BA has decided (clearly this must have taken a few months to come to the conclusion) that the premium and business traffic is down and going to stay down for a long time. With their planes configured for a larger premium traffic share - they are probably wringing their hands over the loss of this valuable and higher yield business.
But what to do about it? Earlier this year the airline opened up the tier system to discount tickets. Now the shoe is about to drop on the Biz Travel Agents
In a conversation with the UK's TTG-Business Trade Magazine, Scott Davies, BA’s head of TMC relations, told ttgbusiness.com he had finished a period of careful consideration regarding SMAs and would be informing agencies about how the agreements will work in the future.
Davies said: “BA’s sales and marketing agreements for TMCs have followed a similar structure for the best part of ten years. The market has changed dramatically in recent times and we recognised the need to re-evaluate our approach.
“We consulted with key trade partners during the summer regarding the most mutually beneficial approach to take and we have opted for two key changes.”
He said BA would firstly update the activities TMCs need to complete to trigger payment, which will make the agreements more relevant to today’s market. ttgbusiness.com understand this means TMCs will have to work harder for their SMA.
The airline had “re-visited” its fixed and variable payments within the agreements, said Davies. “This is key as variable payments provide TMCs with a more interesting upside as the market begins to recover.”
He said updates to SMEs would take effect in the New Year.
My team has been on the phone to a few TMCs in the UK and so far no response as the issue is very sensitive. Given BA's footprint in the UK no one is making any statements. However smaller TMCs are saying that so far they have not been contacted - that will likely mean they will lose out. However that is speculation on my part. I believe it will be the bigger players with footprints that straddle the Atlantic who will get the best dea;s but the guaranteed payments are likely to go in favor of a pure variable incentive model albeit at a lower number than before with some high thresholds. Small and Mid size players will find this hard to achieve.
Other airlines are likely to step into the breach and provide some level of value to the players. With the Transatlantic market now very competitive, BA needs to tread very carefully.
Could it be that old cosy (and some might say unhealthy) relationship between GBTA and BA moves to a new and more financially conservative basis? Inquiring minds want to know.
Cheers
Showing posts with label TMC. Show all posts
Showing posts with label TMC. Show all posts
02 November 2009
01 November 2009
Why and How TMCs Hate LCCs.
As an observer of the Travel Industry I have watched the different sections of the value chain behave in different ways. Of late I have been thinking about the whole value chain and in what ways different parts of it are affected by fragmentation of content and differentiation of customer needs and providers capabilities. In looking at the corporate market it has somewhat worried me that the typical TMC has shunned the LCC market. It seems that even when the LCC footprint is pretty significant (the top two branded airlines on the planet are both LCCs – WN and FR) TMCs have shunned them and vice versa. I am not going to debate who shunned who first but it is still a pretty interesting view.
It seems to me that TMCs have done a remarkable job in deflecting the basic need to provide the corporate customer with the full product as a neutral provider in exchange for operational efficiency and service excellence.
This is an interesting concept but this blinding flash of inspiration came from one of my fellow Professor’s who wishes to remain anonymous. But that is a pretty fundamental view that on reflection I now whole heartedly agree with.
So how do they do this? Firstly their almost unhealthy relationship with the GDSs and tying themselves to the legacy model has resulted in a shunning of LCC products. The focus on “saving money” sends them into deep activity on intra product as opposed to inter product (to wit – getting the best price on the itinerary booked vs checking first whether the trip is necessary and secondly what is the most efficient way to address the needs that drove the trip request in the first place).
Then the lack of attempt at providing a service proposition to LCCs by the TMCs seems to be a significant failing on their part. Being passive while airlines such as Jetstar says let the customer book direct only seems to indicate an unwillingness to embrace the LCCs and help the customer to make a decision about the most efficient way to get from A to B. I am sure there will be TMCs who will say that this is not true and that the real problem is the unwillingness of the LCC to play ball with the TMCs. Well I think that argument is academic. The issue is the fact that little is done by the TMCs.
The promotion of operational excellence is almost tied to the concept that the legacy airlines have in differentiating their products when in reality it really is a commodity. TMCs don’t want to stray outside of the box because it means that they would have to do more work and pay for something. So the legacy TMC model doesn’t endear itself to the servicing of LCCs. Even though the customer would ultimately save money by using the LCC more frequently. One could also say that TMCs are too operationally focused - just like legacy airlines are.
So chaps – the continued shunning of each other (TMCs and LCCs) is set to stay. But given the amount of possible market share that LCCs command – this cannot continue. The mature US based TMCs now have only a few pockets of pure LCC activity. However Europe has a very large LCC footprint where in quite a few cases the ONLY option is an LCC. The TMCs (and their attendant service partners) therefore must change their position or risk seeing themselves disintermediated as a result.
Recent efforts by Travelport and others to bring LCCs to the GDS environment have only shown that the GDS model is increasingly flawed. With AA now moving to a 100% pure direct model - can the TMCs ignore the LCCs any longer. That does not require an answer.
