Agent Groups in Uproar Over IATA Distribution Plan

by Michèle McDonald
Agent Groups in Uproar Over IATA Distribution Plan

IATA approved a proposal for a new airline distribution capability that travel agents fear will upend the current distribution model and bring an end to price transparency.

And while IATA has repeatedly called its New Distribution Capability (NDC) project a collaborative effort among all stakeholders in the distribution chain, travel agency groups say they have been left out in the cold.

In a speech at IATA’s World Passenger Symposium in Abu Dhabi, chief executive Tony Tyler said the association is taking a “partnership approach” to the project. It was an assertion that ASTA found stunning. “Nothing could be further from the truth,” ASTA said.

Infuriated & frustrated
Nina Meyer, ASTA chief executive officer, said in a statement that “ASTA sees nothing in the IATA process to create NDC that resembles full and open transparent collaboration with the travel agency community.”

The Association of Canadian Travel Agencies (ACTA) declared itself “infuriated” and “frustrated” by IATA’s claim that its approach is collaborative.

“It has been ‘transparent’ to ACTA that Mr. Tyler and his team have not been forthcoming and have no intention to open up as it relates to the development of the New Distribution Capability,” ACTA president David McCaig said.

Global group upset too
Lars Thykier, chairman of the World Travel Agents Associations Alliance, said IATA had initiated no contact with the organization regarding the project. “If you want to work with us, it’s a strange way of going about it,” he told Travel Market Report.

At a meeting of an IATA-travel agency work group prior to the World Passenger Symposium, IATA representatives did not even bring up the topic, he said.

However, the WTAAA has managed to “push ourselves through some doors,” he said. The global group will have a representative at a meeting of the IATA Working Group on NDC in Montreal in late November.

ASTA blocked
ASTA was less welcome. Meyer said ASTA wanted to attend the meeting as an observer and “was told that neither it nor any other agency associations would have access to the development process for NDC.”

IATA said it was willing to meet separately with ASTA, “but that is far from the full collaboration and openness that IATA is trumpeting,” she said.

Thykier noted that IATA had asked for travel agency volunteers to pilot the new model in 2013 yet has provided little information to agencies about the project. “I don’t know how I could do that if I don’t know what you have in your secret works,” he said.

What it’s all about
While most of the wrangling over transparency has focused on ancillary fees, the New Distribution Capability (NDC) project envisions the dynamic calculation of the airfare itself.

The project would make it possible for airlines to create personalized airfare offers, along with ancillary variables, based on customer data.

The personalized fares would not be filed with ATPCo or the GDSs. Rather, the GDS would provide the airline with the customer’s identity, and the airline would assemble the offer.

Airlines already do that on their websites, Tyler said in his speech. “They can recognize return visitors and make offers based on travel history, loyalty status, credit card brand or other parameter. And customers have complete visibility of additional products and services on offer.

“But for the 60% of air travel that is sold indirectly via travel agents using GDSs, the model is different,” he said.

The problem with GDSs
“The travel offer is put together outside the airline by third parties. The customer is anonymous to the carrier until the transaction occurs. Thus it is impossible for the airline to tailor its offer to the customer via the indirect channel.”

The GDSs also have commoditized the airline product, he said. “Airlines are trying to escape the commoditization trap through differentiation, and merchandizing, such as offering a low, mid and high price point for every offer.

“They are developing products and services, such as special meals, expedited boarding, roomier seats and access to airport lounges,” Tyler said.

“But at the end of the day, the travel agent sees only codes — F, J, Y and their various derivatives. There is no way to tell if your ‘J’ product is a flat bed or an economy class seat with an empty seat beside it.”

An insult to agents
ACTA’s McCaig was particularly incensed by those statements, calling them “insulting”

“Agents sell what is available to them and understand exactly the products in which they are booking their clients, all within an environment that lacks the transparency it deserves,” he said.

And he challenged IATA’s stated goals for the project. “We have no doubt that the long-term intent of the NDC is to reduce or eliminate GDS fees charged to the airlines, which affects the bottom line for the booking agent,” McCaig said.

Speaking at a luncheon of Ensemble’s Canadian members in Las Vegas last week, McCaig went further, saying to agents, “You can kiss your GDS booking incentives goodbye. This will mean millions of dollars of revenue will be lost.

“It’s the most significant threat to your income since the airline commission cuts,” McCaig said.

NDC ‘reverses the model’

Cyril Tetaz, head of marketing, airline distribution, at Amadeus, said that if it is widely adopted, the NDC would make comparison shopping, one of the principal advantages of using a GDS, impossible. “It would completely reverse the model,” he said.

Tetaz questioned how such a system would deal with interlining among airlines.

He also noted that GDSs cache air fares, in effect providing a buffer that protects airline systems from an overwhelming number of hits that could bring them down.

Key players not included
Svend Leirvaag, vice president of industry affairs at Amadeus, noted that IATA’s “so-called collaborative effort” was missing key players – such as the people who actually sell the majority of airline tickets in the world.

“For some reason, IATA is speed-managing this process, and for whatever reason, it felt that it absolutely had to put a resolution to vote at the World Passenger Symposium 2012,” he said. “We thought it would be good to have some other trade representatives.”   

Airlines left out too
Agents are not alone in feeling left out. The NDC proposal apparently was pushed through by about 10 large airlines, and some carriers are confused about what the NDC entails for them.

Tetaz said that in one session of the Abu Dhabi conference, airline attendees were asked if they understood that the NDC was not about GDS bypass. “About 40% said it was not clear to them,” he said.

Maria Lenhart contributed to this report.

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