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Is Report Credible That DOT�s 3-Hour Rule Is Flawed Public Policy?

Mon, 26 Jul 2010 15:55:00 GMT

<blockquote> <blockquote>   Is Report Credible That DOT’s 3-Hour Tarmac-Delay Rule Represents Flawed Public Policy? Or is the airline industry just seeking lower fines? Business Travel Coalition - July 26, 2010, Radnor, PA   On April 29, 2010 a U.S. Department of Transportation (DOT) rule went into effect, after a 120-day notice, requiring U.S. airlines to provide passengers an opportunity to deplane after 3 hours of an extended tarmac delay, on most commercial aircraft, providing it is safe and operationally feasible to do so. AT ISSUE Last week two airline consultancies (The Aviation Zone and Marks Aviation) published an analysis exceedingly critical of the DOT’s 3-hour rule asserting that the public harm from the rule could reach some $3.9 billion over 20 years; a conclusion based upon just the first full month’s aggregation of flight-cancellation data. The analysis, seriously flawed on many levels, would have likely received little press attention were it not for overreaction by a sensitive DOT that criticized the report in an official statement, supported by a quote from Secretary of Transportation Ray LaHood himself! The factual and statistical defects in this study are stunning and include: <blockquote> • ignoring the significant and complex work ahead for airlines to efficiently comply with the 3-hour rule; • avoiding the central fact that passengers need only be given the opportunity at 3 hours to deplane versus cancelling a flight; • dismissing the built-in exceptions to the 3-hour rule for safety and unworkable operational conditions; and • basing conclusions on only the first full month of data since the rule has been in effect(1). </blockquote> Any serious analyst or business executive understands the significant length of time it takes to drive fundamental change to where a new model produces normalized and predictive results; to take a snapshot at the beginning of such a major change-management process and make such grand exaggerations is inexpert in the extreme. BACKGROUND The airlines brought the 3-hour rule on themselves after 10 years of not treating the issue as a management priority; on this there is nothing to debate. The issue all along has not been the cause of these extraordinary irregular operations, e.g., severe weather systems, but rather, how airlines responded to them. Were there coordinated plans in place for such events? Were communications systems adequate? Were staffs trained? Did senior executives care enough to engage? Were their spokespersons indifferent? Too often since 1999 the answers were the wrong ones; airlines did not sufficiently heed the many early warning signs of government intervention coming at them. We live in a country compassionate enough to send a fire truck to extract a cat from a tree or a Coast Guard helicopter and crew to rescue a dog from a swollen river, and without a second thought! What were the airlines thinking? Did they seriously believe our country would allow elderly, infants and health-compromised citizens to be kept on parked planes in freezing cold or sweltering heat at risk for 4, 6 or 8 hours in poor and deteriorating conditions while some airline industry leaders disingenuously dismissed concerns on the rationale that such circumstances are rare? On the other hand, DOT gave just 120 days for airlines to prepare for the 3-hour rule; under these circumstances it is no surprise that flights will be canceled this summer. No study needed to be conducted to know this. This was a terribly insufficient amount of time to implement the rule given the enormous work that will be required to make adjustments, which includes complex internal airline planning as well as negotiations with federal and local governmental bodies such as TSA, FAA, Border Control, airport authorities and law enforcement. Many airports, for example, can and should arrange for removal of passengers (who want to deplane after 3 hours, per the rule) by way of truck-mounted stairs, as Dallas Fort Worth International Airport does, thus minimizing flight cancellations. It will likely take a good year or more for airlines, airports and other participants to adjust to this rule. As I stated in a May 2010 National Journal posting, “Passengers will likely be negatively impacted by the rule, largely emanating from flight cancellations, at least during a transition period of a year or more from April 29, 2010.” INDUSTRY LEADERSHIP MISSING The Air Transport Association (ATA), which represents U.S. airlines, acknowledged its leadership responsibility in stepping up some 10 years ago, after the Northwest Airlines winter-storm debacle at Detroit, and