Travelport is poised to begin biasing certain American Airlines' flights by including an airline surcharge to travel agencies in fare displays, fare quotes and shopping displays beginning Dec. 20.
This means that some American Airlines fare displays in Travelport's Galileo, Worldspan and Apollo GDSs would appear more expensive than some competitors' fares, and travel agents using the GDSs and consumers shopping on online travel agency websites outside the U.S. likely would look beyond American Airlines for flights.
For example, a Galileo GDS fare display in Germany for an American Airlines flight would include an extra $23.75 in the fare for a 2.5-leg flight.
These developments take American Airlines' conflict with Travelport to a new level.
The controversy is taking place on several fronts.
American Airlines is pushing a direct-connect strategy for travel agencies and GDSs, and is locked in court battles with Travelport over American's desire to remove its inventory from Travelport-controlled Orbitz.
Hearings involving Travelport and American Airlines over the Orbitz issue, with Travelport arguing that an American pullout from Orbitz would violate the American-Travelport GDS full-content agreement, are continuing in Chicago Dec. 17.
In a statement, American Airlines blasted Travelport's pending move as "egregious," and added:
Travelport is deliberately misleading agents and customers by hiding booking surcharge fees within base fares for American Airlines flights that it distributes to travel agencies, including online travel agencies. This deceptive practice falsely inflates the base fares for American Airlines flights, discriminating against American Airlines fares and deliberately misleading agents and consumers into believing that there are fewer choices available for low-cost flights. At the same time, Travelport is pocketing the increased booking fee.
The backdrop to the controversy is that several weeks ago Travelport apparently increased the booking fees it charges American after the airline revealed its intent to remove its inventory from Orbitz over distribution costs and the direct-connect issue.
American then revealed it would begin charging travel agents outside the U.S. a Booking Source Premium -- or surcharge -- for American bookings to recoup Travelport's higher GDS fees.
American is slated to begin leveling the surcharges Dec. 20 and would collect them from travel agents beginning in February through debit memos.
And, Travelport would begin including those surcharges in fare displays beginning Dec. 20, as well.
In a statement, Travelport labeled American's Booking Source Premium "wholly arbitrary." Travelport says:
AA has announced a plan to impose a surcharge on bookings made by agencies that use Travelport in certain markets outside the USA and Caribbean from 20thDecember 2010. Called a “Booking Source Premium” these charges are wholly arbitrary with extremes of variability by country that do not bear any discernible relation to what Travelport charges AA which only varies on a regional basis. Through this action, the very travel agents who deliver valuable revenue to AA in these international markets are being penalised.
In addition, Travelport states that American's surcharge to travel agents will effectively be passed along to consumers. Travelport states:
As these additional charges by AA will effectively be borne by consumers, Travelport believes that the true cost of booking an AA ticket will need to be shown to consumers at the point where a buying decision is made so that consumers can make an informed choice about which carrier to fly.
Travelport notified agents of its enhancement, entitled "Booking Source Premium Fee for American Airlines (AA). Here's the notification, obtained by Tnooz:
American criticized what it considers Travelport's attempt to portray the airline's surcharge to travel agents as a passenger fee. American stated:
The Booking Source Premium is not any kind of passenger fee and should not be portrayed as such. It is categorically not part of the fare for air transportation, nor is it related to any other kind of service rendered to the passenger by American or any other charge from American that in any way a passenger can be required to pay in the name of American. To suggest otherwise would be, in our view, an unacceptable deception on consumers for any sales intermediary to engage in this deceptive behaviour while processing tickets for American, without prejudice to the intermediary’s possibility in its own name to ask its customers to bear some portion or all of the intermediary’s own costs separate from the air fare.
The airline further argues that Travelport "strikes a blow against transparency for air travel" and that "Travelport is using its subscribing agents worldwide as vehicles for retaliation against an airline that is looking for better ways of interacting with the agency community."
Travelport rejects the notion that its enhancement amounts to display bias or discrimination but considers the move a way to provide more transparency to agents about the American Airlines Booking Source Premium that they will incur beginning Dec. 20.
"Travelport is showing our travel agencies the full price, including AA’s surcharges, so that they can inform their customers the true cost of an AA flight," Travelport states.
