Winners and Losers - US Intermediary Market 2010

As we get more and more data about 2010 - we can start to see some clear trends emerging.

Using ARC data which is a very good proxy for the US Intermediary market, we can see that totally there are some key trends.

I suspect - not yet borne out by hard data - that based on 9 months of activity that the airlines direct business also grew share-wise vs the intermediary market. You have to be VERY careful with this measurement. In my view I look at the issue of hard pax numbers rather than dollar value. We have had several times the situation in the past where the dollar value of sales is not commensurate with the transaction numbers. There is an underlying reason for this - People tend to find the lowest fares on the airlines websites in the USA market. Not so in Europe and other parts of the world while transparency is more pronounced in the North American market.

So looking at ARC's stats we see that the optimism of the overall market reflected in the hunt for bargains. This showed that Online agents did very well starting in January. However during the year that declined in represented value as the Airlines curtailed some of their inventory to online players making it harder to get deals on the online sites vs the airlines direct sites.



The corporate market too had a surge in bookings which resulted in a surge in the Corp market - as represented by the mega category. However it too saw that decline over the year as the increases reached capacity constraints.

There is a number of important factors here at work here. The US airlines are maintaining capacity constraints resulting in extra yielding possibilities and higher pricing to the consumer. The holiday period will demonstrate that the airlines were able to make a bundle. We are already seeing Q3 2010 numbers looking good and now Q4 is promising to be a banner quarter.

Maintaining this discipline is crucial to the airline profitability. Even Southwest is being very careful. The only carriers who are actually expanding above the threshold are carriers like Virgin America and JetBlue. The expansion for the other airlines are coming from International routes. I expect that to continue into 2011.

In my view the current battle over distribution will spill into customer numbers. The organizations lined up against AA and ancillary fees are hiding the true cost battle which is that the TCO of a reservation continues to rise higher than corresponding yields in the core ticket price. As this cost element is opaque to the market - only the impact on the guy paying the fright - IE the airlines - shows up.
The customers will therefore vote with their feet and more likely move more traffic to airline direct websites. Thus more share channel shift will impact ARC's numbers. The emerging channel of non legacy GDS distribution will further cut into the amounts. However this will be a share shift battle and not reflected in ARC's numbers

So Long British Airways Group

On Friday January 21st a storied name – actually two – will disappear from the stock markets of London and Madrid

In Madrid Iberia will disappear. In London on the UK stock exchange – the Footsie component BAY will disappear.

In its place will appear the somewhat soulless IAG – Mega Inc – aka International Airlines Group.

So farewell BAY and BAG. I always liked BAG – I thought it was appropriate for an airline to be called BAG.

25 years almost after its founding – its now big airline group.

Cheers

Date Goofs – Last Chapter Unless…

Thanks to all of you Professors who sent me other date goofs. I particularly like Amadeus’s seeming obsession with 4010. I cant find any reference to Nostradamus in that year.

So this is why I think I will probably drop this line of fun…

There are just too many of them. So unless you have some really good ones .. this is the last post on the subject.

Cheers

2010 In the USA. Its all Up and it was all Change.

In looking at the numbers from the travel agency community – everything looks positive. By any metric the numbers are very positive. Top line. ARC (US) reports 2010 domestic US travel increased 7 percent, reaching levels near pre-crisis in 2008, with 76 of top 100 airports gaining traffic.

No ifs ands or buts – its all good in the distribution hood. http://www.arccorp.com/news/stat/2010-12.jsp

The newly revised annual figures from ARC are a good way to look at the numbers. However note there is one metric not listed here. Ancillary Revenues. These numbers will take perhaps until April to get a complete picture of what has transpired. We know that the airlines made a boat load of cash in 2010. We further know that the move to ancillary services has been growing. On my recent DL flight the price of a drink internationally has grown to $7.

Despite a lot of hand wringing on the issue of ancillaries and even a little bit of wrist slapping (FR) clearly Ancillaries are here to stay and will be a critical part of the airline product mix.

In the USA that move is inescapable. In other markets it will not be quite as easy a sale. Further evidence that while the airlines are changing – the process of splintering of different business models as well as different strategies of distribution are now fully under way. No amount of GDS interference nor pseudo (or real) customer annoyance can derail that process. The cusp of change has already arrived. This is an immutable force. Like it or like it now we are going through radical change.

Cheers

Ansett Revisited - ANZ Buys 14.9 Percent of Virgin Blue

I hate to see history repeating itself. However that seems to be the case here.