subsequent Congressional hearings, with airline Customer Service Plans. Business Travel Coalition (BTC) had advocated that very step to the U.S. House Transportation and Infrastructure Committee and ATA in 1999, i.e. let the industry solve its problems before considering legislation. That positive ATA initiative unfortunately turned into industry indifference, and then annoyance that this issue continued to persist. The airlines, at the industry level, have provided next-to-zero leadership on this issue since those Customer Service Plans were announced in September 1999. BTC testified 4 times in Congress over the past decade against Congressional / government intervention in this passenger-rights area. After 10 years of airlines not taking the issue seriously BTC, the American Society of Travel Agents and the National Business Travel Association all reversed positions last summer with respect to supporting a 3-hour rule. WHAT’S REALLY HAPPENING The new DOT rule will have been only the proximate cause of cancellations this summer. The root causes will have been over-scheduling, especially at NYC airports, as well as inadequate planning and implementation time to comply with the new rule. Blaming the 3-hour rule and DOT for cancellations is akin to saying Mexican President Felipe Calderon’s crackdown on drug-cartel activities is responsible for the 25,000 violent, cartel-related deaths since 2006, without acknowledging underlying root causes. Despite the disruption that is likely to be rained-down on passengers this summer, the 3-hour rule has in fact forced airline senior managements to finally prioritize extended ground delays as a problem to be thoughtfully, if not urgently addressed. To their credits, Continental Airlines and US Airways proactively implemented steps to comply with the new rule ahead of its April 29 implementation date. Airline hyperbole as mirrored in these consultants’ report regarding mass cancellations is really just part continued denial of a legitimate problem, part advance blame-game antics to set DOT up as the cause of all 3-hour rule-related problems and part posturing to have the $27,500 per passenger fine reduced. THE 3-HOUR RULE IS ALREADY EFFECTIVE The simple fact of the matter is that because of the new rule, airlines are now forced to fix this extended ground delay problem, and they are and will continue to do so. Canceling flight-loads of business travelers on a sustained basis would disastrously dampen demand just as these high-yield travelers are returning to the market, or drive these customers into the open arms of more able competitors. Mass cancellations represent an unworkable proposition, and well-managed airlines will successfully emplace new systems and processes to avoid this highly undesirable outcome. UNINTENDED CONSEQUENCES ANYONE? From a DOT perspective this study and its associated branded website and PR campaign probably look like more of the same coordinated airline industry stonewalling on this issue; apparently the study was initiated before the ink was even dry on the order! What negative "unintended consequences" for airlines might this ill-considered and ultimately shallow attack likely have as DOT takes all manner of decisions later in this year regarding the currently open passenger-rights Notice of Proposed Rulemaking? Have airlines not learned anything from the “gift” of the 3-hour rule? Not content any longer to just shoot themselves in the foot, are airlines now embracing amputation in place of true industry leadership? <div align="justify"> <blockquote>  </blockquote> </div> <blockquote>(1)SOURCE: AirlineForecasts, LLP May 2010’s 1.24% cancellation rate is much lower than the annual average of 1.5% over the last 15 years, as reported by the DOT. However, the 10-year average has been 1.17% and may be a more representative base line. However, there is a large variation around the mean cancellation rate over the last 20, 10, and 5 years so a one-month comparison would be too noisy to produce anything that could be considered representative of a trend. As an example, cancellations as a percentage of operations increased 116% year-over-year in 2005 [May-over-May] and 85% in 1998, but decreased 48% in 2001 and 45% in both 2002 and 2005. The monthly variations are significantly more volatile than the annual variation. </blockquote> … CONTACT BTC Kevin Mitchell | 610.341.1850 | <a href="http://businesstravelcoalition.com/mitchell@BusinessTravelCoalition.com">mitchell@BusinessTravelCoalition.com</a> About BTC Founded in 1994, the mission of Business Travel Coalition is to bring transparency to industry and government policies and practices so that customers can influence issues of strategic importance to their organizations.     </blockquote> </blockquote>

