22 June 2008

Is IATA nuts or just its DG?

The latest missive from IATA's Director General (yes Martha he is Italian), takes aim at the GDS providers.

The International Air Transport Association has called on GDSs to cut their fees – or risk losing air product. IATA director general and chief executive Giovanni Bisignani said its partners in the value chain “must deliver similar efficiencies to airlines”. “Why can China TravelSky charge US$0.50 per segment
while the western GDSs charge over USD$4?,” he said. “The industry is in crisis and they must come to the table with better efficiencies or we will use other ways to distribute products.”

OK - so the theory is Travelsky can do it for 50 cents but the Western GDSs charge too much. Either he is nuts or he is mad or he has another agenda. Frankly this cannot possibly be a good way to start a dialogue with your "partners".

Please note I am not defending GDS costs. Far from it - I believe wholeheartedly that the GDSs need to do something about their cost structures and about their technology and processes. Airlines need to just transform their cost structures - however you have heard me rail against that set of issues before. But he clearly knows nothing about China and Travelsky as to why they charge that fee, nor does he understand the issues facing GDSs.

Where I will agree with him - is that there needs to be a transformation in the cost structure for distribution. This is essential. What he is attacking is the headline number. There are many more costs which are dependent on this number which need addressing. At the same time no one seems to be paying attention to the new cost structure which is even worse than the old one with a certain company's new hosted product that the Lemmings are buying.

So perhaps he has a secret pact to attack the GDS model while preserving the new hosted reservations system model? I for one do not understand why he is taking this tack because to those who understand the economics of distribution - he is barking up the wrong tree at the wrong time.

Perhaps he just knows something more than the rest of us. OK - I will buy that... just share a little please.......... If you know - please help me out from my misery of understanding his position.



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