The airlines and global distribution systems had better get together on ancillary fees soon – or risk getting clobbered by the federal government instead. As things stand now, travel buyers are already getting clobbered, as soaring ancillary costs go largely untracked.
That was the stark warning to airlines and global distribution systems during the Global Business Travel Association annual meeting in Boston earlier this week.
GBTA executive director Michael McCormick warned the two sides that if they didn’t settle their differences over ancillary fee transparency and actionability, the Department of Transportation would order them to do so.
“If the industry doesn’t fix the issue on its own, government will intervene and the unintended consequences will harm all of us,” McCormick said during Monday’s general session. “Airlines and GDSs, you must resolve your differences before the government steps in.”
Both sides in the dispute have valid concerns, McCormick suggested.
Airlines clearly need flexibility in product and flexibility in product distribution.
While GDSs and travel buyers need full transparency on ancillary fees and products so they can make apples-to-apples comparisons of service, price and value.
Customer control, revenue
“Ancillary fees are about two things – customer control and revenue – nothing more. Airlines should provide complete data on all services and all products in any channel in which they intend to sell,” McCormick said.
“GBTA fully supports the free-market right of businesses to create and follow their own chosen business models, including charging ancillary fees.
“But travel professionals must be presented with an accurate view of the full cost of products. To that end, it is imperative that there is full transparency to buyers on fares and fees. This also applies to booking, ticketing, billing and fulfilling those services.
“Without transparency, travel buyers are caught in the middle,” McCormick said.
Ancillary revenues soar
The middle is an expensive place to be.
Airline ancillary revenue has soared from about $9 billion in 2009 to more than $22 billion in 2011, according to a new report from Amadeus.
Yet only 21% of companies are able to track any appreciable portion of their airline ancillary fees, according to GBTA data. Among those who are able to track the expense, ancillaries add 8% to the base fares paid for corporate air travel.
For TMCs, a stark scenario
If the issues are not resolved, the consequences for corporate travel management companies would be severe, Lea Cahill, CTC, chief operating officer of Atlas Travel, told Travel Market Report.
The alternative to full transparency is a thicket of individual contracts with every vendor, said Cahill, whose firm is headquartered in Greater Boston.
A travel management company would need a contract with each carrier that guarantees full content and data, as well as a technology team to deal with data streams from each carrier and an integration team to normalize and integrate the data streams on a single system.
“It’s just not viable for us as a TMC,” she said.
“The data all need to be on the same system. The technology is there to integrate, but it would require us to customize for each vendor and each customer. There are costs involved that would have to be passed long.
“That could all be avoided if the airlines and GDSs fix their business models.”
It shouldn’t be all that difficult for the airlines and GDSs to work out the details of transparency and actionability.
“It’s just a matter of working out the business model, nothing more. The technology is there for both to work together,” said Cahill, who was Amadeus’ director of product management, definition and design before joining Atlas Travel earlier this year.
“On the scary side, travel buyers and travel managers aren’t even at the table. We’re a victim of the outcome. If they don’t clean up their game, the ability to put your best services in front of your client suffers. ”