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BTC Statement To House Aviation Subcommittee Re Airline Fees

Wed, 14 Jul 2010 16:31:00 GMT

BTC Verbal Testimony Business Travel Coalition House Aviation Subcommittee Re Airline Fees July 14, 2010 FULL WRITTEN STATEMENT: <a href="http://businesstravelcoalition.com/written_statement.doc">http://businesstravelcoalition.com/written_statement.doc</a> Mr. Chairman, Ranking Member Petri, and Members of the Subcommittee thank you for inviting the Business Travel Coalition to appear before you today to represent passenger and corporate managed travel interests on airline product unbundling and fees. Todays hearing is critically important because of the potential for consumer abuse in this fast changing, unbundled marketplace for airline services. BTC is not against unbundling as a matter of principle, but rather, it is opposed to the absence of full disclosure of all add-on fees and charges such that all consumers cannot make genuine, apples-to-apples comparisons of all-in airline fares. Without timely and complete airline disclosure of the increasing array of add-on charges to global distribution systems, and the travel agencies that they automate, consumers deprived of all-in information will become as economically trapped by airlines as they would be physically trapped during a seven-hour tarmac delay. The need for consumer protection in this area is acute, but the remedy need not be burdensome. The highlights of BTC survey results of 188 travel industry experts released yesterday are revealing of a sea change in thinking about government oversight in commercial air transportation: CONSIDER: 100% of corporate travel managers indicated that unbundling and extra fees have caused serious problems for their managed travel programs. 86% believe that airlines, absent government rules, will not make fair, adequate and readily accessible disclosure of their add-on fees and charges so that travel managers and their TMCs can do comparison shopping of the all-in prices for air travel across carriers. 95% support the proposal that the U.S. DOT require airlines to make add-on data available and easily accessible to the travel agency channel through any GDS in which that airline has agreed to participate. These survey participants are business people who do not generally favor government intervention in the marketplace. However, they see a market failure coming at them with the speed and impact of a Stephen Strasburg fastball to the side of the head. With across-the-board unbundling of air travel services, and absent the government umpire stepping in, consumers will not have the ability to evaluate the full price of air travel options available to them. For decades the transparency of airfare information through all channels has been a marvel of modern technology and has benefitted consumers immeasurably. Unbundling without disclosure threatens to catapult us out of the 21st century and back into an opaque stone age where a telephone, calculator, pen and paper, and a lot of unproductive time, were needed to figure out how to compare airline services. Add-ons like checked bags are material to air transportation, the way a chair is material to a restaurant meal. What some airlines are doing is akin to a restaurant advertising a $20 businesspersons luncheon special and then surprising the patron with a $10 add-on fee for use of a chair when handed the menu. The patron is given partial information and essentially tricked into coming to the restaurant. The stakes of course are much higher at the airport for families and businesses on tight budgets, which is why youre having this hearing today. Of significance is that major airlines remain at a 30% to 35% cost disadvantage against low-cost carriers, and as such, cannot offer the kinds of across-the-board low fares LCCs do. There is therefore a motivation present to obfuscate the true all-in price by keeping fees opaque and especially resisting efforts to have fees and fares displayed transparently for travel agents via the GDSs. Importantly, the Airline Tariff Publishing Company has a new airline-tested data system ready to facilitate the loading of add-on fees in the GDSs. However, not a single major U.S. airline has signed on, to BTCs knowledge, to permanently use the new system because the first airline to do so would likely show higher all-in fares of 30% or more than competitors. In an industry where a few dollars can make the difference for a consumer in choosing one airline over another, no one airline can rationally be expected to make the first, potentially suicidal, move. Thats why a reasonable measure of government help is needed to ensure that all airlines jump together for the benefit of consumers. Moreover, except to the extent Congress or DOT mandates specific consumer protections, airline passengers are without legal rights and remedies because of federal preemption and lack of FTC oversight authority. In conclusion Mr. Chairman, the International Airline Passengers Association (IAPA) and its 400,000 members join BTC in encouraging this Committee to urge the DOT in its NPRM to require airlines to make add-on fee data easily accessible not only on their websites, but also to the travel agency channel - through any GDS - in which an airline has agreed to participate. Congress could also provide this relief in the FAA Reauthorization Act through Senator Menendezs sensible disclosure proposal. Either way, consumers would finally have the batting helmet needed to step up to the plate confidently in todays unbundled marketplace. Thank you and I look forward to your questions. --

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Industry Survey Results Reveal Significant Concern Over Airline Unbundling Practices

