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3 Stages of FATCA Testing and Quality Assurance

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3 Reasons why Apple Pay could dominate the payments space

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Shaken or stirred – Are you connected?

Posted on: 12 January '11

Just when we all thought the new year is bringing in more relief and joy to the travel industry, more people are flying, load factors are improving and a general optimism was is in the air, at least for Q4 of 2010; the American Airlines(AA) – Online Travel Agency (OTA) – Global Distribution System (GDS) tussle, now turned war kept us industry folks busy. Yes, busy and how! As if the chaos of the future of online travel, meta-search engines and emerging new mobile technologies gaining more prominence wasn’t adequate.

That said, enough has been written, debated, argued about American Airline’s Direct Connect strategy by stalwarts of the travel industry, technology and ancillary industries, research and trade pundits. We all have been keenly watching this unfold layer by layer. AA has been brazen enough to go the Direct Connect way to reduce distribution costs. OTAs Orbitz and Expedia are miffed, Sabre has announced that it would be terminating its distribution contract with AA and Amadeus is subdued and quietly monitoring the going-ons. AA has apparently sued Sabre for increasing booking fees and fare display preferences.

The Open AXIS Group, an organization that has set Airline XML integration standards and promotes XML as the new electronic messaging structure has commented on the recent distribution actions and called for an open industry dialogue in a press conference recently. Results of this are yet to be known.

Open Travel Alliance is soon going to voice their thoughts and we may see some more twists in this drama. Meanwhile, travel technology vendors that provide support in the integration of XML APIs (used in the direct connect type model) are possibly optimistic, but a lot remains to be seen on whether other carriers seek their technical expertise to follow the AA path.

Let’s not forget, the Interactive Travel Services Association whose members include the major GDSs and US-based online travel agencies are on the look out to include global players to partner with. Once this gains momentum, be prepared for more resistance and perhaps change as well. On another track, in a move to bring about product differentiation and drive more traffic to their own website; Delta Airlines removed its flight information from One Travel, Cheap Air, Vegas, CheapOair, BookIt, AirGorilla and Globester.

What do these new developments mean for the key folks in the travel fraternity?

  • Travel Management Companies (TMC) – the corporate travel agent is going to have to subscribe to AA’s Direct Connect (and all other airlines who may follow this route) by incurring a fee to access their inventory. Additionally, they would continue to use the GDS for other airlines they have contracts with; and /or their corporate booking solution that stows all their corporate travel policies. These multiple systems, tools and avenues for different airlines only compound the issue. I believe more time will be spent on looking, booking and complying instead of focusing on customer service and SLAs. I anticipate corporate travel managers re-strategizing their contracts and possibly also evaluating a new revenue model as part of their negotiating with airlines.
  • Travel Agencies – use the GDS for airlines that continue to make their inventory available for carriers like AA. They would need to invest in technology and seek the help of technology vendors to integrate the XML standards with associated content to access the airlines inventory. Like TMCs, multiple front, mid and back office solutions will be in use. Keeping track of ancillary revenue, service fees et al will require time and perhaps some change management.
  • Leisure Travelers – They will need to check fares or purchase tickets only on AA and for other airlines visit an Online Travel Agency. Every time an airline chooses to by-pass the GDS, the consumer will need to remember and visit multiple sites to check and compare air fares, both for the traditional PC user as well as the mobile user. Complexity may have just entered a new level.

I’m wondering if this will influence any or all of our big players in the Indian travel industry and the Online Travel market. Will any of our scheduled airlines like Air India, Jet Airways, Kingfisher etc. emulate AA, or will the GDS continue to be their distribution partner?

Now, have we thought about ourselves in this entire mix? What are our next steps as an IT Services company with a significant footprint in Travel and transportation technology maze?

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  • Vinod

    Interesting. The car rental scene is not this sophisticated. But we already have Direct Connect channels for Car Rental companies running for quite some time. No major noise there.

    Taking a more abstract view; what I see is a battle within the supply chain. If you take FMCG, in developed markets, the retail stores call the shots as they are closest to the consumer. The manufacturers listen to the retailers. In India; the manufacturers call the shots; as the retail sector is fragmented.

    Here; its a battle between the retailer(Distributers) and the supplier (Airlines). And if you ask me; the Internet is great medium to remove middlemen. Ultimately; all distributors are middlemen.