The only thing that surprises me about all this
is that anybody is surprised. This has been a nailed-on certainty for the past few years and ties in neatly with other significant costs which many airlines have passed on via their intermediaries. In fact, this is the greatest value agents give airlines at the moment--the ability to transfer cost indirectly. Except, finally, they have gone for a big one that is visibly less stealthy than the others! [more]
It is all part of the commoditisation of air travel. In the past, airlines have been able to avoid having their service product viewed as a commodity but now, as in other commoditised products, they have to get their lead price down whilst retaining what margin they can by "extras." The same is happening with travel management companies who are using the same tactics to avoid these extra costs sticking to them. Put simply, if you take any reduced price ticket and add extras such as distribution premiums, card fees, fuel surcharges, cost of credit, increased TMC costs, etc., you end up with pretty much the same cost as it was before prices supposedly went down.
Main legacy airlines hate
the onset of commoditisation that has made them do this but the almost obsessive demand for transparency by buyers--combined with, seemingly, highly marketed, low up-front prices from new entrants like easyJet and Ryanair--has made them embrace the concept. They simply now have to do this to compete and buyers, who thought they had got low price and increased transparency, simply have not.
Why has United done this now? I suspect that it is probably through desperation and opportunism.
Why do they think they will get away with it? Because they know that every other mainstream airline wants to do the same, and they are banking on all of them adopting the same strategy.
As I said in my past blogs, and without making me sound like some kind of prophet, I saw this coming. You would have to be blinkered not to. The next one that is well on it's way in Europe is airlines cutting agency credit terms from 27 to 7 days, which will immediately pass on to corporations. Simultaneously, airlines will continue to dictate which global distribution systems must be used to get their fares without premium being charged. On top of that, they will be beefing up their own Web sites to encourage direct booking for own and third party products. After all, you only have to observe what the low cost carriers are doing and then play "follow my leader." Finally, they will accelerate the use of their industry association, the International Air Transport Association, to apply leverage on TMCs to further reduce distribution cost at the expense of Joe traveller.
To me, an industry veteran, all this sounds pretty disheartening. But is it? OK, the way this industry has run in the past reminds me of a Mickey Mouse Disney cartoon but it did run rather well despite its vagaries. What bugs me about these new changes is that they are all rather panicked and knee-jerked. There is no balanced thought about it and certainly too much bias and precious little consensus going on.
To me, this is now the time when a global body such as the Association of Corporate Travel Executives or the National Business Travel Association (or preferably a merge of both) grab hold of this issue and gather the key players together to try and find some sort of future best practise. I cannot think of anything more important for them to do. Can you?