I have been watching and biting my tongue all week at the somewhat personal vitriol coming from BTC. I feel qualified to speak since one of my posts was widely quoted in the formal letter from BTC to the AA and others.
Firstly let me set the record straight. I do not support BTC in this process. But I am not going to use this as a personal attack. I do hope that all the parties will refrain from further engaging in that type of behavior. I hope that the organizations involved show a little more professionalism in future.
Further to set a stance in my comments – one of our clients of T2Impact is LUTE Technologies which is a company focused – and created specifically for the purpose of addressing - the problem of fragmentation and quality of products and service.
At present I am acting as their CTO and happy to do so because if firmly believe that we need to move the whole world on and stop looking backwards.
I am going to try and take a non-partisan approach to this article and I ask you to read it with an open mind. I don’t have any interest to protect nor do I consider myself an airline apologist or spokesperson because I am clearly not. I hope therefore that this piece is seen as a common sense view of the situation and why I think that BTC has it wrong.
I would like to make sure that we don’t lose sight of the real issue which is that there is a need both commercially and technically for Direct Connect from both the user community and the supply side.
So let’s be sure we all understand what the issue is. Airlines, as everyone seems to agree, need ancillary revenues to shore up their business models. Not all airlines and not all markets - but broadly speaking we can accept that this is true.
We should also accept that if the current distribution systems had been more in tune with their customers (on both sides – airlines, agencies and let’s not forget the travellers) and had developed the correct products and services earlier, then this debate would not be out there now. That is history.
So far I don’t see many from the traditional camps leaping to the forefront stating, “here is an answer” and leading a charge for its resolution. Indeed, I think we should all applaud AA for actually taking a stand and doing something about it. As well as being upfront about it. Others such as ARC have taken a very proactive stance to the issue. Indeed none of this issue is new.
IATA created standards around ancillary revenues a long time ago and also promulgated standards for financial fulfillment which also have been around for a long time. Not as in ancient history but as in long enough for the various players to adopt the standards and work towards implementing them. Further I am glad to see that at least one GDS is actually stepping up to the challenge as well.
One characteristic of the internet has and always will be its ability to foster individualization. Airlines on the other hand could easily be considered a commodity product. In the telecoms industry, the battle for the internet was lost by the fixed line providers, but the mobile battle is now fully joined for retaining differentiation. And this provides a good analogy for the distribution of airline products. After all it is seat and it gets you from A to B.
Product Differentiation is a critical element for the airlines. We all know there is a tremendous focus to make the airline product as complicated in order to obfuscate the real price to the consumer. Every marketer worth his salt tries to do that. And this is part of the acceptable commercial relationship game.
For the longest time – agencies of all types were compensated exclusively by the airlines but did the bidding of their users. Today the agencies get benefits from all sides – the customers (particularly Corporations) pay for service.
The GDSs pay the agencies for using their system – and the airlines still compensate agencies in some shape or form for sales performance. We can debate the issue but this is the reality. We should also be clear that the real contract remains between the person paying for the ticket and the person supplying the service.
The people in the middle are all servants of these two entities. How well they/we (me included) do that will result in the customers staying with these providers – or moving to elsewhere for commercial, technical, convenience or even personal reasons.
While it would be nice if we lived in a fluffy world where limited competition exists and everything happened in a nice neat homogenized fashion, last time I checked there is no law that mandates that. Indeed I am almost certain it is against the basic rule of law as monopolies are usually illegal and against the public interest.
A closed shop environment creates monopolies and prevents freedom of choice. The failure of the totalitarian regimes that supported the one size for all model should be ample enough evidence. So let’s be clear that freedom of choice must exist on both sides of the supply chain. The chaps in the middle must never forget that.
So to bring this back to perspective. I firmly believe that the airlines should be able to offer the products their way. They have always done that and there is no reason not to expect them to carry on doing it.
I don’t think there needs to be standards in this instance other than those that can help deliver the service to the user community. Those standards are already in place but as yet not widely adopted.
The GDSs should not be instructing the airlines how their products are bought and sold. They must remember their role is to be a facilitator of the interaction. If they fail to do that and do not maintain an environment that allows for the free flow of products and services to the user community then more the fool them.
