Flight buyers will foot bill for fragmented market

7 January 2011

7 January 2011 | Angeline Albert  

Business travel purchasers should brace themselves to bear the costs of a more fragmented, less transparent travel distribution system created by the airlines, an industry association has said.

The National Business Travel Association (NBTA) said buyers will pay more as a result of airlines bypassing existing global distribution systems (GDS) and choosing to directly connect with customers to sell tickets.

NBTA, whose members include corporate and government travel managers, said “direct connect” proposals will lead to higher costs because businesses that rely on clear and transparent fare information to negotiate for airline discount programmes will find it far more difficult to track volume and enforce travel policies in a fragmented market.

The association said in a statement: “Travel management companies and agencies will need to build new systems to capture these direct connect fares on behalf of their business travel clients, resulting in higher costs overall.”

The association’s comments follow a move by Sabre Holdings, one of the world’s largest global distribution systems which is used by most travel agents to search airline data, announced this week it will cancel its contract with American Airlines in August, a month earlier than planned, because the airline has withheld fare content such as ticket prices.

In a statement Sabre said: “We are taking these steps now because over the past months American Airlines has taken a number of aggressive actions in an attempt to impose a costly, unproven and unnecessary system on agencies and corporations, including withholding fare content.”

In December, American Airlines removed its fares from the online travel agency Orbitz.com. It means the airline effectively declared war on the established corporate process of travel management companies booking flights on behalf of corporate clients through global distribution systems. Other airlines may follow its lead and force customers to go to their own websites where they have more control.

Mike McCormick, executive director at NBTA said: “News from Sabre represents a serious escalation of the growing conflict around airline-mandated ‘direct connects’, and business travel buyers will ultimately foot the bill for marketplace fragmentation caused by airline initiatives that push the travel distribution marketplace in the wrong direction – away from transparency and competitiveness and toward confusion and higher costs.”

American Airlines said it had “received notice from Sabre that it has taken a set of punitive actions against the airline and its customers, despite the fact that American has met all its obligations and continues to work in good faith with Sabre”.

“The actions, which include biasing its shopping displays, are anti-consumer, anti-competitive and harmful to its subscribing agents. American is committed to working with all efficient distribution channels, including traditional travel agencies, online travel agencies and global distribution systems,” the company said.


[Story updated on 17 January 2011]

On 10 January AA filed a request in a Texas court for a temporary restraining order to prevent Sabre from hiding the airline’s data on its GDS.

Institute of Travel & Meetings (ITM) CEO Paul Tilstone said the dispute between the two firms could lead to a less transparent market and travel buyers would lose out.

“Business travel represents the third-largest expense for most businesses. Any trend towards airlines not publishing fare content details on GDSs is not good news for buyers," he said. "Buyers could be faced with technology workarounds to get the data they need and increased costs further down the line.”

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