Revolution In Canada? Kevin Mitchell, Chairman of Business Travel Coalition, Comments on Travel Distribution Development in Canada



    RADNOR, Pa., Aug. 30 /CNW/ -- The following is being issued by Kevin
Mitchell of Business Travel Coalition:
    On August 15, Air Canada (AC) and Galileo (GAL) issued a press release
regarding a new graphical display tool for TMCs to use to access AC inventory,
proclaiming it a "revolutionary solution". (See link to the announcement at
bottom.) For nearly a year and a half, since AC's Tango-class fares were
stripped from the GDSs, the industry has been impatiently waiting for AC to
return these fares to the industry's repeatedly-stated preferred distribution
channel. In the meantime, AC introduced additional content available only on
its web site with its FlightPass product and so-called "derived" Latitude
fares further impacting TMCs' and corporate travel buyers' ability to
efficiently source AC's full product line.
    Unfortunately, the recent AC/GAL communication raised more questions than
it answered and has left corporate travel managers scratching their heads
about whether the cryptic AC/GAL announcement undermines rather than promotes
efforts to regain efficient procurement of AC's full product line. BTC
published a preliminary analysis on August 16 (See link at bottom), and sought
additional input from GAL, AC, TMCs and corporate travel managers regarding
this development. BTC subsequently provided GAL with a set of questions from
industry participants related to full content, functionality and economics.
The response from GAL and AC was not encouraging.
    While AC would not respond to BTC's requests for additional information,
GAL, to its credit, did provide responses to some of the industry questions
gathered and transmitted by BTC. (See link at bottom.) Unfortunately, GAL's
answers do not clarify many of the key concerns that have been raised about
the operation of this new program -- including the issues of functionality and
cost, and the eventual impact to the remaining efficiencies that exist today
for the majority AC product purchases which are still facilitated through
GDSs.
    The analysis that follows is provided to enable TMCs and corporate travel
managers to understand the issues and raise the threshold questions with AC
and GAL. Indeed, from what BTC can determine at this point, there are
potentially profound industry-wide implications resulting from this AC/GAL
agreement.
    
    Background
    
    After strong negative industry reaction to AC's removal of Tango-class
fares from the GDSs in 2006, AC promised TMCs and corporate travel managers
that it would work toward a technology solution with GDSs to accommodate the
unbundling and merchandizing requirements of AC's new product and distribution
strategies.
    Based on public statements and information provided to BTC about the
proposed functionality of this new AC/GAL desktop, it appears to offer an
inadequate option for the customer at best, and may represent a threat to
remaining efficiencies, potentially making it even more expensive to source AC
products. Instead of efficient distribution through the customer's preferred
channel, early indications are that, at a minimum, the content AC has chosen
to withhold from GDSs will simply be aggregated from the AC website.
    The lack of clarity provided raises the specter that more, if not all AC
inventory, could be withheld from the GDSs with access only available from the
airline's web site, reducing the new GAL desktop to little more than an
aggregator tool. If true, this would be a suboptimal solution for corporate
travel programs and could have enormous negative economic and service
consequences; existing economic relationships could be undermined.
    What's more, there are the service issues when live bookings are housed
in the airline web site system. For example, itinerary changes, cancellations
and upgrades will be handled by way of phone calls from TMCs or CTDs to AC.
Importantly, there will be no interlining functionality. These services are
best practices in modern travel distribution. Without them, corporate travel
managers are going to be stuck with expensive workarounds. All the attendant
inefficiencies and increased costs of such a proposed model as a long-term
solution will directly impact TMCs and ultimately corporations -- who in the
end will have to pay more, for less service.
    GAL's responses were incomplete or silent on where the bookings will
reside, i.e. in GAL or in AC's system. GAL also seemed to imply that it would
not pay incentives to TMCs for these bookings and completely avoided these
important questions: What happens to the end-to-end economics of distribution?
Does this new model change the core economic relationships among industry
participants? Who is going to pay for this new distribution model? Silence on
these core issues is not a good sign for our industry.
    This proposed new offering may be an attempt to usher in as permanent a
dramatically different economic and procurement model that serves AC's
interests. However, if this new model becomes the norm it could be extremely
bad news for TMCs and corporations who will have to foot the bill and endure
the service challenges. Extra costs and service fees will likely be charged
for access to inefficient distribution services that are run from AC's web
site. It is unclear what those costs and fees might be, because neither AC nor
GAL is talking about them. It's time for industry participants, both in Canada
and around the world, to ask hard questions and keep asking them until they
are satisfactorily answered. The integrity and efficiency of modern managed
travel programs are at stake.
    
    Analysis: What Really Could Be Going On?
    
