Reality of Unbundled Faring's Challenges Taking Hold

The Beat ~ a travel business newsletter
New York City
April 17, 2008

New initiatives by travel distribution companies including Amadeus, Farelogix and others notwithstanding, technology providers and airlines do not yet see eye-to-eye on how to handle rapidly changing airfare practices. As airlines increasingly look to charge fees specifically for baggage, food, preferred seating and other "features" or "attributes," tech providers are challenged to keep up while also making the case that the hard work is not solely confined to their pieces of the puzzle.

The airline experience runs the gamut from pioneers accusing tech firms of not keeping up, to laggards looking to ready themselves along with the tech companies, to other airlines seemingly caught in the middle. On one end, United Airlines managing director Shama Patel recently said, "It's tremendous to hear about airlines that are far ahead of us in that journey. You'll see a lot of things coming out [from United] in 2008 and 2009." United is working with Amadeus on its merchandizing platform as the airline migrates to the Amadeus Altea res system.

On the other hand, carriers like Air Canada are offering fare features and attributes on their Web sites, regardless of what global distribution system firms or others can provide to the travel industry. Speaking in Chicago last week at the Travel Industry Association's TravelCom08 conference, Air Canada vice president of sales and product distribution Marc Rosenberg said, "Unfortunately the GDS technology is not capable of managing or handling all this unbundling and that is part of the continuing rift between us as carriers, and our needs in raising additional revenues, and satisfying the needs of the marketplace, versus a technology model which simply can't cope."

Rosenberg said he knows that travel management companies, for whom the GDS remains the main channel for fares and inventory, "don't like what we've been doing. I know we've dragged some of you through a lot of mud. But our key corporate accounts are saying to us, 'As much as I don't like it, I want your value proposition and I'm going to do what it takes to get it because that's my responsibility to my company.' The marketplace is willing to move, and if you don't move with them, they're going to move away from you."

JetBlue Airways vice president of sales Noreen Courtney-Wilds offered similar thoughts at TravelCom, noting that competitors' decisions to charge customers $25 for a second checked bag--led by United Airlines and followed by many others--has become a "huge topic at JetBlue," which has not matched the fee.

"In most of the third-party distribution channels, the decision-making is comparing based on fare," said Courtney-Wilds. "If you're someone traveling with two bags, there is now a difference in what you'll pay and that doesn't reflect in the fare. We know that if we don't match fares, we'll see bookings decline. That's really troublesome for us."

Asked if this variance would prompt JetBlue to also charge for a second bag, Courtney-Wilds joked that "if you ask our revenue management guys, you'll get a different answer than you'll get from me. We don't want to go there, but we're concerned that we lose sales in these third-party channels because people may not be aware. Being able to differentiate in the distribution channels we play in is important."

GDS Firms Respond

At Travelport GDS, "We've actually been out talking to our customers--both our online travel agency and traditional travel management customers--about the whole concept of merchandizing, upselling, and so forth," said senior vice president Flo Lugli. "I don't think they're against it, quite frankly. I think their concern is they need to make sure it's not overly complex and there's a way for the value proposition to be delivered on.

"As a frequent flyer, I would pay extra to ensure that the overhead space above my seat was mine," Lugli said. "But as an airline, how do you make sure that's delivered on at the other end? Quite frankly, the res component of that is the simple piece of that."

Sabre Travel Network last summer announced a merchandizing solution offering such features as premium coach seating and branded fares with the likes of Midwest Airlines and Qantas. Sabre's GetThere booking tool will soon support a sixth airline's fare families. Information is delivered via both the GDS and directly by carriers, but it hasn't been easy. "Assuming the content is readily available to grab, each airline has a different approach," said GetThere vice president of product marketing and user experience Suzanne Neufang. "One will bundle it together into a branded fare. Another wants to unbundle the whole thing and upsell at various places along the way in the shopping process. That's the well-known Air Canada process, and some of the low-cost carriers do it, as well. When an airline does this for its own airline.com site, it's a more concise project because it's one shopping experience, and they are one airline with one set of content. In a distribution orientation with an agent desktop or an online booking tool, if every airline is doing it slightly differently, our user interface has to keep up and it's not just the first-time creation--it's also the maintenance. Managing that complexity is a full-time job."

The latest initiative along these lines was announced earlier this month by Amadeus. The firm said its retailing and merchandizing platform starting next month would allow airlines to load various product characteristics, unbundled pricing and upsell opportunities.

"Today and in the past, when any airline has had to deal with a GDS, essentially there is a whole lot of loading requirements, table maintenance and parameter setting that is being done in the old cryptic," said Amadeus director of airline distribution and low cost carriers David Doctor. "No work has been done up to now to improve that."

