IATA's Bisignani Knows Something We Don't

Today at IATA's Annual General Meeting in Kuala Lumpur, the group's director general Giovanni Bisignani lashed out at just about everyone. Based on his speech (posted here), the message seemed pretty simple: the global airline industry is in a tailspin, and if you are not helping us in the way we deem most appropriate, then you are part of the problem. He attacked governments for their policies on taxation and "archaic" ownership rules that hinder access to capital. He attacked several airport operators and air traffic control entities for daring to raise user fees, calling such decisions "nonsense." And he implored "all suppliers and manufacturers" to "reshape their products to reduce their costs and ours ... Governments and partners must understand that we are struggling to survive with a new and harsh reality."

He also warned travel agents that "the clock cannot be turned back. Travel is more accessible than ever in price and purchase options. To survive in the global online market you need to reshape your services and your business models to provide greater value that travelers are willing to pay for."

Kind of vague but not wrong on its face. But what about when he turned to the global distribution systems? "We cannot accept that those in the West charge around $4 per transaction when China TravelSky does the same job for $0.50. This must change," said Bisignani. Hmmm. [more]

One certainly can argue whether GDSs should change their pricing, and if so, why and how. But Bisignani's comparison (repeated from a year ago) between GDSs "in the West" and China's TravelSky is ridiculous.

TravelSky is part of TravelSky Technology Limited, which at last check was majority-owned by Chinese state-controlled entities. Thanks to barriers to entry, the TravelSky GDS has no competition for issuing tickets in China. It doesn't have a solid record of collaborating with the global industry for data sharing and other common business functions.

One might debate whether the pure transaction processing cost of a basic ticket in the GDS is cents rather than dollars, but does Bisignani want Western governments to re-regulate Western GDSs or Western airlines to re-acquire them? Unless the free-market mechanics now at play completely unravel, $0.50 is a long and unrealistic way from the current benchmark low of about $3 per segment in some markets.