Virgin Blue and Air New Zealand jointly announced today that the Kiwi airlines is buying just under 15% of Virgin Blue Group.

This was the same situation that preceded the collapse of Ansett Airlines and nearly brought down the former NZ National Carrier.

Let's hope that the lightening doesn't strike twice.

Cheers

Is Search Powered by the GDS Really Fair? You Be the Judge

In the lines of the usual untruths being floated out there. Here is a key question to ask your favorite GDS. I think its high time to take the challenge and ask this key question once and for all.

Before I answer the headline question let's all be clear about a set of assumptions that seems to be in place.

1. The GDSs are neutral and unbiased
2. The GDS provide full search across ALL airlines
3. The airlines are depriving the GDS and therefore the agents and the consumers of information on all their charges.
4. The airlines are only deliberately trying to change the game and make it harder to figure out the price.
5. All Travel Agents including OTAs provide neutral and unbiased results to their customers.

if you turned each of those assumptions into a question. You would be wrong if you answered yes to any of the above questions in the USA.

1. In the USA GDSs are unregulated by any formal process other than conventional commercial rules. In the EEA certain rules and restrictions exist.
2. The GDSs do not have ubiquitous access to all airlines equally and therefore the neutral search is a COMPLETE fiction. Not all airline participate equally, not all airlines place all content in the GDS, not all airlines are even present in the GDS.
3. The Airlines are compelled by law to display all charges and not hide any charges from the consumer. Further the Airlines have for many years used the Internet not the GDS to communicate their service fee and commercial models with the agency community over the internet because - the GDS systems (known as Co-host or Info pages) are inadequate and costly to maintain. Never once has anyone complained about this process. Almost ALL airlines now use the Internet Web pages to store data that is easier and simpler plus better for the travel agency community at large.
4. The airlines have always tried to obfuscate their pricing and hide the true market price from the consumer? If you want any further proof of the reasons for doing this - just ask AA who tried to create a transparent pricing model called Value Pricing in the 1980s and were forced to recant it because they could get no other airline to join them.
5. No travel agency including the OTAs are required to provide neutral or unbiased information. I should know - I fought that battle with the European Community in 1997 and won the right not to have to. Note that the compelling argument I made was that to force the OTAs to display neutrally as the GDSs are in Europe would force the same rule to be applied to any agent. Meaning that the agency communicty would be forced to tell their customers about ALL suppliers no matter what the customer requested. And just so we are clear - WHO was the company that tried to force that issue? Yup you guessed it a GDS. I wont embarrass the company by naming names but they know who they are.

In the USA it is not required.

Good now that we have that out the way. Can we please stop with the untruths about the expressions and words "GDS" "Fair" and "Search" in the same breath?

Folks this is capitalism. And as long as its fair and the big boys don't beat up on the little ones nor create closed oligopoly rules on suppliers and users.

Cross subsidization by big players to preserve their dominant position is often outlawed on both sides of the Atlantic.

I hope you can accept that there needs to be a little honesty in the debate.

So I am not going to answer the question. I don't need to - it answers itself.

Cheers

With thanks to Mark Hodgetts Blog for the Image. Check out his blog its quite interesting.

Farewell Northwest Logo

I missed this one - but now its all done. Delta retired the last of the NW logos when it retired the last of the DC-9-40s. Mostly operated by SAS - Northwest picked them up as they were retired.

In all NW operated almost all of the ones built.

So long Northwest Orient - a lot of the world went your way....

Cheers

7 Late 7 Official 3rd Quarter

All though I notice that most news reports didnt put in the year.

One interesting comment:

"We've also restored some margin in the schedule to allow for any additional time that may be needed to complete certification activities," Fancher said.

Translation - as there was a bunch of FAA inspectors on board the flight that went down in flames (literally) they will be paying a lot of attention to the software this time around.

The impact is significant because Boeing uncovered a number of issues as a result of the fire although not directly related to it. These things should be regarded in a positive light.

Cheers

Normal Service Resumed - Amadeus Date Bug Exposed

I really wanted to entitle this one

"Amadeus Date Goof #93"

Seems that Amadeus doesn’t have anyone reading of substance the "Professor’s Wisdom."

(Note to the nice 1A people in PR who do read it – please let your customer relations people have a copy)

Here is another example of the use of the 4010 date. Why they pick 4010 is beyond me but they do. Here is the link… in the clear for everyone to see:

https://extranets.us.amadeus.com/SolutionProviders/service/details_print.asp?cn_key=577

OK so a little fudge lie in the sub - head – this is only the 3rd time I have seen the problem. I just thought I would take a little poetic license and exaggerate.

