27 March 2009

Is The Rhetoric Against Lufthansa's PFP Too Loud?

I have tremendous respect for Kevin Mitchell and his advocacy of the Business (Corporations) user community.

However I have to wonder why the heat is being turned up against LH? To read more please go here:


So why do I disagree with Kevin here? Frankly there is a sense of responsibility that has blame all the way round. LH's frustration with trying to get a resolution out of the GDSs has spilled over into the services model for the agencies. It is of course a classic squeeze play. I have listened intently to both the arguments from the GDSs and from the Airlines who are the real protagonists in this battle. However the agencies (TMCs in the main) and indirectly the corporations are drinking from the well of the Airlines cash which is being diverted by the GDSs for their express intent to retain their customers by using the cash to preserve their market share.

As a member of one of the teams that introduced the incentive model while I was at Worldspan, I can honestly say that the original intent has been somewhat perverted along the way. But frankly it doesn't matter how we got here - the fact is that we are here and the airlines whose cash it is - believe that they should be in control rather than the GDS.

Whether you agree or not, the end game here is that the incentive fees are likely to end or be substantially reduced. It is just an unsustainable model in a transparent distribution world economy.

Where I think there is a real issue is that the transition from a supplier paid model to a user paid model (which is currently under way) requires that the nice and easy holistic one size fits all model either delivers its promise (or its PR!) or the agents have to accept that they cannot rely on the GDSs for full aggregated content. As many regular readers know this has been a constant theme of mine. This is the moment I absolutely think the rhetoric has been misplaced.

I believe that my position is supported by the fact that the Agencies - particularly TMCs - rely ever increasingly on 3rd party automation to fix the inadequacies of the GDSs. Either in content provision (eg access to LCCs) Fare tools, Quality control tools or customer service management tools. The Corporations are happy to demand that level of quality service and even happier to pay for it - or so it would seem.

As the GDSs retreat from the full service model, they are attempting to simply preserve the status quo via a commercially unsustainable incentive program that robs Peter to pay Paul. Perhaps one should ask if that is fair?

Thus in reality if BTC is going to hold a mock trial then there should be a set of co-defendants in the dock. The Agencies and the GDSs are at least accessories to the crime if there is indeed one.

For now, if you follow the logic, LH should not stand alone in the dock - there should be another defendant added to the accused - Air France/KLM. But even then that is not all. You can easily add Gol, Norwegian and EasyJet.

While I think there was once a never never land where the GDSs provided all the tools and services that the agencies (Corporate and Leisure) needed, sadly that time has long passed. There is not going back. So like it or lump it the new world order makes the current model anachronistic at best. Unsustainable - that is for sure. LH is just doing what they think they can.

I just hope that the Airlines and the Corporations can get to an accommodation on this issue - that requires a good dialogue - for that Kevin is correct. But in case anyone is thinking that this will all get resolved with everyone making nice, I fear that they are going to be sadly mistaken. The underlying financial numbers in my humble opinion do not lie. There just isnt a way to make the numbers work for everyone. Whether it is in 2009, 2010 or 2011, the current model WILL undoubtedly change. On that you can depend - and that is no hot air. I simply do not believe the defendants have a case to answer.


No comments: