20 December 2009

Airline Traffic Nov 2009 Figures Reveals Interesting Dilemma for US Carriers

We have two pieces of interesting data from sources that normally match.

The data sources are the US ATA - Air Transport Association, and the Airlines Reporting Corporation - ARC.

ATA measures total traffic for US airlines. So taking like for like - there are two sets of metrics. The table looks like this

November 2009 year vs year previous activity.

ARC Transactions up 8.64%
ARC Sales up 6.86%

ATA Passengers down 1%
ATA Sales down 7%

Even accounting for approx a 21 day advance purchase average and some date skewing due to Thanksgiving - this shows us that there is perhaps an interesting phenomenon emerging. I believe be that the percentage of travel booked via Intermediaries is actually rising and significantly.

PhocusWright and others have been predicting this for some time. The Professor believes this to be the case. We have seen that the effect of the Fee removal on OTA sales has been pronounced, with significant revenue increases since September - most recently in November the Y/Y growth was 20%. In addition even the TMCs are reporting better at 6% growth. The remaining category of "other" namely retail and tour operator/wholesaler based sales were flat in November. While it will be some months before we see formal numbers out of the GDS companies - we can be sure that the big 3 are showing increases that seem to counter the airlines continued downward trend.

It will be some months yet until the BTS (official government stats) are reported but we have a pretty good proxy now with the numbers we see from ARC and the ATA.

For the airlines this trend represents an interesting dilemma, and perhaps a clue to their recent behavior. With all the positive talk of airlines enabling Intermediaries to sell ancillary products via new tools this can only be positive. However there is a lurking issue. The legacy GDSs will also benefit from this swing in sales from Direct to Indirect.

Thus the airlines will need to look to the agency community as a class to swing them away from the legacy GDSs if they are to be successful in reducing distribution costs. If not then there is a risk that the GDSs will gain power and force concessions (and therefore higher costs) from the airlines. As we have seen even in the recession gripped down market - the GDSs have been able to boost yields.

As I have noted before - this is a war with many battles.


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