In 1492 Christopher Columbus sailed west from Europe in search of a new trade route to India. Instead of the popular belief that the world was flat he believed that it was round. Instead of India he came upon what we now know as the Americas. But while he is widely credited with discovering this "new world" the land had already been discovered and populated by native peoples who had migrated over many years before Columbus reached shore.
There are many that say that American Airlines is going into uncharted waters to change the distribution model. However, the fact of the matter is that we are not alone in our desire to utilize the advancements in technology to improve our business. [more] Numerous other carriers have well established distribution models that are more direct in nature to the consumer or agency and are more cost competitive.
This includes the largest U.S. domestic carrier--Southwest Airlines. Agencies go to a separate booking site to facilitate transactions and use other tools to check fares. This more direct model has resulted in a competitive cost advantage to the rest of the industry. With their acquisition plans for AirTran, Southwest's network will only grow larger and make them a more formidable competitor. When there are low fares in a given market and one carrier is paying a double digit percentage less in their distribution costs that becomes a significant competitive advantage that quickly becomes unsustainable for other carriers to compete effectively.
The growth of XML messaging technology, more robust computing power and lower connectivity costs have also enabled carriers to have more direct distribution models. As technology improves and the costs to connect decrease it becomes more viable for a supplier to have a direct distribution agreement with an agency to sell its services. We have seen numerous examples in other areas of the travel industry with hotel and car companies have been utilizing direct connections with many of their top agencies.
American Airlines desires to utilize the advances in technology to have more direct distribution agreements with our agency partners and to be able to provide access to many of the services and functionalities that are available through our direct channels. We recognize the unique processes that differentiate an agency booking from a direct to consumer booking and thus have designed our direct connect to be able to easily integrate with existing agency processes. This includes settlement through ARC and BSP, the use of XML industry standards to allow for easy access and integration, and integration with a content aggregator and other supplier sources to allow for an integrated display of multiple suppliers to the agent as opposed to a standalone solution. We think this will enable agencies with better access to services and functionality to better serve our mutual customers while at the same time better equipping our airline to compete with our competitors who currently enjoy a distribution cost advantage.
The GDSs have all developed multi-source platforms (aka content aggregators) that can take an XML feed and combine it together with other competitor's offers to present to the agent and seamlessly facilitate bookings. They have XML connections with other carriers including a recently announced deal to incorporate Southwest's direct connection into Travelport's Universal Desktop. Yet when we ask for a similar connection it is characterized as unproven technology afflicted with scurvy and something that will cause the industry to fall off the edge of the earth.
Just as transportation has advanced a long way since the days of the Nina, Pinta & Santa Maria, so has travel distribution. It is time to set sail. Welcome to the not so new world.
This post was republished with permission from American Airlines' Distribution blog.