Cheers

2000th Blog Post - The End Of An Era

For my 2000th Blog post – I thought I would pick on a news story that crossed my desk the other day. As regular readers know the Professor has been involved in distribution for many years.

I am of the opinion that the legacy GDS business needs to change and provide better services, better products at a lower price than they do today. What I see them doing as a cabal is to continue to avoid investment in core open technologies preferring to “buy” their market share through tied contracts and legal restrictions preventing a free market. Their revenue streams are more than adequate to support a much greater investment in product development. When a legacy GDS tells you they spend so much money on R&D – take that with a pinch of salt. Much of that expenditure is purely in maintaining the systems’ requirements to remain compliant with the respective authorities. Read development has slowed to a trickle. Lawyers and marketing seems to be a lot more cost effective that real product and customer focus.

Arguably Worldspan was the gold standard for connectivity amongst the legacy GDS players. The company from the mid 1980s developed a number of solutions that provided external system access into the host environment. The company was one of the leading players in opening up the GDS. For this reason it was an early winner in the eCommerce stakes winning most of the major freely contested IBE contracts with the leading OTA players. Sabre as a competitor tended to focus on very strict rules for external system access. Apollo/Galileo was largely non-present and Amadeus was very focused on preserving its monopoly status in its core markets.

At the end of the day the system provider status enabled Worldspan as the smallest GDS – with lesser market share to protect – to develop solutions with its partners and that drove a significant amount of revenue to the owners. Worldspan’s open attitude to technology was well known with the release of many products from a PC all the way up to mainframe connectivity a hallmark of its business. The teams in Atlanta, Kansas City and London paved the way for many innovations in Travel Technology.

Since the acquisition by Travelport and the integration of the company – but not the core systems – Worldspan has lost significant marketshare. It lost Expedia as a customer amongst others. As a result its fortunes have declined and the product line is now seen in many circles as the lesser of the 3 Travelport GDS systems. (The other two are Galileo and Apollo).

Travelport has announced the end of one of the key attributes of the system the universal access. The generic sign on code known to just about every GDS developer is BSIA1234PM/GS.

It has actually some significance. BSIA – B was always better, SI Sign In, A was the work space. 1234 was the generic code and PM was supposed to be the letters for the agent. PM meaning Pars Marketing. GS was the type of sign in – GS-General Sales.

From Feb 11th this will go away and the generic sign will be cancelled. The other generic access 0747 – will also disappear soon. With this – new controls will emerge to ensure that unauthorized system access will be prevented.

https://benelux.travelportservices.com/extranet/info/show/836/

So farewell BSIA1234PM/GS - The end of an era.

On this note I would also like to thank the hundreds of people who have commented or contributed to the blog over the past 5 years. I commit that I will continue writing and providing content and commentary on the crazy world of Aviation Travel and Tourism.

And a final thanks to you the readers. Thank you!

Cheers

The CTA Continues To Spread Untruths

I came across another untruth - I leave it up the the user to determine if I should have used stronger words

Here is a statement from a recent post from Charlie Leocha.

Find it here.

"Give me a break. First AA hides their ancillary fees from passengers by not revealing them to travel agents of any kind. Next, they decide that they need to make airfares more difficult to compare by trying to force an untested and flawed propriety ticketing pipeline on travel agents and hence consumers."

Both these statements which underpin his whole story are clearly and patently untrue.

The proof can be found on every airlines' website. Not only is it the right thing to do - the airlines are compelled by law to provide full information on their product pricing.

With regard to making it more difficult - the process is common and has been in place for more than 3 years and is used in more than 50 countries around the world (including the USA).

Last time I checked it is not the responsibility of the airline to ensure that the legacy GDSs invest in their infrastructure to support the changes in the marketplace.

Sadly these legacy GDS companies have decided that it is better to bribe travel agents and hire expensive lobbying firms rather than invest in their products to meet the needs of the market.

I would be MORE than happy to spend time with Charlie or anyone else to explain how the system works.

Cheers

Justice Dept? Who Cares We Are Already Promoting Our High Speed Travel Services..... Love and Kisses Google

So this is an ad running throughout Germany.

Get your travel from Google on Chrome - very fast.

Wait a second wasn't Microsoft accused of tieing their browser to the OS.

Let's try and count how many components Google can cram in its travel offerings.

Scary - very scary