Tue, 13 Jul 2010 03:06:00 GMT

<blockquote> PRESS RELEASE For Immediate Release     Industry Survey Results Reveal Significant Concern Over Airline Unbundling Practices U.S. DOT Rules Required To Protect Consumers, Managed Travel Programs JULY 13, 2010, WASHINGTON, DC - Business Travel Coalition (BTC) today published results of a survey of 188 travel industry professionals from 11 countries, including corporate travel managers and travel agency executives, regarding airline product unbundling and ancillary fees. These survey results are being released ahead of a July 14 U.S. House Transportation Subcommittee on Aviation hearing regarding airline fees at which BTC is providing testimony. (BTC survey results can be downloaded at http://www.businesstravelcoalition.com/fee_survey_results.pdf) The overriding message from survey participants is that ancillary fees are wrecking havoc on corporate managed travel programs and the U.S. Department of Transportation must, through it Notice of Proposed Rulemaking, require airlines to make add-on fee data easily accessible not only on their websites, but also to the travel agency channel through any GDS in which an airline has agreed to participate. The following top-line results represent a sea change in thinking among travel industry professionals regarding government oversight in commercial air transportation: <blockquote> • 100% of corporate travel managers indicated that unbundling and these extra fees have caused serious problems for their managed travel programs. • 86% of travel managers believe that airlines, absent government regulation, will not make fair, adequate and readily accessible disclosure of their extra fees and charges so that travel managers and/or their TMCs can do comparison shopping of the all-in prices for air travel across carriers. • 95% of travel managers support the proposal that the U.S. DOT require airlines to make ancillary fee data available and easily accessible to the travel agency channel through any GDS in which that airline has agreed to participate. • 95% of travel managers do not support an airline distribution model wherein access to airfare and ancillary services content is available only on airlines’ websites, or through direct connections to multiple airlines’ inventory systems. </blockquote> “Importantly, survey participants are business people who, as a general proposition, do not favor government intervention in a marketplace. However, as with BTC, who testified four times since 1999 against passenger rights legislation, these industry experts lived through 10 years of airline stonewalling and broken promises and finally realized that the airlines were never going to take extended tarmac delays seriously until made to do so, said BTC Chairman Kevin Mitchell. “Travel managers and travel agency executives do not want to wait 10 years, or even 1 more year to see if the airlines will properly disclose their ancillary fees in all channels in which they sell their products - and thus already make their published, but now incomplete, fares available, he continued.” Here are sample comments from survey participants: <blockquote> • “Determining the actual cost of transportation is now so difficult that we cannot help departments prepare travel budgets for the following year.” • “The comparison of different providers’ options is difficult as there are all-inclusive, partly-inclusive, status-inclusive, non-inclusive prices. At the moment the extra services and fees are not available for total cost calculation in our preferred channel, the GDS.” • “I can no longer manage costs as the fees are hidden. There is no way to determine if the traveler paid for baggage or upgraded to business class.” • “Because airlines are not forthcoming with information, we cannot relay the true cost of an itinerary to the traveler.” • “Many airlines want to hide these charges from buyers so that they can distort the real ticket cost in the GDS and other distribution channels.” • “Many consumers still use their local travel agency as a resource for making travel arrangements, therefore, it is essential they have that all the information concerning ancillary fees available to them/and the consumer at the point of sale.” • “All fee data should be made available to travel agents through their GDSs. All airlines should be required to provide full and fair disclosure by law.” </blockquote> Full BTC survey results can be downloaded at <a href="http://www.businesstravelcoalition.com/fee_survey_results.pdf">http://www.businesstravelcoalition.com/fee_survey_results.pdf</a> The Consumer Travel Alliance’s just-released analysis of hidden fees can be found at <a href="http://consumertravelalliance.org/?p=338">http://consumertravelalliance.org/?p=338</a> ### CONTACT BTC || Kevin Mitchell | 610-341-1850 | mitchell@BusinessTravelCoalition.com About BTC Founded in 1994, the mission of Business Travel Coalition is to bring transparency to industry and government policies and practices so that customers can influence issues of strategic importance to their organizations. </blockquote>

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BTC REQUEST: Preparation For Congressional Testimony Re Airline Ancillary Fees

Tue, 06 Jul 2010 21:56:00 GMT

<blockquote> July 6, 2010 Dear Industry Colleague, Business Travel Coalition (BTC) has been asked to testify before the House Committee on Transportation and Infrastructure, Subcommittee on Aviation on July 14 regarding airline extra fees and charges (often called “ancillary fees”) for services like checked luggage, advance seat assignment and meals. Many of these services were traditionally included in the fare paid to purchase a ticket. I ask for your input ahead of this potentially influential hearing whether you are located in the U.S. or another country. While BTC has supported unbundling and ancillary fees in principle as a potentially profitable and sustainable revenue stream for airlines, thus far these airline strategies have caused serious problems for corporate managed travel programs. To their credit, a few airlines have endeavored to engage distribution system participants, including corporate travel managers, in exploring equitable and cooperative paths forward. Unfortunately, many other airlines have been loath to implement such cooperative programs and seem intent on hiding-the-ball on the all-in costs of taking one of their flights as opposed to the flights of their competitors. Worse yet, other airlines would like to unilaterally impose upon the industry their self-centered vision of the future of travel distribution with absolutely no concern about the disruptive impact on the workflow processes - and attendant added expense - of the corporate travel departments that ultimately underwrite already a disproportionate share of the costs of the air transportation system. This hearing is an opportunity to communicate managed travel community perspectives with respect to the opportunities, problems and potential industry direction of unbundling initiatives as well as the availability and format of ancillary fee data. Importantly, the U.S. DOT has an open Notice of Proposed Rulemaking that seeks industry input regarding where, when and how airlines should be required to make ancillary fee data available for use in managed travel programs (comment period closes 8-9-10). Based on feedback I have received so far, it is my current view that whenever an airline has agreed to make its fares available for sale through a particular travel agency or GDS that incomplete disclosure by that airline of the entire price to be paid for a specific itinerary – by holding back needed information on these extra fees and charges so that travelers can be fairly and adequately informed – is plainly deceptive and simply not an allowable option. No doubt this hearing will be of keen interest to the U.S. DOT; so your participation is crucial. I have created a survey of threshold questions surrounding managed travel and ancillary fees to inform BTC testimony on July 14. Corporate travel managers, travel agency executives and all other industry participants are encouraged to provide their views to this House Committee. You can find the questions at <a href="http://www.surveymonkey.com/s/263BZMX">http://www.surveymonkey.com/s/263BZMX</a>. Please complete the survey by the close of business on Monday, July 12. Thank you in advance for your consideration of this request. Please forward this communication to your colleagues in the industry. Kind regards, Kevin Mitchell Chairman, Business Travel Coalition </blockquote>   <table width="7" height="38" border="0" bordercolor="#FFFFFF" bgcolor="#FFFFFF"> <tr> <td width="10"> </td> </tr> </table>

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Corporations And TMCs Asked To Make A False Choice Regarding Accessing Airline Content

Thu, 17 Jun 2010 16:36:00 GMT

PRESS STATEMENT For Immediate Release   Corporations And TMCs Asked To Make A False Choice Regarding Accessing Airline Content June 17, 2010, RADNOR, PA - Business Travel Coalition (BTC) today responded with concern over news reports regarding American Airlines’ bundling of services targeting business travelers including pre-boarding, flexible standby and discounts on change fees that will only be available on the airline’s website, or if travel management companies (TMCs) make the investments of time and money to work with the carrier’s so-called direct-connect program. This important content will apparently not be available to corporate travel managers in their distribution channels of choice and is why the outcome of the U.S. Department of Transportation’s Notice of Proposed Rulemaking (NPRM) on enhanced airline passenger protections is so vital to the interests of corporate managed travel.  BTC generally supports airlines’ unbundling initiatives as a potential industry strategy to develop competitively defensible, sustainable and profitable revenue streams. The new American Airlines’ services and discounts could be a welcome development for corporate travelers, if they were incorporated into established agency and corporate workflows. Because they apparently are not, they will force upon agencies the false choice of incurring the inefficiencies, costs and service challenges of implementing entirely new workflow solutions on the one hand, or incurring the costs and challenges of supporting a series of one-off supplier direct-connections on the other.      Commenting on the American Airlines announcement, Michelle De Costa, Global Travel Manager, Sapient stated, “An approach to unbundling that ignores the interests and needs of all supply-chain participants, including the corporate customer, if adopted by multiple airlines would add cost and overwhelming complexity to corporate managed travel programs. Travel managers need to be exceedingly clear with their airline partners that they will not support the disaggregation of content important to their managed travel programs.”  Gary Hance, Director of Group Operational Development, ATPI (Advanced Travel Partners) UK Ltd. stated, “The point of a global distribution system is to provide TMCs and their corporate clients – who make up the greatest proportion of the airline highest yield travellers – with genuine unbiased information on the overall cost of the products as well as the service information in terms of aircraft type, flight schedule and on time performance. Making it harder to compare by charging for some features and not for others is problematic, but forcing an agent or corporate to support a direct-connect link to the airline system seems a step too far.” “Should this logic prevail then it is feasible to see TMCs and their corporate customers required to maintain and finance direct-connects to many airlines in order to best serve their travellers. The individual checking of these data sources would be unviable within the current fee structure of the TMC, and would be a potentially big extra expense for travel bookers in the corporate environment. ATPI urges American Airlines to rethink this policy and make available information and purchase opportunities through all its distribution channels,” continued Hance. Importantly, according to BTC, travel managers should weigh in on the U.S. DOT’s just-published NPRM, which proposes that airlines make available on their websites all their ancillary fees so that consumers understand their “all-in” fare options early in the shopping process, and before they make a purchase. More than 50% of travelers, and virtually all mid-size and large companies, use travel agents and TMCs. DOT is considering requiring airlines to make ancillary fee information available to agents and TMCs through global distribution systems at the same time it is available on their websites and is seeking comments from the industry on that proposal.  As the airline sector becomes more concentrated, and choice is diminished, the need for better consumer information grows so that passengers are better informed about competitive options. Passengers need to be armed with complete and accurate information as a means of enhancing competition and offsetting the loss of competition resulting from mergers and alliances. Passengers and travel managers alike have a legitimate need for neutral and complete data sources and a concentrated airline sector should not be empowered to impair the data flow to such neutral sources.    “Full access to airline and other supplier content through distribution channels of the corporation’s choice has been the consistent demand of the business travel consumer,” said BTC Chairman Kevin Mitchell. “Fragmenting content in a way that leads to the inefficiencies of multiple systems and interrupted workflows shows a troubling lack of responsiveness to that reasonable consumer demand.”   <a href="http://www.regulations.gov/search/Regs/home.html#home">Travel managers and TMCs can file comments with the U.S. DOT here</a>; docket DOT-OST 2010-0140. ### CONTACT BTC || Kevin Mitchell | 610-341-1850 | <a href="mailto:mitchell@BusinessTravelCoalition.com">mitchell@BusinessTravelCoalition.com</a> About BTC Founded in 1994, the mission of the Business Travel Coalition is to bring transparency to industry and government policies and practices so that customers can influence issues of strategic importance to them.      ---

