06 December 2012

Agents Groups - Short Sighted or Defenders of the Realm?

A good article in Travel Market Report by Michele McDonald posited that Canadian agencies as represented by ACTA fear Airlines will bypass agents.  She calls out a critical statement:
"Since the airlines are demanding the contact information before the consumer has chosen any carrier, the airline could bypass the agency entirely and contact the potential customer directly with its response.
ACTA Analysis of NDC"

At the heart of the debate here is whether or not the agencies have a role in the distribution of airlines product (assuming NDC happens) going forward.  Bear with me a moment - I think we have to consider whether NDC has a chance for success. At the moment judging by what is made public, I think it has flaws. Before someone takes my comments out of context I believe it will happen but only if certain obstacles are removed from the process.

The issues that can derail the process occur on all sides but here is a smattering:
  1. Airlines are constrained from what they can and cannot do as a group. 
  2. Airlines have not been terribly effective at getting things done fast. The announced processes look incredibly complex and tedious.
  3. The GDSs are not endorsing the process but are participating (cautiously)
  4. The commercial issues such as the contentious GDS incentive fee programs are not being addressed
  5. Now that the airlines Full Content Agreements (FCAs) have been challenged and the airlines have won at least one round (AA consent agreement with Sabre) we can expect FCAs to be limited.
  6. The spectre of price fixing comes with any effort on constrained distribution
Let's return to the matter of the role of the agent and the conflicts they face. I think we need to remember the key factors that brought us to this point in the first place.
  1. No one has an automatic right to sell another's product. Agents have few rights as resellers of airline products. (It is interesting to note that Travel Market Report describes itself as the voice of the travel seller).
  2. Easy comparison shopping is not a right and there is no law that states that comparison shopping via the GDS is a requirement. (Despite many attempts to do so).
  3. The marketplace for agency distribution is radically different from where it was 17 years ago. The cost of the GDS powered agency channel to the airlines is now one of the highest. 
  4. Viable alternatives now exist for direct and indirect distribution that is unique and customized to the channel and the distribution partners and less expensive. Yet the legacy GDSs have failed to provide adequate tools for the same of ancillary products through agency channels. 
  5. Airlines need to unbundle the standard product, rebundle and segment their product offerings into an increasingly sophisticated marketplace that responds and expects the product owners to do so.
  6. Understanding who the customer is and how they can be targeted by the seller is critical.
  7. Never forget that the airline has a mission to obfuscate the true price of the product. 
After all the rhetoric is expended there is a fundamental truth. The marketplace for airline products is now in the control of the product owner. All intermediary seller's of the travel product and the consumers have to accept this basic fact. The airlines have finally found a way to make money and the days of stupid airlines is rapidly drawing to a close. So agents - be realistic accept that the airlines have the ability to go around you. Get over this obsession. It will do you no good at all. Now you really have to compete in the open market. Use your best weapons. Your relationship with the customer and your superior knowledge.

For most travel agencies this situation has shone a spotlight on a true paradox. Are they the true champions of the consumer or are they the devil's hand maidens? Agencies have been placed here on the horns of this dilemma because they now have to find ways for compensation now that the commission system is no longer in place for air. Most agencies are now compensated largely by consumer. If you are a TMC - probably entirely through fees. if you are an OTA large amounts of your revenue come from the advertising. The smaller agents have an even harder time.  But what of the GDS incentive fee? Today for almost all agencies it is a matter of profit and loss. The billions of dollars in incentive payments that flow from the GDSs to the agencies annually is a life line. Accepting it - which encourages agencies to book only on those airlines for whom a fee is provided (in Canada the incentive doesn't apply in many cases to the sale of products by the largest airline Air Canada). That flies in the face of choosing the best option for the traveller. Indeed it could be argued it discriminates against low cost airlines.

How many agents have told little white lies that there is no lower fare, or that the fare was the best out there for that particular instance knowing full well that indeed there was another fare and another airline but that there was no compensation. Oh the perils of being an advice and transaction purveyor.

Sadly these issues are not debated in the open as airlines and travel agencies are gagged through non-disclosure agreements from speaking about the agreements and their contents. Over the years I have had sight of many of these agreements and can tell you that in my opinion they are onerous and highly restrictive.

Please chaps - can we be realistic about this issue and stop the nonsense about the airlines stealing agencies business. That ship sailed a LONG time ago.