The need for AA to sell its products via Direct Connect is not a one off nor an example of the airline striking a blow at the heart of the distribution infrastructure for just the sake of it.
This is not about efficiencies or products. It is far more basic than that. It is about the right to offer your product your way. The great capitalist system that I hope we all subscribe to encourages this. The market will always decide.
Pressure groups who don’t like something can use public channels such as the media to make their points clearly. But let’s not confuse noise with fact. The current system of distribution has flaws but it works. Does it work well enough for all people all the time? A resounding NO is the answer.
Otherwise airlines like Ryanair and other LCCs would not exist. Yet these airlines have shown that splitting from the homogenous one size fits everything model can and is very profitable. Southwest’s extraordinary growth from nothing to one of the World’s largest airlines by passengers was not accomplished by conventional thinking of building their distribution strategy on the GDS.
No, rather GDS usage is a recent occurrence and while it has good yield it is not the prime distribution channel for them. It is interesting to note that Southwest has been quietly adding fees for services.
In conclusion I believe that BTC has picked the wrong battle at the wrong time. The customer has come to expect (in many cases not without a strong degree of dissatisfaction) to pay for differentiation. Bundling and unbundling – your product, your way – is a fundamental marketing strategy that any company, product or service, including airlines, can pursue.
If the traditional players don’t like it – there is more than enough other choices out there (still hopefully) that users can decide to utilize elsewhere. Can you have your cake and eat it too? Again we are not the deciders – the market will rule.
In researching this article I read a number of papers and pieces and focused on groups who protest about technology and decisions made by collections of entities who adopt technology.
In all of that surprisingly I found a simple piece on, what to me best describes, the arguments being made against American’s decision to offer Direct Connect. I quote from (of all sources) Wikipedia. In this instance I think the wording is succinct and spot on target.
Neo-Luddism is a personal philosophy against modern technology. Neo-luddism is based on the historical legacy of the British Luddites which were active between 1811 and 1816. Neo-luddism does not equate necessarily to outright technophobia and includes the critical examination of the effects technology has on individuals and communities.
So what are we? A little introspection is probably in order.
I have been watching and biting my tongue all week at the somewhat personal vitriol coming from
Business Travel Coalition.
I feel qualified to speak since one of my posts was widely quoted in the formal letter from the BTC to American Airlines and others.
Firstly let me set the record straight. I do not support BTC in this process. But I am not going to use this as a personal attack. I do hope that all the parties will refrain from further engaging in that type of behavior. I hope that the organizations involved show a little more professionalism in future.
Further to set a stance in my comments – one of our clients of T2Impact is LUTE Technologies which is a company focused – and created specifically for the purpose of addressing - the problem of fragmentation and quality of products and service.
At present I am acting as their CTO and happy to do so because if firmly believe that we need to move the whole world on and stop looking backwards.
I am going to try and take a non-partisan approach to this article and I ask you to read it with an open mind. I don’t have any interest to protect nor do I consider myself an airline apologist or spokesperson because I am clearly not. I hope therefore that this piece is seen as a common sense view of the situation and why I think that BTC has it wrong.
I would like to make sure that we don’t lose sight of the real issue which is that there is a need both commercially and technically for Direct Connect from both the user community and the supply side.
So let’s be sure we all understand what the issue is. Airlines, as everyone seems to agree, need ancillary revenues to shore up their business models. Not all airlines and not all markets - but broadly speaking we can accept that this is true.
We should also accept that if the current distribution systems had been more in tune with their customers (on both sides – airlines, agencies and let’s not forget the travellers) and had developed the correct products and services earlier, then this debate would not be out there now. That is history.
So far I don’t see many from the traditional camps leaping to the forefront stating, “here is an answer” and leading a charge for its resolution. Indeed, I think we should all applaud AA for actually taking a stand and doing something about it. As well as being upfront about it. Others such as ARC have taken a very proactive stance to the issue. Indeed none of this issue is new.
IATA created standards around ancillary revenues a long time ago and also promulgated standards for financial fulfillment which also have been around for a long time. Not as in ancient history but as in long enough for the various players to adopt the standards and work towards implementing them. Further I am glad to see that at least one GDS is actually stepping up to the challenge as well.
