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CRS Cost Crisis: American, Travelport Clash Again

November 18, 2010 By: George Dooley

Travelport reacted sharply to American Airlines' announcement that it will impose additional charges for AA bookings in some international markets, charging that AA’s action “discriminates” against Travelport customers. Travelport operates the Worldspan and Galileo GDSs.

In a statement by Gordon Wilson, president and CEO, Travelport GDS and deputy group CEO of Travelport, the company said it believed AA was trying to force agents into their Direct Connect model that inhibits consumer choice.

“We note American Airline’s (AA) intention to impose additional charges for AA bookings made in certain international markets outside of the U.S, where Travelport is being used as the GDS. Travelport does not condone this action,” Travelport said.

In turn, American offered a statement to Travel Agent focused on booking fee costs and the role of agents in AA’s distribution. “Unfortunately, Travelport very recently notified American of dramatic booking fee increases for bookings made in markets outside the United States using the GDSs owned and operated by Travelport - these being Apollo/Galileo and Worldspan,” AA said. “These GDSs have become significantly more expensive to American than all other booking platforms in the affected international markets. To the extent that agencies particularly value the service of one of these GDSs, American has asked them to absorb their cost premium to American, known as the Booking Source Premium, to the degree necessary to bring the net cost of such GDSs reasonably in line with the cost to American of other GDSs.

“American's goal is to provide all travel agencies with access to American's content through the distribution source of the agency's choice, at sustainable costs for American. To achieve this goal, American has continued to make its fares broadly available through all GDSs worldwide,” AA continued. “The following distribution platforms will not generate an ADM for the Booking Source Premium based on their current cost to American: the Amadeus and Sabre GDSs, and the American Airlines direct connection. American's direct connection is compatible with a variety of systems that agencies may already use, and there is no charge to use it,”

“The rationale for this booking source premium is that we need to distribute our products and services through cost effective channels,” AA concluded. “However, Travelport's recent significant increase in international booking fees makes them less cost effective than other channels. Thus, if an agency really wants to use Travelport, it is the agency's business decision. For agency's that do not wish to bear these increased costs, we have provided them with information on distribution platforms that will not generate a booking source premium. It is the agency's choice on which distribution platform to use.”

Travelport countered AA's statement.

“It is quite clear that as any additional charges by AA will effectively be borne by consumers, the true cost of booking AA will need to be shown to consumers at the point where a buying decision is made so that consumers can make an informed choice about which carrier to fly. Through this action, AA is penalizing the very people who deliver valuable revenue to AA in these international markets,” Travelport said. “Travelport remains committed to resolving the dispute with AA which has arisen through what Travelport regards as an attempt by AA to force travel agencies into their Direct Connect model thereby inhibiting consumer choice between multiple airline providers, pushing more costs to travel agencies and resulting in a less efficient and fair industry model. In order to protect the best interests of our customers, Travelport will continue to take appropriate actions in response to any measures AA initiates that discriminate against our customers.”

Last week, Travelport and AA clashed over Orbitz Worldwide’s ability to sell AA’s tickets. Both Travelport and AA filed law suits. Travelport, whose affiliate owns 48 percent of Orbitz’s stock, said they would suffer substantial harm if American stops providing fare data to Orbitz.

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