When it comes to booking travel for their clients, travel agents and travel management companies (TMCs) rely upon a Global Distribution System (GDS) for seamless access to travel suppliers. So, what happens when airlines begin to charge fees to travel agents booking flights via the GDS? The first thing you get is an outcry from the industry.
Like Lufthansa in 2015, British Airways and Iberia plan to charge a fee to travel agents who use the GDS rather than booking direct or through the New Distribution Capability (NDC) starting in November.
"...from 1 November 2017, British Airways and Iberia will apply a charge of £8/€9.50 per fare component to any bookings which are not made using an NDC-based connection, or through other low-cost channels, such as our websites, airline sales offices and call centers," the airline said in a statement to travel agents.
Sabre, one of the largest players in travel technology said it had been working with the airline to drive more value for passengers.
"It is therefore disappointing to see BA/IB introduce a surcharge that will impose costs and inconvenience for those using the GDS channel," said Sabre in a statement. Shares of Sabre dropped 1.6 percent after the British Airways announcement.
While no one is happy about the imposition of an additional fee, some frustration stems from the fact that one of the ways travel agents can avoid the fee is to use a system that is yet to be available.
Ajay Sodha, founder of Key Travel said to Travel Weekly in the U.K.: "We're between a rock and a hard place."
[READMORE]READ MORE: How Often Do Travel Agents Work Together? [/READMORE]
The New Distribution Capability (NDC) is a program launched by IATA with the support of the travel industry. Its main goals are to enhance the capability of communications between airlines and agents and it also is open to third-parties to implement and use. Essentially, it creates an industry standard for booking.
NDC is relatively new technology and has only begun to be approved for integration by GDS providers. The problem for the GDS systems, such as Amadeus, is that they need more time to integrate. (Amadeus shares also took a hit after the BA announcement, dropping 4.5 percent.)
"Airlines need to upgrade their systems to do the work. Coding for delivery [of a BA NDC pipeline] will take 12-18 months from the moment we see it," said David Doctor, vice president of provider offer management at Amadeus to Travel Weekly in the U.K.
This means that travel agents will presumably not have the technology they need available through the GDS, their preferred booking method, when the fees go live, and they are not happy about having yet another fee thrust upon their clients.
What's more, even when the NDC system becomes readily available, Price Waterhouse says the benefit to users is as of yet unknown.
"...while the NDC has the potential to help airlines boost revenue, there are still questions as to whether there will be any benefits stemming from reduced distribution costs," said Pricewaterhouse associate Michael Ng in a 2015 blog post.
The Business Travel Coalition also blasted NDC technology in a recent open letter to British Airways parent, International Airlines Group.
"...those who witnessed the launch of NDC in 2013 by the International Air Transport Association (IATA) will recall vividly that the multiple airlines that are the controlling members of IATA designed NDC as a tool to defeat fare transparency," wrote BTC Chairman Kevin Mitchell.
[READMORE]READ MORE: Travel Agents Speak Out Against Lufthansa's Spurning of the GDS Model[/READMORE]
Mitchell also says the fees are "an attempt to pawn off on consumers the entire amount of distribution costs via the independent channels, and maybe more by turning a cost center into a profit center."
"...anyone in the industry knows that call centers and airport ticket offices are the most expensive channels generating the least economic value whereas the GDS-powered TA channel is less costly and creates more economic value," wrote Mitchell. "Indeed, GDS fees have dropped significantly over the past 10 years. So, if this were about recouping distribution channel costs, then you would be applying the surcharge to your own most expensive channels."
Brian Robertson, president Vision Travel, Ontario-West agrees that this is a case of an airline passing its costs on to the customer. Last month, Robertson told TravelPulse Canada, the fee is "another example of an airline not understanding the needs of their customers. Corporate customers rely on Travel Management Companies to manage their needs and Travel Management Companies rely on GDS companies for efficient, and productive distribution of the product. Adding a fee to the transaction...to the highest percentage of transactions, is doing a disservice to the end user, who is the customer, because they're passing the cost on."
While Lufthansa, British Airways and Iberia likely make up a small percentage of travel agency ticket sales in the U.S., the larger concern is whether fee-hungry domestic carriers will follow suit if the pay-to-play GDS fee model takes flight.
CEO Carsten Spohr has repeatedly said he expects rival carriers to follow suit.
"From what we hear in the industry, and with the visible success of Lufthansa, I'd be very surprised if others would not follow," said Spohr, according to CNBC.
Monica Poling contributed to this report.
For the latest travel news, updates and deals, subscribe to the daily TravelPulse newsletter.
Topics From This Article to Explore
