20 April 2010

GDSs Start Modifying Terms and Pricing - Welcome to the New Model that you will pay - Unbundled and of course More Expensive.

"So how would you like your GDS PCA today sir - you can have it anyway you want it as long as its black." (And profitable to me).
"This is a really old bike good for only one thing, it is not modern and can do very little ... I will give you only a few measly pennies.." "What it was your beloved ancestor's prize possession - then take less not more for this old heap of iron scrap...."

For some time now those airlines (that are astute and are tightly managing their costs) have probably noticed that their total flow of money to the GDSs are - well let's not put too fine a point on it - expanding.

In preparation for the ancillary revenue model that are emerging the GDSs are taking different tacks with regard to the cost model. Some are unbundling and others are now "adjusting" their fee structures.

One thing is for sure. The GDSs are determined not to be left out of this gravy train. They are going to be charging a lot of money for ancillary revenue services if they can get away with it. I predict a showdown is coming between the GDSs and the airlines over this. The GDSs are already putting out stories on how much new infrastructure they are putting in place to make themselves ready for AR. Travelport is taking a different tack from its competitors and is sticking well and truly with the IBM model by buying a whole load of new zTPF boxes.

As one IT wag told me several years ago after evaluating the zTPF system - he made an interesting point. For the first time in his memory (he had started with TPF version 2.X) - zTPF was going to run effectively the same Operating System but with no new functionality added. Seems like the old boys in Hursley (near Winchester) are finally being pensioned off.

But I digress..

The issue is going to be how the GDSs price the ancillary services. Will they do it fairly and equitably? And here they stand at a reasonable risk. If they price it at zero or essentially little charges then they will have a hard time in cost recovery. If they price it too expensively - the airlines wont distribute the AR products via the GDS and will resort to new channels and more flexible yet cheaper alternatives like Direct Connect tools.

The Airline accountants (now somewhat dusted in ash) are going to be looking for more places to save money. The GDS better play nice. For the coming IPOs this year - this represents a bit of a threat. The world is not quite as homogeneous as it once was.

Better pay attention to this one chaps... it wont be a nice and easy model. As the old adage goes - "Fool me once shame on you, fool me twice shame on me." Think of that when you stand across and start negotiating over that big old iron.


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