There continues to be a battle over where you purchase airline tickets. This battle has been going on for years, but now has taken a new turn. Last week the International Air Transport Association announced a "New Distribution Capability." NDC is to be an airline sponsored system that IATA and the airlines hope will make booking through a global distribution system obsolete. (GDSs are companies like Sabre and Travelport, which owns Worldspan and Apollo.)
Travel management companies, or as we were formerly known, travel agencies, still book over 60 percent of all airline tickets, and most are booked through a GDS. The airlines have to pay the GDSs a fee every time you purchase a ticket from our TMC. For some strange reason the airlines would rather walk barefoot across a parking lot of broken glass than pay the GDS fees. And, for some other strange reason the airlines want passengers to come directly to them to purchase airline tickets.
The 60 percent of all airline tickets that TMCs handle, for the most part, are corporate travelers. As a rule, corporate travelers cannot plan their trips as far in advance as leisure travelers. As a rule, corporate travelers also pay higher average ticket prices than leisure travelers.
It has long been my opinion that airlines should pin a great big medal on TMCs. Airlines should not be looking at ways to undermine the GDS/TMC system. TMCs handle the customers the airlines absolutely need to have any shot at making money. TMCs use GDSs to handle these transactions.
Let's say the NDC somehow takes off and great numbers of travelers start to use this system. How will the airlines handle these transactions? I think the airlines can handle only half of the ticket selling process. They can handle the selling part, but they cannot handle the servicing part. What happens when you need to talk to a real live airline person for any number of a long list of reasons?
Do you remember this past March when United changed its computer system and several other systems? They went weeks and weeks with hold times over an hour to speak with someone at their reservation centers.
Do you remember when one blizzard after another hit the East Coast two winters ago? Delta played a recording that said they were busy and asked you to call later. This is not customer service. Corporations will not stand for this. And, for that matter, neither should any vacation traveler.
The airlines want more control over the selling process and they want to lower their distribution costs to as close to zero as they can. They want to be able to offer you their products that are tailored to you. They contend these types of services are not available through the GDSs. As you might guess, the GDS say these services are available today through the GDS.
What industry has little or no distribution costs? I contend that the TMC/GDS system is far more profitable than the airlines attempting to sell tickets themselves. Think of the structure the airlines would have to put into place to support a 60 percent increase in direct bookings. They would certainly need more reservation agents. They would need more computer capabilities. They would need more people to build and run these computer capabilities. The list of more and more costs would be endless.
This leads us to a very strange idea. What if an airline decided not be in the business of selling airline tickets? The airlines are great at moving you from here to there safely, quickly and with your luggage. I mentioned this idea several years ago to the CEO of a large airline. He looked at me as if I had four heads and was from Mars.
But think about this for a minute. You do not purchase a car from GM. You do not purchase groceries from the companies that either grew it or made it. You do not purchase much of anything from the people that actually made the product. You purchase things from people that are good at selling things. Why should the airline business be any different?
The airlines could pre-sell every single flight. TMCs like us would purchase the number of seats we need and then we would resell them to travelers. This process sure seems a lot simpler than the complicated system I have described above. Until the system changes I sure think the best way to purchase all travel products is from a TMC just like Polk CTM.
There is no question I am biased. I firmly believe the GDSs are the very best way for you to purchase an airline ticket and the very best way for us to sell you an airline ticket. Through our Apollo system we can offer you inventory from more than 450 airlines as well as 28,000 car rental locations, 83,000 hotels and all of your favorite cruise lines, tour operators and rail lines. What content will NDC offer? I sure think the best way to purchase all travel products is from a TMC just like Polk CTM.
Robert Polk is CEO of Polk Majestic Travel Group in Denver. These insights are excerpted from Robert's weekly newsletter, Robert's Business Travel News.