Selling Airline Ancillaries: What Happens Now?

ASTA’s Paul Ruden, senior vice president of government affairs, and Jim Davidson, CEO of Farelogix, have been on different sides of a number of distribution issues, but they agree on one thing: Airlines should enable the sale of their ancillary products and services through the GDSs.

Ruden believes the airlines should be required by the Transportation Department to sell the products through GDSs.

Ruden thinks one of the options in the DOT’s proposed rulemaking on “Transparency of Airline Ancillary Fees and Other Consumer Protection Issues” doesn’t go far enough because it only would require airlines to provide fee information to the GDSs. (Another proposal would exclude GDSs from the requirement altogether.)

Selling ancillaries in GDSs makes sense
Davidson doesn’t think the airlines should be forced to enable ancillary sales in GDSs – they should do it because it’s just nuts not to. “If I’m going to spend hundreds of millions on extra legroom, why would I make it unavailable to half my customers?” he said.

Ruden has said he believes airlines are holding back on enabling such sales to get better commercial terms with the GDSs.

But history shows that even after airlines and GDSs sign commercial agreements that include the sale of ancillary services, implementation is painfully slow and sometimes difficult. (See sidebar.)

Waiting for IATA’s Resolution 787
Davidson suggests another reason for the relatively slow development on this front: A lot of people have been waiting for the other distribution shoe to drop, and that shoe – the DOT’s approval of IATA’s Resolution 787 – dropped on the same day that the DOT issued its proposed rules on ancillary fees.

“People were just waiting for this thing to happen,” Davidson said. “Now we’re going to see some action.” (For GDS reaction, see related story.) .

DOT’s approval of IATA’s Resolution 787, which lays the foundation for its “New Distribution Capability,” is tentative. But final approval is almost assured, given that IATA has resolved its differences with most of the resolution’s original opponents.

But who will pay?
Resolution 787 provides the framework for a technical standard for XML connections that would enable airlines to more effectively and creatively merchandise their products through third parties.

One of the underlying issues of NDC has been the question of who will pay for it.

“It’s getting a little clearer now,” Davidson said. “Everybody’s going to have to step up to the plate.”

Airlines have to invest
Airlines who want to play in the NDC ballpark will have to make the major investment, he said. They will need to build application programming interfaces (APIs) to the NDC standard, “and APIs aren’t cheap,” Davidson said.

“If a GDS wants to support NDC, the main investment it will have to make is in the user interface,” he said.

Travel agencies may have to make some changes, but they will be hit the least, he said.

Current methods won’t scale properly, he said.

A lot of companies thought ancillaries could simply be filed through ATPCo, which collects and publishes airfares, and make their way to GDSs just as air fares do. “They thought it was just like a fare, but it’s not a fare,” Davidson said.

An API can get an airline’s merchandising efforts to market much more quickly, Davidson said, and provides “a lot more dynamic capabilities.”

Travelport’s experience
Gordon Wilson, chief executive officer of Travelport, concurs. He recently told Travel Market Report that if an airline has an API, it’s easier to integrate its ancillary products and other merchandising strategies into the Travelport Merchandising Platform, which made its debut in April 2013.

He noted that Ryanair’s implementation took a couple of weeks. “Luckily, it is hosted on Navitaire [the New Skies reservations system], which has an API,” he said.

“EasyJet took much longer. It built its own system.”

What’s next?
Davidson said he expects API builders “to come out of the woodwork” now that NDC has been given the go-ahead.

Those companies, most likely purveyors of passenger services systems along with other technology providers, will be competition for his company, which has built APIs for American, Air Canada, United, WestJet and other carriers.

Davidson is excited about what’s next for the industry. If all goes well, he expects a new wave of innovation.

“At the end of the day, I believe the GDSs will say, ‘I can do this for you the right way and make you a boatload of money,’” he said.

“There’s been so much ‘us and them’ in this industry. ‘Us and us’ could be a good thing.”