One characteristic of the internet has and always will be its ability to foster individualization. Airlines on the other hand could easily be considered a commodity product. In the telecoms industry, the battle for the internet was lost by the fixed line providers, but the mobile battle is now fully joined for retaining differentiation. And this provides a good analogy for the distribution of airline products. After all it is seat and it gets you from A to B.
Product Differentiation is a critical element for the airlines. We all know there is a tremendous focus to make the airline product as complicated in order to obfuscate the real price to the consumer. Every marketer worth his salt tries to do that. And this is part of the acceptable commercial relationship game.
For the longest time – agencies of all types were compensated exclusively by the airlines but did the bidding of their users. Today the agencies get benefits from all sides – the customers (particularly Corporations) pay for service.
The GDSs pay the agencies for using their system – and the airlines still compensate agencies in some shape or form for sales performance. We can debate the issue but this is the reality. We should also be clear that the real contract remains between the person paying for the ticket and the person supplying the service.
The people in the middle are all servants of these two entities. How well they/we (me included) do that will result in the customers staying with these providers – or moving to elsewhere for commercial, technical, convenience or even personal reasons.
While it would be nice if we lived in a fluffy world where limited competition exists and everything happened in a nice neat homogenized fashion, last time I checked there is no law that mandates that. Indeed I am almost certain it is against the basic rule of law as monopolies are usually illegal and against the public interest.
A closed shop environment creates monopolies and prevents freedom of choice. The failure of the totalitarian regimes that supported the one size for all model should be ample enough evidence. So let’s be clear that freedom of choice must exist on both sides of the supply chain. The chaps in the middle must never forget that.
So to bring this back to perspective. I firmly believe that the airlines should be able to offer the products their way. They have always done that and there is no reason not to expect them to carry on doing it.
I don’t think there needs to be standards in this instance other than those that can help deliver the service to the user community. Those standards are already in place but as yet not widely adopted.
The GDSs should not be instructing the airlines how their products are bought and sold. They must remember their role is to be a facilitator of the interaction. If they fail to do that and do not maintain an environment that allows for the free flow of products and services to the user community then more the fool them.
The need for AA to sell its products via Direct Connect is not a one off nor an example of the airline striking a blow at the heart of the distribution infrastructure for just the sake of it.
This is not about efficiencies or products. It is far more basic than that. It is about the right to offer your product your way. The great capitalist system that I hope we all subscribe to encourages this. The market will always decide.
Pressure groups who don’t like something can use public channels such as the media to make their points clearly. But let’s not confuse noise with fact. The current system of distribution has flaws but it works. Does it work well enough for all people all the time? A resounding NO is the answer.
Otherwise airlines like Ryanair and other LCCs would not exist. Yet these airlines have shown that splitting from the homogenous one size fits everything model can and is very profitable. Southwest’s extraordinary growth from nothing to one of the World’s largest airlines by passengers was not accomplished by conventional thinking of building their distribution strategy on the GDS.
No, rather GDS usage is a recent occurrence and while it has good yield it is not the prime distribution channel for them. It is interesting to note that Southwest has been quietly adding fees for services.
In conclusion I believe that BTC has picked the wrong battle at the wrong time. The customer has come to expect (in many cases not without a strong degree of dissatisfaction) to pay for differentiation. Bundling and unbundling – your product, your way – is a fundamental marketing strategy that any company, product or service, including airlines, can pursue.
If the traditional players don’t like it – there is more than enough other choices out there (still hopefully) that users can decide to utilize elsewhere. Can you have your cake and eat it too? Again we are not the deciders – the market will rule.
In researching this article I read a number of papers and pieces and focused on groups who protest about technology and decisions made by collections of entities who adopt technology.
In all of that surprisingly I found a simple piece on, what to me best describes, the arguments being made against American’s decision to offer Direct Connect. I quote from (of all sources) Wikipedia. In this instance I think the wording is succinct and spot on target.
Neo-Luddism is a personal philosophy against modern technology. Neo-luddism is based on the historical legacy of the British Luddites which were active between 1811 and 1816. Neo-luddism does not equate necessarily to outright technophobia and includes the critical examination of the effects technology has on individuals and communities.
So what are we? A little introspection is probably in order.