24 April 2010

PSS and GDS Customers Might Want To Revisit Their Contracts

This is a salutory warning to those who interact with external (typically GDS based and PSS based) systems. This post should be read by airlines, travel agents and third party technology providers to the passenger industry.

In the overall scheme of things the unprecedented events since April 15th of the Volcano should cause those who pay bills to the GDSs for products and services to go back to look hard at their contracts.

If you have a contract that has threshold clauses in it - then definitely pay attention.

Let me pick on 4 customer types:

Airlines - IT Customers
Airlines - GDS - Participating Carriers (PCA)
OTAs - GDS subscribers
Travel Agents - GDS Subscribers

I also recommend anyone who has a signed GDS contract as a third party technology provider should also read this post.

In the next few weeks and months the airlines are going to be getting a lot of extra charges from, amongst others, Amadeus (the bills will come due after the IPO). Amadeus is on the record as saying that the volcano will have minimal impact on their IPO and are steaming ahead with it. What they didn't say was if the impact will be bad. It just may be - as more than one person who reads this blog told me - positive. The airlines didn't cause the mess but they are going to be paying for it no matter what. But all that extra processing is going to be an additional cost for the airlines. All those passengers who were checked in and then had to be "de-boarded" Hmmm that will be interesting to see how that works in those contracts. (PSST Hint to other PSS and airline IT vendors - if you didn't cash in on this gravy train more the fool you!)It is very important that the bean counters examine their invoices from their vendors VERY CLOSELY over the next few months to ensure that all the costs that are in the contract are correctly charged and that the Airline IT guys don't try and slip in some extras in there. I liken this to an unscheduled maintenance on a car. You get the bill and the estimate just doesn't match what you were quoted for!

For PCA based agreements - the cancellation costs that may be accrued needs to be carefully studied. Every airline accounts receivable person worth his salt better be on his toes. Also those nice bill auditors - people like Kale Consultants - should get into the act and make sure that they are poised to check and support their customers - the users.

For OTAs, the big ones at least, they should be OK (GDSs have a habit of turning a blind eye to larger users) - however head back to your contract and look at the threshold clauses. You will like be breaching them. Hitwise and others reported record breaking traffic which translates into a lot of extra hits for NO ADDITIONAL revenue. For smaller OTAs and those whose IBE is provided by a third party - indeed the 3rd party technology providers as well - go check out your contract. I just checked mine and I cringed. Fortunately I had no traffic on it last week!!!

For regular travel agencies whether or not you have an online presence via a booking engine, you need to make sure you have checked your activity. For those bookings that were canceled or re-booked by you - you should be OK. But for those cases where you helped your stranded clients and looked for viable options for them (because you are a customer service operation) and didn't generate additional GDS bookings - you will be hit by a double whammy - additional traffic and several days of no revenue.

With BA and others shutting out inventory, other airlines generating schedule change messages onto queues - there was an AWFUL lot of airline initiated traffic that resulted in extra hits with no corresponding revenue.

If you are one of these people - it may be a good idea to pull out your contract and have a deep look at it. If you are adversely affected - you might want to consider this next time you are sitting round the table whether its for a cold brew or its a hard negotiating session.

You have been warned


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