Moving forward, airlines would interact with Amadeus through a new "point-and-click" graphical user interface that is expected to "reduce the time distribution managers spend on administrative tasks," Doctor said. "We unified the way to interface from a source code level and then we put a GUI on top of that. The GUI has functionality to allow airlines to group points of sale, group flight ranges, etc. You can set those groupings up in tables to distribute certain attributes to different points of sale or different parts of your network."

Once loaded by airlines, those attributes and other price and product specifics would be viewable and bookable at all Amadeus points of sale, including "a single, integrated display" for travel agents using the Amadeus Selling Platform.

Amadeus has rewritten code "in the core itself," Doctor explained, facilitated by the transition--now 80 percent complete, he said--to open systems technology from the Transaction Processing Facility environment. "We're doing this in the core so it is available to all Amadeus subscribers in all ways of accessing Amadeus. If you come through [our] corporate [self-booking] tool, you can access it. If you are coding through another corporate management tool via the Amadeus API, you can access it."

Amadeus cited the help of such "pilot customers" as British Airways, Iberia, Qantas, Air France. Finnair, Lan and United served as "validators," Doctor added. "Once available to a pilot customer, it will be available for all of them. It won't just be available to one airline in one market because we did a front office integration."

The first new release, to be made available next month, will include the airline GUI, flight feature displays (showing such items as flat beds in business class), banner advertisements (through which airlines can "communicate" to travel agents) and other functions.

The next release, slated for early 2009, would include various upsell features, fare families (like branded airline price points) and such other unbundled services as airline lounge access and priority boarding.

As for pricing, Doctor said use of the airline GUI--which will be optional--would become "the standard way of inter-relating with Amadeus", and part of participating carrier agreements at no extra charge. Certain benefits of the retail platform also would not incur an additional charge, though others--like upsell features--"will have an additional charge, subject to the value created." For those aspects, Amadeus will establish "a pay-for-use" model," Doctor explained.

Non-GDS Channels

At TravelCom, both Amadeus North America vice president of strategic business development Stewart Alvarez and Travelport's Lugli acknowledged that some airlines may go to other third parties to complement the technology that they're getting from GDS companies, even as GDSs develop new capabilities.

"As a GDS channel, we've never served 100 percent of the transaction," Alvarez said. "Today is no different. Multiple channels exist. We will service those where we can add value and the others will be serviced in other channels."

Rosenberg acknowledged that GDS firms have made progress over the past four years, but suggested the "lead role that the GDS have taken is being diminished every day by the fact that there are third-party vendors who can not only get the richness of the GDS content, but complement it with whatever in a non-GDS environment, which if you watch airlines, is becoming a growing part of the revenue base."

These include both new third-party distributors and the airlines' own Web sites.

JetBlue decided to make $10 fee for extra legroom available only on its Web site because its current reservation provider doesn't support the interactive seat maps necessary to offer it in GDSs, said Courtney-Wilds. It "wasn't a play to get more consumers direct," she said, but added that every airline wants to bring customers to its site because "you can follow what they do, you can track that behavior and figure out how to be smarter on offering the right thing. On third parties, you can't do that. That whole customer-centric approach that we're going for is more of a challenge with third-party distribution than costs."

At Farelogix, the second-generation of its Fare Management System allows airlines taking bookings through non-GDS channels to load various product attributes, unbundled pricing options and upsell opportunities through a graphical user interface.

FMS2 would receive published fare feeds from GDSs, airline res systems "or wherever the airline files it base fares," explained Farelogix CEO Jim Davidson, and use "an intelligent rules engine to identify and add value around attributes." Airlines using the GUI can assign attributes--and the discounts or price premiums they carry--to flight numbers, citypairs, aircraft types, sections of their networks and frequent flyer levels. By using spreadsheets and pre-determined geographic zones, airlines could quickly establish such attribute selling, he said.

Davidson suggested airlines would start with five or six attributes--including seat selection, baggage and inflight meals--but added that, "the system is designed to get down to" prices for individual travelers. "That is ultimately where these guys want to get to. We're not going to get there on day one."

FMS2 would send XML files either airline or agency users, either of which would need "to build out attribute selling screens," Davidson said. "They have to create the ability to accept the XML and have to create the ability to present that." With Pass Consulting, Farelogix built an agency tool to present Air Canada's menu pricing, Davidson added.

Davidson said he expects "two or three airlines" by the end of the year to use FMS2, as well as certain TMC customers selling "private fares." A spokesperson for BCD Travel said the company "does intend to use the FMS2 from Farelogix in our Source Platform."

~ David Jonas and Mary Ann McNulty

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