The controversy is not just about American Airlines, Orbitz and Travelport, but might be considered part of a broader airline-GDS power struggle over the future of airline distribution.
The following is Travelport's full statement about American's Booking Source Premium and Travelport's GDS display changes:
AA has announced a plan to impose a surcharge on bookings made by agencies that use Travelport in certain markets outside the USA and Caribbean from 20thDecember 2010. Called a “Booking Source Premium” these charges are wholly arbitrary with extremes of variability by country that do not bear any discernible relation to what Travelport charges AA which only varies on a regional basis. Through this action, the very travel agents who deliver valuable revenue to AA in these international markets are being penalised.
As these additional charges by AA will effectively be borne by consumers, Travelport believes that the true cost of booking an AA ticket will need to be shown to consumers at the point where a buying decision is made so that consumers can make an informed choice about which carrier to fly.
Therefore, this AA surcharge will be shown in the Travelport GDSs from 20th December in fares displays and fares quotations so that travel agents have full transparency and can compare the ultimate price and consumers know what they have to pay. Furthermore, this means that where AA tickets are issued this Booking Source Premium will be collected along with the other fees and charges relating to AA plated tickets and remitted directly to AA, obviating the additional inconvenience and cost to the travel agencies of having to deal with ADMs issued by AA. The vast majority of agency associations around the world have told Travelport that the planned approach of AA to use ADMs for this purpose is not in keeping with the purpose of ADMs and that there has not been the requisite, or any, consultation between the parties.
It is important to understand that this issue and resulting actions have been precipitated in direct response to AA's actions to withdraw ticketing authority from Orbitz, a large customer of Travelport as a result of that customer's refusal to submit to AA’s heavy handed tactic to force Orbitz to use the AA direct connect. Further, based on AA’s public statements, this is clearly not an isolated incident concerning one U.S. based travel agency and AA, and neither is it anything to do with technology to enable the sale of airline optional services through the GDS. Rather it is an attempt by AA to fundamentally change an existing distribution model that works well for all constituents – airlines, travel agencies, and consumer travelers – and to do so by abandoning a pro-competitive and pro-consumer economic and technology framework. Travelport is taking a position to oppose such a move which has not been fully thought through and where there is imbalance between the supplier and intermediary sides of the distribution equation.
Insofar therefore as AA’s planned surcharge fee will inevitably cause some disruption despite the mitigations we have put in place as described above, we regret any inconvenience to our travel agency customers. However we do think that the travel agency community understands and supports the position that Travelport has in this wider matter and that it is fundamentally right to support the consumers’ right to have maximum transparency and the ability to shop, compare, and book travel services in whichever channel they chose to buy from.
The following is American's full statement about Travelport's actions:
Travelport is deliberately misleading agents and customers by hiding booking surcharge fees within base fares for American Airlines flights that it distributes to travel agencies, including online travel agencies. This deceptive practice falsely inflates the base fares for American Airlines flights, discriminating against American Airlines fares and deliberately misleading agents and consumers into believing that there are fewer choices available for low-cost flights. At the same time, Travelport is pocketing the increased booking fee.
The Booking Source Premium is not any kind of passenger fee and should not be portrayed as such. It is categorically not part of the fare for air transportation, nor is it related to any other kind of service rendered to the passenger by American or any other charge from American that in any way a passenger can be required to pay in the name of American. To suggest otherwise would be, in our view, an unacceptable deception on consumers for any sales intermediary to engage in this deceptive behaviour while processing tickets for American, without prejudice to the intermediary’s possibility in its own name to ask its customers to bear some portion or all of the intermediary’s own costs separate from the air fare.
By embedding the booking surcharge into the base fare, Travelport’s action is patently misleading and strikes a blow against transparency for air travel. This egregious action once again shows that Travelport is willing to stop at nothing to protect an outdated business model and platform for distribution of airline services from new technologies that are more robust, flexible, and cost effective. Travelport is using its subscribing agents worldwide as vehicles for retaliation against an airline that is looking for better ways of interacting with the agency community.
Travelport has inaccurately told agents on several occasions that American acted on its own in implementing the booking source premium. However, the fact remains that the booking surcharge for American flights was implemented only after Travelport arbitrarily increased booking fees for flights on American Airlines booked through Galileo and Worldspan, the GDSs owned and operated by Travelport.