The Distribution War Goes Global – to Kazakhstan

After skirmishes in Europe a couple of years ago – Lufthansa vs. Amadeus, Air France/KLM vs. Travelport – there is a new battle shaping up in the central Asian country of Kazakhstan. It has a familiar ring to it for those who have followed similar sagas in the U.S.

Amadeus canceled Air Astana’s agreement on Jan. 21, after 15 days’ notice, alleging a breach of the terms of their agreement. But it was obliged to restore distribution services to Kazakhstan’s Air Astana after a court in Amadeus’ home town of Madrid granted the Kazakh carrier injunctive relief on Feb. 3.

Air Astana unveiled a “Competitive Booking Source Program” in July, slated for implementation on Jan. 1, and began renegotiating its GDS contracts with Abacus, Travelport, Sirena and Amadeus.

The carrier adopted a tactic used by U.S. airlines in the 2006 round of GDS negotiations: designate certain distribution channels as preferred and penalize users of non-preferred channels.

Air Astana said GDSs that offer “a good product, fair contractual terms and competitive prices” would be designated Competitive Booking Sources and their subscribers would receive full commissions for the sale of Air Astana’s domestic fares.

Preference or discrimination?
Amadeus said it believes the program “discriminates against Amadeus subscribers and hence constitutes an illicit action, expressly prohibited in the distribution contract between Amadeus and Air Astana, as Amadeus has made clear since July 2010.”

“Air Astana has ignored repeated warnings from Amadeus that it would not tolerate this contractual infringement,” Amadeus said in a statement.

When the program went into effect, “Amadeus invited Air Astana to correct in 15 days. Air Astana chose to maintain the CBSP (Competitive Booking Source Program) in operation and hence to maintain the penalty on Amadeus customers. Those actions forced Amadeus to interrupt its distribution services to Air Astana.”

Amadeus said it intends to seek damages from Air Astana, “whose actions have created unjustified commercial damage to Amadeus and its customers,” according to the statement.

It noted that the restoration of service was temporary. “The decision taken by the Spanish court is preliminary and Amadeus’ position has not yet been considered,” it said.

Competition or coercion?
Air Astana, meanwhile, said it considers Amadeus’ actions “coercive.”

Since Jan.1, “Amadeus has been charging Air Astana at a rate several times higher than that charged by competitors for all bookings made in Kazakhstan,” the airline said in a statement.

Although Amadeus is the smallest GDS operating in the U.S., it is the largest in the rest of the world and has a dominant position in many countries.

Air Astana said Amadeus’ 2010 share of travel agency bookings in Kazakhstan exceeded 90%.