opportunity to the airlines. What needs to change is the distribution method, which requires a technology and commercial capability that the GDS have been unwilling to provide as it also creates a system that allows an airline to differentiate not only what is sold, but how it is displayed and sold. The Open AXIS Group distribution standard is inclusive to all distribution channels, either direct to an agency or via the GDS network.
In an interview this morning, before Sabre's actions became public, Young indicated that although American has been the most vocal and public airline about its merchandising and direct-connect strategy, "every airline has a merchandising strategy."
"I'm sure other carriers are looking at that [American Airlines Direct Connect] and other options moving forward," Young said.
Many of these airlines will use technology partners, ranging from Farelogix to HP and Datalex, to help facilitate their merchandising strategies, Young noted.
"A lot of airlines are working on their strategies and will make it public when they are ready," Young said, adding that it "makes no sense" for airlines to keep their merchandising strategies secret forever.
It doesn't look like the supply chain will heed Young's call for dialogue any time soon -- given the events of the past few weeks.
The major reason is economics.
Douglas Quinby, PhoCusWright's senior director of research, notes that American Airlines Direct Connect challenges the very notion of a GDS as a shopping vehicle for intermediaries.
In an article about the distribution spat, Quinby writes:
What does American's Direct Connect platform have to do with this? Today, when a consumer shops for airfares via a travel agency (online or off), the 'shopping and faring' is handled by the intermediaries (the agency or the GDS). In other words, it is the software of the agencies and the GDSs that decide which flights and fares are displayed for a given search request. Airlines file their schedules and fares with ATPCO, and the agencies and GDSs search against those fares. Airlines have little say in what gets displayed to travelers.
American wants to change this. In its model, the search query would be passed from the agency to its Direct Connect, and they would determine what flights and fares to display. And American wants all intermediaries – whether an agency or a GDS – to access its content through its Direct Connect. The significance of this cannot be understated. This is nothing less than a battle for control of airfare search results.
The National Business Travel Association also chimed in about the dispute, saying: "Business travel buyers will ultimately foot the bill for marketplace fragmentation caused by airline initiatives that push the travel distribution marketplace in the wrong direction – away from transparency and competitiveness and toward confusion and higher costs.”
Corporations would have to foot the bill if travel management companies are required to increase capital expenditures "to capture these direct-connect fares ... ," the NBTA argues.
The NBTA added:
Businesses that rely on clear and transparent fare information to negotiate for and maintain airline discount programs will find it far more difficult to track volume and enforce travel policies in a fragmented market. This will ultimately result in higher costs for business travel buyers.