    It is BTC's concern that AC, which dominates the Canadian airline market,
approached GAL and offered it a Faustian Choice. Under this worst-case
scenario, AC may have indicated to GAL that GDSs are not part of its
going-forward strategy; that an "aggregator model" where the agency pays is.
The inefficiencies flowing from such a model would be shouldered by TMCs and
their clients, not AC. If GAL could reinvent itself as an uber aggregator in
Canada, and lead this revolution, AC would do everything in its power to drive
business to it. Perhaps GAL might have found this offer compelling, even at
the expense of efficient and customer-centric distribution services.
    BTC hopes its analysis is wrong because of the negative impact on the
customer. It's no secret that airlines want to shift 100% of their
distribution cost to the customer (including merchant fees), despite the fact
that the customer is already paying for distribution in the price of tickets.
Corporate travel buyers have successfully pushed back against this model in
the U.S. and Europe. However, had it succeeded there, TMCs and corporations
would at least have been left with the efficient GDS channel. It's one thing
to shift the cost of distribution - it goes to a whole new level when the
airline also seeks to force inefficiencies and service degradation on top of
the shifted cost. The AC strategy appears to be based upon controlling the
passenger and shifting the cost of distribution, and in the process burdening
the managed travel industry with new levels of complexity and inefficiency.
    If this AC/GAL model is what it appears to be, and if the marketplace
accepts it as the norm, then the goal of regaining access to full airfare
content in Canada through the channel of choice for TMCs and corporations will
have been denied. This would only serve to highlight a root cause of problems
in the Canadian marketplace for commercial air transportation services: lack
of adequate airline competition levels. AC has demonstrated it believes it is
in such a dominant market position that it can compel TMCs and corporate
customers to deal only on AC's terms. Indeed, AC may be attempting to dictate
the workflow of TMCs, impairing their efficiency, and burdening the airline's
very best customers with new costs for less service.
    Upon seeing the press release of this new offering come out, one would
think this was something to celebrate. However, if this means losing all the
remaining efficiency TMCs and corporate buyers had with AC, and if it means
sending a message to all other carriers that the marketplace is willing to
accept an inefficient aggregator model where agencies and corporations foot
the bill for airline distribution -- what's to celebrate?
    
    Strategic Concerns
    
    Industry analysts and journalists will undoubtedly uncover whether this
arrangement effectively allows AC to control and manipulate the GAL system to
the detriment of competitor airlines in Canada, and to the ultimate
disadvantage of consumers and corporations via higher airfares and surcharges.
GAL never did indicate to BTC where the bookings will reside -- in GAL or AC.
By their silence on this question, one would naturally presume the bookings
will reside on the AC web site. Right now, the stated plans are for consumers
to have the ability to comparison-shop AC and its competitors' offerings.
    However, what would stop AC, after some period of time driving customers
to its web site, from turning off the comparison shopping functionality,
thereby harming WestJet, Porter and other airlines? The GDSs would be
irreparably damaged in the Canadian marketplace by then, and GAL would have
become eviscerated into a mere conduit for implementing AC's domination
strategy. TMCs and corporate travel managers would be without effective
recourse or alternatives. The industry has seen this scary movie many times
before and knows for sure that it doesn't have a Hollywood ending.
    It's also no secret that airlines in the United States and around the
world are watching closely how the North American marketplace responds to AC's
distribution policies and programs. Most corporate travel managers do not have
deal-breaking problems with an airline unbundling its products' features and
attributes, per se. However, AC committed to working in earnest with GDSs to
collectively set standards and develop solutions that solved AC's distribution
challenges while protecting the interests of TMCs and corporate buyers of AC
services.
    AC has not followed through on these promises, and worse, seems intent on
returning the industry to the travel management dark ages. The industry
shouldn't go back there without a fight -- time and again, travel buyers have
proven that when they demand better, they get better from airlines, GDSs and
all suppliers. Now is not the time to capitulate to half-baked, unexplained
solutions that threaten interests of all participants in the distribution
chain.
    TMCs and corporate travel managers must protect their interests and
seriously engage this industry policy issue of strategic importance. Please
ask the tough questions of all the GDSs and AC and consider joining in on a
BTC webcast on the Canadian marketplace. BTC will conduct the webcast at
noon(EDT) on September 11 to update the industry on the problems travel
management companies and corporate travel managers are experiencing in Canada
with airfare fragmentation and the associated expensive workarounds. Low-fare
pioneer WestJet will also make a brief presentation and limited-time offer to
corporate travel managers. To register for this free webcast, visit
http://www.AdvancedSurvey.com/default.asp?SurveyID=54361.

    
    STORY LINKS
    AC/GAL Press Release:
    http://businssstravelcoalition.com/advocacy/campaigns/97.html
    BTC Preliminary Analysis:
    http://businesstravelcoalition.com/advocacy/statements/101.html
    GAL's Responses to BTC Questions:
    http://businesstravelcoalition.com/advocacy/statements/100.html
    NOTE:
    
    This article is available as free content for linking, republication or
reproduction in any format, e.g., electronic or print. No advance permissions
are necessary; all that is required is attribution. To use this article,
please include the following: "Republished with permission from Business
Travel Executive / askBTE.com and Business Travel Coalition."




For further information:

For further information: Kevin Mitchell of Business Travel Coalition, 
+1-610-341-1850, btcmitchell@gmail.com Web Site:
http://www.AdvancedSurvey.com/default.asp?SurveyID=54361                 
http://www.btcweb.biz                 
http://www.businesstravelcoalition.com

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