Food for thought?
It seems to me that TMCs have done a remarkable job in deflecting the basic need to provide the corporate customer with the full product as a neutral provider in exchange for operational efficiency and service excellence.
This is an interesting concept but this blinding flash of inspiration came from one of my fellow Professor’s who wishes to remain anonymous. But that is a pretty fundamental view that on reflection I now whole heartedly agree with.
So how do they do this? Firstly their almost unhealthy relationship with the GDSs and tying themselves to the legacy model has resulted in a shunning of LCC products. The focus on “saving money” sends them into deep activity on intra product as opposed to inter product (to wit – getting the best price on the itinerary booked vs checking first whether the trip is necessary and secondly what is the most efficient way to address the needs that drove the trip request in the first place).
Then the lack of attempt at providing a service proposition to LCCs by the TMCs seems to be a significant failing on their part. Being passive while airlines such as Jetstar says let the customer book direct only seems to indicate an unwillingness to embrace the LCCs and help the customer to make a decision about the most efficient way to get from A to B. I am sure there will be TMCs who will say that this is not true and that the real problem is the unwillingness of the LCC to play ball with the TMCs. Well I think that argument is academic. The issue is the fact that little is done by the TMCs.
The promotion of operational excellence is almost tied to the concept that the legacy airlines have in differentiating their products when in reality it really is a commodity. TMCs don’t want to stray outside of the box because it means that they would have to do more work and pay for something. So the legacy TMC model doesn’t endear itself to the servicing of LCCs. Even though the customer would ultimately save money by using the LCC more frequently. One could also say that TMCs are too operationally focused - just like legacy airlines are.
So chaps – the continued shunning of each other (TMCs and LCCs) is set to stay. But given the amount of possible market share that LCCs command – this cannot continue. The mature US based TMCs now have only a few pockets of pure LCC activity. However Europe has a very large LCC footprint where in quite a few cases the ONLY option is an LCC. The TMCs (and their attendant service partners) therefore must change their position or risk seeing themselves disintermediated as a result.
Recent efforts by Travelport and others to bring LCCs to the GDS environment have only shown that the GDS model is increasingly flawed. With AA now moving to a 100% pure direct model - can the TMCs ignore the LCCs any longer. That does not require an answer.
Food for thought?
22 February 2009
JetBlue Now Loves the GDS - Higher Yields...BUT...
I find this an interesting discussion. For some stats - click on over to the Beat's website and check out David Jonas's blog on the subject of jetBlue and its relationship to the GDSs:
http://www.thebeat.travel/blog/node/361
The GDSs and the Hotels have long argued that the GDS represents a higher yield channel. And actually it probably does. But lets consider the reasons before drinking all the KoolAid and rushing headlong into the arms of Dallas, Madrid and Atlanta.
The Travel Agency market has largely lost the small travel agency. While pockets still exist - the travel distribution market has fundamentally changed within the last 15 years. There are very few Mom and Pop type businesses that sell airline tickets. That business has gone online and for no commission the remaining business is split between the OTAs and the airline direct business. However the Corp market has largely not changed. Even though GetThere and other online versions of corporate tools have been out for a long time - they have not fundamentally changed either the profile - or more importantly the habits of the Corporate travelers. So the TMC remains a largely captive GDS market. A fact that the GDSs still hang onto. A word to describe that process would be - FEROCIOUSLY.
So with jetBlue wanting to access the business travel market as its own model matures - it is seeing a higher yield emerging from the GDS channel. Indeed Southwest and in Europe EasyJet are seeing the same thing and are so pursuing it. But I caution, this is not a function of the GDS model itself but the market. And this is where the non-sequitor exists. The self fulfilling prophesy means that there is a very tight symbiotic relationship between the GDSs and the TMCs. Hence Charles Petrocelli's statements at PhocusWright in LAX in November to that effect.
However as I talk to real travellers and workers who live with the constraints of the TMC/GDS based booking services made by people who (the travellers believe) have little or no consideration of their needs, its become obvious that the situation is not sustainable for the long term. The move to a tight budget environment has travellers making decisions on what is the cheapest flights rather than the most convenient. This pressure has been there for the SMEs for a long time whose yields have always been lower for airlines as they tend to book direct or via OTAs.
Now in today's new reality, the bigger Corps are feeling the same pressure. If you want to travel for business you had better chose the absolute lowest cost solution or not go. Guess what? In droves business travel people are going to their managers and showing them the lower prices available on the OTA or direct websites.
This is a dirty little secret that none of the existing players - the Suppliers, GDSs and TMCs - really want anyone to notice.
I am not slamming anyone for this behavior. Convenience always trumps price in a conventional environment. But these are not conventional times. The creativity that used to be applied to maximizing frequent flyer points is now being applied to justifying trips that the corporate travellers absolutely need to make so that their businesses can actually stay afloat. Survival drives some radically different behavior.
Bottom line to all this - the GDS/TMC model is due for sea change. Already we see this occurring in that there is competition creeping into the mix. The GDSs are now competing with their best clients (Travelocity for Business as an example) and TMCs are developing their own holistic full content supply chain management systems for which the GDS is not the sole/exclusive source.
I will conclude by reminding you dear reader - that I, fundamentally and for a very long time, have believed that fragmentation is a way of life. You cannot legislate against it or prevent it. It is inevitable. Those who embrace it will be winners. Those who deny it will be road kill. 'Nuff said?
Cheers
http://www.thebeat.travel/blog/node/361
The GDSs and the Hotels have long argued that the GDS represents a higher yield channel. And actually it probably does. But lets consider the reasons before drinking all the KoolAid and rushing headlong into the arms of Dallas, Madrid and Atlanta.
The Travel Agency market has largely lost the small travel agency. While pockets still exist - the travel distribution market has fundamentally changed within the last 15 years. There are very few Mom and Pop type businesses that sell airline tickets. That business has gone online and for no commission the remaining business is split between the OTAs and the airline direct business. However the Corp market has largely not changed. Even though GetThere and other online versions of corporate tools have been out for a long time - they have not fundamentally changed either the profile - or more importantly the habits of the Corporate travelers. So the TMC remains a largely captive GDS market. A fact that the GDSs still hang onto. A word to describe that process would be - FEROCIOUSLY.
So with jetBlue wanting to access the business travel market as its own model matures - it is seeing a higher yield emerging from the GDS channel. Indeed Southwest and in Europe EasyJet are seeing the same thing and are so pursuing it. But I caution, this is not a function of the GDS model itself but the market. And this is where the non-sequitor exists. The self fulfilling prophesy means that there is a very tight symbiotic relationship between the GDSs and the TMCs. Hence Charles Petrocelli's statements at PhocusWright in LAX in November to that effect.
However as I talk to real travellers and workers who live with the constraints of the TMC/GDS based booking services made by people who (the travellers believe) have little or no consideration of their needs, its become obvious that the situation is not sustainable for the long term. The move to a tight budget environment has travellers making decisions on what is the cheapest flights rather than the most convenient. This pressure has been there for the SMEs for a long time whose yields have always been lower for airlines as they tend to book direct or via OTAs.
Now in today's new reality, the bigger Corps are feeling the same pressure. If you want to travel for business you had better chose the absolute lowest cost solution or not go. Guess what? In droves business travel people are going to their managers and showing them the lower prices available on the OTA or direct websites.
This is a dirty little secret that none of the existing players - the Suppliers, GDSs and TMCs - really want anyone to notice.
I am not slamming anyone for this behavior. Convenience always trumps price in a conventional environment. But these are not conventional times. The creativity that used to be applied to maximizing frequent flyer points is now being applied to justifying trips that the corporate travellers absolutely need to make so that their businesses can actually stay afloat. Survival drives some radically different behavior.
Bottom line to all this - the GDS/TMC model is due for sea change. Already we see this occurring in that there is competition creeping into the mix. The GDSs are now competing with their best clients (Travelocity for Business as an example) and TMCs are developing their own holistic full content supply chain management systems for which the GDS is not the sole/exclusive source.
I will conclude by reminding you dear reader - that I, fundamentally and for a very long time, have believed that fragmentation is a way of life. You cannot legislate against it or prevent it. It is inevitable. Those who embrace it will be winners. Those who deny it will be road kill. 'Nuff said?
Cheers
10 April 2008
HRGs Milky Bar Kid rides off... maybe
Mike Platt is leaving Hoggs - excuse me the HRG Group. After a long and illustrious career in the UK Travel market - he will ride off in the sunset. Most people who have been round long enough will actually remember Mike as the original (I believe) Milky Bar Kid.
Perhaps Mike is getting out at a good time. Last month is was revealed that a sister company controlled by the same owning family as BCD Holdings had grabbed more than 10% of HRG. This could be interpreted as the canny Dutchman JFVV is looking to consolidate again. This may see the reconstruction of BTI. Do remember the last time he took a stake in a competitor it was in Navigant which some say precipitated the tectonic shift in TMCs a few years back.
Mike is coming to join the ranks of the Unemployed (er I mean Consultants) so expect him to start showing up at conferences and the like. Perhaps now he will take the gloves off ;-)
Congrats Mike! Are the Milky Bars still on you?
Cheers
Timothy
Perhaps Mike is getting out at a good time. Last month is was revealed that a sister company controlled by the same owning family as BCD Holdings had grabbed more than 10% of HRG. This could be interpreted as the canny Dutchman JFVV is looking to consolidate again. This may see the reconstruction of BTI. Do remember the last time he took a stake in a competitor it was in Navigant which some say precipitated the tectonic shift in TMCs a few years back.
Mike is coming to join the ranks of the Unemployed (er I mean Consultants) so expect him to start showing up at conferences and the like. Perhaps now he will take the gloves off ;-)
Congrats Mike! Are the Milky Bars still on you?
Cheers
Timothy
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