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BTC Takes Aim at Airline Cost ShiftingApril 6, 2010 By: George Dooley
Travel management companies and corporate travel managers are being invited to sign a signatory letter to all major U.S. airline CEOs encouraging them to work cooperatively and in good faith with GDSs, TMCs and corporations on industry standards, according to Kevin Mitchell, chairman of the Business Travel Coalition (BTC). The letter questions airline “direct-connect” strategies that would could shift costs to a user-pays model that would adversely impact agents and consumers.
“In late 2009 travel agents and corporate travel managers began informing the American Society of Travel Agents (ASTA) and Business Travel Coalition that American Airlines was exploring with them in meetings a “direct-connect” strategy that would flip the distribution system economic model from one where the airline funds its unbundling, merchandising and selling activities to a “user-pays” model,” the BTC says.
“In addition to layering on significant new complexities and costs to corporate managed travel programs, a “user-pays” model would result in high-value unbundled and repackaged content being available - for no channel fee - only through American’s direct-connect pipeline,” the BTC said.
The “Direct Connect” plan being promoted by American Airlines “if implemented as communicated by American and if it then spreads to other airlines, could have the adverse effects on travel agents and consumers, BTC says in a backgrounder on the issue. This includes:
* Restricted consumer access to large segments of key travel information
* Reduced transparency and higher prices
* Restricted channel choice
* Higher search costs
* Decreased productivity within the distribution system
* Higher distribution system investment and operating costs borne by the end user
It would also allow airlines to otherwise charge for the merchandizing and sale of its content through alternative channels. “In other words, virtually all merchandising and distribution costs would be shifted to TMCs, and ultimately onto the backs of the airline’s best customers. Managed travel efficiencies would be substantially degraded.”
“Of course, in recent years numerous airlines have attempted to shift costs and other distribution burdens to the customer, but a unified supply chain has repeatedly and successfully pushed back,” BTC says.
The BTC says it is the agencies’ corporate customers who keeps the lights on at airlines’ headquarters and that their managed travel needs must be respected. “Unfortunately, we are faced with another one of these challenges to the investments of significant time and money in technologies that enable TMCs and corporate travel departments to shop for, purchase and report on airline products and services efficiently. “ Mitchell is asking for responses by the close of business Friday, April 9. Email: