Farelogix Response To Sabre's 20+ Questions On Direct Connect

Farelogix is a travel distribution technology services company that provides distribution solutions to travel suppliers (mostly airlines) and travel agencies. We have a vested interest in growing our company by creating innovative and low-cost technology solutions. We believe in fair, healthy and legal competitive practices. We even enjoy a good fight now and then. Farelogix is in business to create value for our customers and maximize the return for our investors. We charge our customers fees for using our technology services. Farelogix offers a number of products and services as Open Source and free of charge (primarily to promote industry technology modernization), as well as our for-fee products and services ... and contrary to all the rumors, "I am not a witch!" [more]

[Farelogix CEO Davidson submits the following comments in response to a memo of talking points circulated by Sabre Travel Network. As reported in The Beat last month, Sabre provided its perspective to travel agencies on airline merchandizing, distribution economics and content fragmentation. Following his initial commentary, Davidson (JD) provides responses to Sabre's (STN) talking points.]

I wanted to point out something from the article introduction, as it relates to the Interactive Travel Services Association, or ITSA. ITSA is not an "industry pundit." In fact, as reported by The Beat (May 5, 2009 "INTERVIEWs: ITSA And ETTSA"), ITSA formed as a Washington, D.C. based 501 (c) 6 not-for-profit corporation whose executive director is a registered lobbyist. According to the ITSA website, the organization appears to be funded primarily by the GDS and entities fully or partially owned by the GDS. I find it a bit ironic that ITSA is talking about airline transparency around ancillary services while the GDS themselves are not being transparent about the established intent of ITSA. While its espoused mission is to "promote(s) consumer choice, access, confidence, protection and information in the rapidly growing world of online travel," its real purpose would appear to be to protect a technology and business model that is closed, proprietary, out-dated, inefficient and expensive for its airline customers to use. I suppose it is up to the GDS if they want to take some of the revenues they receive from their airline customers to fund a group that is actually lobbying against those very same airline customers!

STN: Background Talk Points: A healthy airline industry benefits all constituents--airlines, travel management companies, corporations and travelers. Increasingly, airlines are unbundling their offerings in an attempt to grow revenue. And to the extent that merchandising ancillary offerings provides airlines with added revenue and travelers with more choice and a better travel experience, we're fully behind it so long as there is fair and full disclosure to consumers of the prices for "add-ons" through all channels in which consumers purchase the airline's product.

It seems that a supplier serious about deploying new merchandising initiatives as a way to grow revenue would want to deploy those initiatives as broadly and rapidly as possible.

JD: I am sure that is the case. However, in an age of personalized shopping options, the airlines simply do not want to be pigeon-holed into deploying their product through a distribution technology that perpetuates anonymous (non-personal) selling and commoditized display. When a representative from Continental (now United) Airlines was asked by a panel moderator at the recent Eye for Travel Conference in Chicago if Continental would support selling ancillary services through the GDS channel, the answer was that CO would be willing to support any competitively priced channel that enabled the airline to sell and display ancillary services through a pre-offer traveler authenticated (my words) process where the airline maintained control over its product. In other words, it appears airlines are ready and willing to embrace any channel that is able and willing to modernize enough to support current airline product selling methodologies. Yet, it appears that the GDS are "able," but perhaps not "willing."

STN: Sabre has invested to support new travel supplier merchandising initiatives--transacting millions of dollars of ancillary revenue annually for a number of major carriers through preferred agency workflow. Now, leveraging industry standards developed in conjunction with airlines, we are well-positioned to help the broader airline industry achieve rapid and broad distribution of ancillary services.

JD: While I believe this statement sounds really good and I will take them at their word, I have yet to see any production-ready GDS travel agency or corporate booking system that is capable of selling the way the airlines want and need to competitively sell through the indirect channel. (There are lots of press releases and screen shots though--just nothing that would appear to support the traveler-authenticated shopping that is required.) In the world of instant communication and unlimited access to information and communication, few can hide behind the scenes for long.

STN: Sabre uses XML today to connect to numerous travel suppliers (including air, hotel, cruise and credit card companies) and XML can deliver significant benefits to all constituents (suppliers, agencies, corporations and technology providers). More recently, Sabre announced XML connectivity with major hotel chains and regional hotel aggregators (Carlson Hospitality and Accor, Boscolo and and introduced a new air participation level based entirely on XML connectivity (FlexConnect).

JD: Frankly, I would be surprised if a technology company the size of Sabre did not utilize XML in their technology arsenal. However, the issue is not just about incorporating XML technology; it is also about altering its process workflow. Today's GDS workflow is based upon a "push" model where the GDS essentially gathers raw data from the airline systems and then the GDS "manufactures" the offer to the travel agency/corporate booking tool through an anonymous sell process. Think of it as a "Dear Occupant" direct mail offer you used to get in your mailbox. Outside of having a mailbox, that's all you may have in common with the next person that gets the same "Dear Occupant" offer. I specifically say--used to get--because even the snail mail direct business has moved beyond the Dear Occupant offer to a more personalized approach! Isn't it time our industry did the same?

The airlines, on the other hand, have evolved into more of a "pull" selling model that supports pre-offer traveler authentication, referring to the capability for the airline itself to dynamically generate a specific offer for a specific customer based on a variety of airline inventory factors, traveler identification, past travel experiences and more. This pull selling model is not a "nice-to-have" for the airline, it is a competitive necessity. Yet so far, this requirement has not yet been embraced by the GDS in their published new platform solutions. By the way, the GDS are very familiar with the "pull" model as they "pull" availability directly from each airline on almost every sell transaction made. The GDS simply do not want to lose airline product control.

STN: Implementing merchandising initiatives through one-off, non-standard distribution approaches that drive costs while creating inefficiencies and service challenges for agencies and corporate travel programs is bad for these constituents--and ultimately bad for travelers. If an airline makes its product more difficult and expensive to purchase and service, it could also hinder adoption of the airline's merchandizing initiatives.

JD: This is a lame technical argument. No airline would invest the tens of millions of dollars required to develop an effective merchandising program/system if it were a "one-off" or "non-standard" approach. The reality is that technology has made great advances in systems communications and interconnectivity enabling airlines and many other entities to offer differentiated products and services, while maintaining systems efficiency and even lowering their cost of service. The fact that many travel agencies have gotten themselves "locked-in" to GDS-provided closed systems (technically and process-wise)--which, by the way, is no doubt a very deliberate strategy by the GDS--is not a very good reason to force the airlines to support sub-competitive and commodity-based GDS distribution systems.

STN: Make Your Voice Heard: Some customers have shared that one major U.S. airline has communicated that the path it is following is based on a commercial desire to change the economic model and is not driven by technology issues relative to the GDS. Some customers have expressed concerns that the airline's proposed actions would not only push the carrier's distribution costs downstream, but that 'new costs' (the adoption and support of one-off direct connections, or of new, sub-optimal workflow processes) and service challenges will be introduced into the procurement process.

JD: It is hard to believe they are still bringing this up. I believe they are talking about American Airlines. Well over a year ago, American publicly stated their position on this, providing answers and dispelling many rumors. This is a straight fear tactic aimed at TMCs, and I would hope most will see through it.

STN: If you're concerned that any travel supplier is forcing you to incur additional costs, inefficiencies or service challenges which could ultimately devalue your business, you should express your concerns to that supplier directly.

Tell airlines that it's unrealistic for any airline to expect you to sell their products if it means incurring significant inefficiencies, services challenges, direct costs and lost revenue.

JD: I would agree with that if it were true. Today, a number of travel agencies have either worked with their GDS or independently of their GDS to enable systems that meet the needs of the airline and the travel agency and their mutual customers, without major investment or disruption. It doesn't get publicized for two reasons--competitive advantage or fear of GDS retaliation.

STN: Ensure they understand the complexities of your business.

Ensure they know you'll support those airlines that make their full product available in a manner that supports your established workflow processes.

JD: Encouraging agencies to threaten their suppliers is probably not the ideal way to ensure that they develop collaborative relationships, don't you think? The fact is that both corporate and leisure customers will demand certain services from the airlines, corporate or online booking tools and travel agencies. Each entity will have to decide what path they will take in order to stay relevant and competitive.

STN: Educate your corporate customers about the potential risks

JD: Here I am assuming that the agency will advise the corporate customer that they will not be able to support them and that they will have to switch travel agencies. Maybe I missed the point of this warning.

STN: Ensure your corporate clients understand that your GDS provider (Sabre) has invested significantly and is well positioned to support broad distribution of airline ancillaries within your established procurement process.

JD: This is all well and good, but unfortunately, it is not the process that the actual customers (the airlines) of Sabre want to utilize to offer products and services to their corporate clients. Nor is it the process that a growing number of travelers want to use. Consider it from this perspective: travel agencies differentiate themselves through unique services, special pricing and customer service offerings they provide to corporate customers based on a number of factors--loyalty, spend, position, etc. Why is this good for agencies but not good for airlines to be able to do? Why not invest in helping agencies adapt to newer and more modern workflows ... versus rallying to protect the status quo?

STN: Ultimately, it will be your agency and others like yours, along with your corporate customers that determine the success or failure of initiatives that attempt to shift the supplier's distribution costs to you, while also burdening you with new costs and service challenges. So express your opinions with the carriers or not--but one thing is certain, if one major airline is successful, it's only a matter of time before some other carriers line up with them.

JD: Two things:

(1) I don't get the distribution cost shift comment that keeps coming up. Instead of fighting to preserve the status quo, why not simply use some of that innovation the GDS keep talking about and create a new set of solutions that entice the airlines to distribute their products in a manner that meets their needs (rather than the GDS). I am confident that the airlines would be willing to pay for that!

(2) Any airline that wants to remain competitive in the indirect distribution channel will adopt a distribution approach that is more in-line with what they have already invested in on their own web site, especially when it comes to traveler authentication, product bundles and ancillary services. The airlines are simply saying they want to leverage this same approach for the indirect channel.

STN: Inform Your Elected Officials: Enough concern has been raised over the issue of fee disclosure that the U.S. government is examining the issue. Urge your senators and congressional representatives, through the currently open Notice of Proposed Rule Making (NPRM), to require airlines to make add-on fee data easily accessible not only on their websites, but also to the travel agency channel--through any global distribution system in which an airline has agreed to participate.

Also, communicate your position to the U.S. Department of Transportation (while the formal comment period has ended, additional signatures on these documents can still be helpful):

Sign the petition at

Add your name to the signatory letter at

JD: On a recent panel at "Eye for Travel," the Sabre representative downplayed efforts to solve our industry problems through government mandate; in fact I think his statement was "the marketplace will solve this." As such I find it highly ironic that Sabre continues to promote the concept that DOT will solve transparency issues, versus free markets! Again, isn't it strange that the GDS are essentially campaigning against the very customers that generate most of their revenues (the airlines)?

STN: Inform Your Corporate Clients: There are hard dollar costs and service implications associated with carrier-specific "direct connections" and/or fragmented workflow, such as the following:

Increased costs and service degradation

JD: This entire section just goes to fuel a rumor mill intent on pushing more scare tactics that will keep travel agencies "in line" with the legacy workflows in place today by the GDS. Specific examples are illustrated by the bullet points.

STN: Limited choice and reduced ability to shop for the best value for the trip

JD: Given many of the airlines' desire to control their own product, I would argue that without embracing newer traveler-authenticated shopping models, TMCs may find themselves severely disadvantaged.

STN: Inability to access and apply negotiated rates

JD: This is industry standard stuff in use all over the place, and totally not the case! We are even seeing instant and dynamic pricing based on traveler authentication.

STN: Inefficiencies in PNR services, creating disjointed online and offline processes

JD: Actually, there is some pretty cool stuff in production today, from Farelogix and other companies, for servicing and managing disparate PNRs.

STN: Compromised program governance

JD: None of this is happening today with airline content that is not in the GDS. Give the professional TMCs some credit here. I have seen some very impressive data management systems operating at a number of TMCs and they are not just managing data they get from the GDS, but rather multiple sources.

STN: Inability to effectively track and execute supplier and vendor commitments, and apply travel policy across all transactions

Potential loss of data required for government or regulatory reporting and tracking/ preventing fraud, waste, and abuse

Data management and security risks

JD: See answer above. Whoever wrote this needs to get out in the TMC community more often.

STN: Loss of centralized, aggregated data for tracking performance, compliance, etc.

Compromised data for negotiating new agreements

Exposure to security risks through inability to find travelers at a moment's notice

Clarifying Questions For Carriers

JD: Here, I have numbered the questions for reference purposes.

STN: Corporations can ask carriers the following clarifying questions regarding carrier-specific "direct connection" solutions:

1. Is your "direct connect" really ready for use right now?

JD: First, let's remember that The Open AXIS Group now publishes a standardized XML schema for airlines' direct connect connectivity. The standard has been adopted and is in production (read ready for use) with a number of the world's leading airlines.

Furthermore, I would like to clarify that implementation of the "direct connect channel" concept (and the Open AXIS Group schema) has two possible "flavors":

Part 1 Direct connect - GDS by-pass option. This is where an airline and a specific travel agency, corporate booking tool or online travel agency enters into a mutual commercial and technological relationship where the airline, or its designated third party technology company, provide a direct link between the agency and the airline. No GDS interaction is required.

A GDS by-pass option can be delivered in two forms:

(i) an API (or Application Programming Interface) for those entities that already have a front end booking application that they connect with the API for airline content access. This is a fairly common technology practice, already supported by a number of online corporate and leisure tools/sites and supported to a lesser extent in the pure travel agency environment.

(ii) The second delivery form of the GDS by-pass direct connect is that of an actual booking application interface or travel agency front end. This too is already being supported in thousands of travel agencies around the world (55 countries that I am currently aware of) and comes in a number of varieties offered by various vendors including Farelogix (SPRK and Open Source Hawkeye) that can also be used for post booking servicing those direct connect reservations such as exchange, refund, voids, PNR splits, etc.

Part 2 - Direct connect - through a GDS option. This is where the airline and the GDS extend, revise or renegotiate a mutual agreement where the airline or its designated third party technology company provides the airline's direct XML link between the airline and the GDS. The specific implementation of this airline direct link is mutually defined between the airline and the GDS. Depending on the type of agreed-upon connectivity, this will most likely require the GDS to replace some or all of the current Edifact airline connectivity with the airline's published XML API. The GDS already do this today with a number of low cost airlines so, while it is a new type of link, it is not unfamiliar to the GDS. Also it would most likely require the GDS to adopt the "pull" model with that airline as defined above. Again, let's remember that while this approach may be new as relates to a specific airline/GDS relationship, this is not a new technology concept for the GDS.

STN: 2. What testing have you done/will you do to ensure it can meet the needs of sophisticated travel management companies and corporate travel programs?

JD: I can't imagine any airline not going through rigorous testing. I can only speak about the airlines we work with but testing is generally the longest part of the process and our production systems are covered by service level agreements. Hey, do the GDS provide service level agreements to the airlines and the travel agencies?

STN: 3. Are you working with the major GDS system providers? Why not?

JD: Great question! See Q1, Part 2. I would encourage all travel agencies to ask their GDS why they are not working with third-party technology providers like Farelogix.

STN: 4. The GDS we use for our corporate travel program has told my TMC that you are not working with them to provide access to your new merchandising content through established workflow processes. Why not?

JD: While I can't speak for any specific airline, maybe the answer is that the established anonymous (non-custom) selling workflow of the GDS does not enable that airline to offer you the products and services you deserve based on who you and your travelers are. Maybe, that airline wants to offer some of your select travelers dynamically bundled options based on who that traveler is, and what the airline has available at that specific time of the request, and based on prior travel experience with this airline (good or bad)? Maybe, you will have to change to a TMC that can support you or maybe your TMC will have to change to a GDS that can support the TMC that can support you? Sorry, I hate it when people answer questions with questions!

STN: 5. At least one major airline has communicated that through its "direct connect" all shopping takes place in the airline's system. In a world where shopping must take place in each individual airline's system, what is the impact on my TMC's efficiency? What is the impact to my TMC's ability to efficiently shop across all airline options, including interline itineraries?

JD: If the airline and GDS adopt Part 2 in question 1 above, I can't see any impact other than a very positive one--you would now be able to get much richer content from that airline.

STN: 6. How will the lack of your airline's full content in the major GDS affect my TMC?

JD: I really don't understand this question. Besides, let's give those professional TMCs a bit more credit as they have been dealing with content fragmentation since the birth of the Internet. I will go out on a limb here and say that some of those TMCs are looking at this entire issue as an opportunity for them to become more competitive than the agency down the street!

STN: 7. If my TMC continues to use its current GDS system, how will they book your airline's new merchandising content? How will the TMC service those reservations made out of workflow?

JD: See question 1.

STN: 8. Will my TMC need to swap out technology systems to have access to your content? Will the other technology system provide access to all the content I need? How will my TMC book travel for my company on other airlines--including interline itineraries? What about hotels, cars, etc.?

JD: TMCs have a number of options here and, remember, all the GDS have announced they have new platforms that will take content from any source, aggregate it and provide required workflows. I don't see the big issue here unless those platforms don't work. If that is the case, you could look at some of the non-GDS options for travel agencies but I would first encourage agencies to push their GDS for these very platforms they are marketing ... and in the process, demand the traveler-authenticated workflow that will enable agencies and airlines to have improved relationships with their travelers and corporate clients!

STN: 9. Ensuring maximum value for my company's travel spend requires, among other things, cross-shopping for the best travel alternatives--across all available carriers for an itinerary, including interline itineraries where it makes sense. How will your direct connect accommodate that? How will it ensure that my travel policy is applied?

JD: I refer you to question 1 above because either alternative of direct connect can maintain the current policy and process you have in place today. I am happy to discuss this with you in more detail, especially if you are a really big corporation.

STN: If answer is TMC will need to use a different system for its agents--one that supposedly aggregates the airline's direct connect with content from the major GDS--then...

JD: Hey, wait a minute! That is exactly what all the GDS say they have! Remember Sabre Red, Amadeus One and Travelport Universal desktop? Problem solved! Why are we even asking questions 10 through 13, but what the heck, I have nothing better to do so I'll suggest some answers.

STN: 10. You're suggesting my TMC will need to do a complete technology conversion and move agents to an entirely different point of sale tool just to book your airline? How likely is that? Why would they incur the costs and disruption to do this?

JD: They have lots of options. In reality, the traditional "green screen" selling systems just won't cut it when it comes to selling these new services the way the travel agency and corporate buyer want to buy them, and the way the airline wants to sell them ... sorry but someone needs to say this!

Keep in mind the following history: the GDS built the green screen with extremely closed and proprietary command lines, because that was modern technology at the time. Then they found out that the proprietary interfaces made it harder for TMCs to change GDS providers--so the GDS continued to develop against the green screen as a defensive strategy. Seriously now, how many of those travel agents using the green screen at work in the agency go home at night and surf the web using DOS and a dial-up modem? It is time to move on!

STN: 11. Are the GDSs and other technology providers working together right now to enable this integration?

JD: Farelogix would love to work on these industry challenges with Sabre and the other GDS but remember Sabre cancelled our developer agreement and the other GDS appear to like the Sabre approach to Farelogix ... but I am sure there are other companies out there that are working with the GDS. In the end, it will be the airlines and the GDS who must come to an agreement for this technology--that is production ready by the way--to be implemented so more travel agencies and corporations can have access to it.

STN: 12 How can I ensure that the direct connect won't disrupt my TMC's service levels or my ability to access aggregated real time data across all my company's travel reservations? For example, I rely on my TMC to be able to locate my travelers at a moment's notice. Will they still have this capability?

JD: Again, I refer you to question 1 and I really don't see why this issue is any different than what professional TMCs deal with every day. They know how to handle this stuff. If you are working with one that doesn't, you may need to shop around. These business challenges and opportunities are not going away. Also see question 6.

STN: 13. How will my travelers be able to book your content through the corporate booking tool we utilize?

JD: See question 1.

STN: 14. How will your direct connect impact my economics with my TMC?

JD: Great question to ask very openly with all parties involved: airlines, GDS, corporations and travel agencies. It is time we had some more transparency around incentives since they seem to be such a big issue for everyone. We can't address it if we don't talk about it.

STN: 15. If it's more expensive for them to book my travelers on your airline, won't my TMC charge me more for those reservations?

JD: Not sure why it would have to be more expensive. See question 1.

STN: 16. Given GDS incentives are part of the overall economics, will similar incentives be available for bookings through the direct connect? If GDS incentives are not available for sales on your airline, won't that raise the cost of buying tickets on your airline for me?

JD: Seems to me like a great question to discuss with the airline, your corporate customers and the GDS. Full transparency of this incentive topic seems to be a much needed discussion. See question 14.

STN: 17. Bottom line: If I can easily access full content and functionality through my TMC and GDS partners on a large number of other U.S. and foreign carriers, why should my TMC and my travel program incur added expense and inefficiencies to buy travel on your airline in any situation where I have a choice in carriers? Explain to me why I would do that.

JD: First, after you really think about how airlines want and need to become more competitive, seriously look at how much they have invested in their own web presence and how they are selling, and get a sense for the fast approaching mobile and social network distribution opportunities--does anyone really believe it is just a single airline? I realize that there is a tremendous amount of speculation that all of this is just about a negotiation and, once that is concluded, all will go back to being the same. If that is what you want to believe, no one will likely change your mind but I would simply ask you to take a serious look around.

In the end, it seems to me the answer is simple and easy. Just like the TMC provides services today to customers that request content that is not in the GDS, generally, I see travel agencies using a lot of their own innovation to provide these and other value-based services to their customers. On the other hand, maybe I did not understand this question or was it one of those veiled threats? Remember, I'm a bit slow on the uptake sometimes.

Closing Comment: It is simply not true that existing legacy systems and workflows must be preserved across channels in order to satisfy traveler and corporation needs, or to keep costs in line. In fact the opposite is the case: Just take a look at the latest mobile statistics as well as the continued migration of consumers to airline .com as evidence that today's travelers--corporate and leisure--want a more personalized shopping and travel experience.

If the indirect channel does not make an effort to modernize and support new and proven models of selling more differentiated airline products, the value gap between Direct (supplier .com) and Indirect (GDS, TMC, Corp) will continue to widen. Nobody in the industry wins in that scenario.

The airlines seem to have figured out how to meet customer needs on their web sites in a cost-effective manner--which, by the way, have cannibalized about 40% of the GDS business in the last 10 years. They must be doing something right! Those of us running distribution technology companies--and all travel intermediaries for that matter--should pay close attention.