A Take on AA Distribution Issues

Isn't the American Airlines distribution blog interesting? No I mean it without the slightest hint of sarcasm. Obviously it is a vehicle for getting their point across to all sectors of the market but it does make some good and credible (albeit biased) comment on this key issue.
I find the language they use fascinating as well as it mirrors their strategy at any particular moment in time. For example they are currently referring to TMCs as "Travel Agency Partners" so one can assume that the very zigzag line that represents their TMC love/hate relationship must be on the ascendancy as they focus on those dastardly GDS. No point in having a go at TMCs and GDS at the same time.

The only downer I have on this blog is that it fails to identify or even pay any lip service to the broader issues and seems rather me-centric. What their corporate end customer's true needs, objectives and arguments do not seem to get much coverage. Perhaps if they focused more on these and put forward some proposed solutions for debate it might help both their cause and the industry they work in. Mind you this might become a double edged sword as their arguments would need to be compelling.

They would also have to think outside their own box which most major airlines find far too vexing.

Let me try and give you an example. In the last of their blogs I read on The Beat they were trying to say that TMCs' choice of GDS was predictable and closely linked to their original owning airline. This is a far too simple assumption and somewhat USA-centric. TMCs choose GDSs for much broader reasons than that although, in the past, there is more credibility in that argument. Now it is more a matter finance, other non air products, trained staff availability, support, global reach, and yes, full content and fares. The GDS have exploited their broader strengths in the markets they were dominant in to maintain that position.

Corporates demand that their TMC is kitted out with a booking engine that can provide a total regional and global focussed product for all services including that continental train or local hotel. The TMC responds by searching for a system that meets as many of those demands as possible and then bolts on any extras through their own technology. Preferably a one-stop shop covering as many core products as possible. Not just American Airlines bookings. They need to do this cost effectively and as seamlessly as possible.

What the corporate and their TMCs do not want is to find airlines who cherry pick what fares they put on which GDS thus depriving their travellers from the best prices and availability. Any airline who does this is basically saying that they alone will decide which booking system you will use. Even worse they then impose fee penalties on those corporates who have the effrontery not to comply.

So the distribution battle is getting hotter. AA in their blog are now talking about a test of "global" reach with the GDS. It reminds me of a "dare" game I enjoyed with my friends in the playground all those years ago. I cannot see much benefit for the customer while these two forces slug it out and I am not sure either would come out without a very bloody nose.

Meanwhile what is the TMC doing? Are they just sitting their in a ring side seat or in the corner of their favourite with a towel and gum-shield? No, they cannot afford to do either and you will find the bigger ones building alternatives. Their issue is that direct links with numerous different suppliers (there are hundreds, perhaps thousands of them) is a poor but necessary option to the current few well chosen links, but they need to do it.

One very likely scenario for the future will be the formation of mega TMC platforms with numerous links. Sounds familiar? Yes, such an entity is currently called a "GDS."

What will that do? It will enable TMCs to put (or deny) whatever content they want in front of whoever they want to see it. It will give them power. It will enable them to go to suppliers and negotiate deals and incentives.

So by trying to destroy one type of GDS the airlines will be creating other, possibly stronger ones. The same way they found removing TMC commissions meant they had to charge lower prices. Good luck to them. I suspect they will need it!

This post was republished with permission from the blog of former managing director of HRG UK Mike Platt.