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BTC Applauds U.S. DOT Passenger-Rights NPRM

Wed, 02 Jun 2010 16:35:00 GMT

PRESS STATEMENT For Immediate Release BTC Applauds U.S. DOT Passenger-Rights NPRM Corporate travel departments also require complete and timely access to unbundled offerings Radnor, PA, June 2, 2010 - Business Travel Coalition (BTC) today applauded the direction of the U.S. Department of Transportations passenger-rights rulemaking announced today. DOT is proposing a wide range of consumer protections ranging from increasing compensation for passengers involuntarily bumped from flights, allowing passengers to make and cancel reservations within 24 hours without penalty, requiring full and prominently displayed disclosure of baggage fees as well as refunds and expense reimbursement when bags are not delivered on time, requiring fair price advertising, prohibiting price increases after a ticket is purchased and mandating timely notice of flight status changes. DOT Secretary LaHood continues his aggressive efforts on behalf of consumers in supreme style. His proposal is comprehensive and timely and represents smart regulation. The Cornell University website (regulationroom.org) for consumers to weigh in on DOTs proposal reinforces the Secretarys belief in participatory rulemaking, said BTC Chairman Kevin Mitchell. We urge the Secretary to clarify and affirm that Section 399.85 of the Notice of Proposed Rulemaking requires that all unbundled fare information be shared with global distribution systems and travel management companies such that corporate travel departments will be assured that they have timely and transparent access to unbundled offerings at the same time as they are made available on airlines websites. ### CONTACT BTC || Kevin Mitchell | 610-341-1850 | <a href="mailto:mitchell@BusinessTravelCoalition.com">mitchell@BusinessTravelCoalition.com</a> About BTC Founded in 1994, the mission of Business Travel Coalition is to bring transparency to industry and government policies and practices so that customers can influence issues of strategic importance to their organizations. -

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INDUSTRY ANALYSIS: United Airlines � Continental Proposed Merger

Mon, 24 May 2010 08:32:00 GMT

INDUSTRY ANALYSIS United Airlines Continental Proposed Merger Business Travel Coalition May 24, 2010 Business Travel Coalition (BTC) has long viewed airline mergers and industry consolidation with a good measure of skepticism regarding anticipated benefits for all stakeholders. While we are still working to formulate a public position on the proposed Continental (CO) United (UA) merger, there are several areas of concern worth noting ahead of U.S. Senate and House hearings that suggest the antitrust analysis should go beyond management spin that this is an end-to-end network combination made in heaven that will drive benefits for all and that should be approved post haste. The concern over the Delta Northwest proposed merger in 2008 that prompted BTC to testify in the House and Senate in opposition to it was that it would trigger radical consolidation to 3 mega carriers against a history of failed mergers while raising prices and reducing service. Soaring jet fuel prices and worsening airline financial results in 2008 effectively put consolidation on hold. A CO-UA merger would likely cause an American Airlines combination with US Airways, and thus, 3 mega carriers would result. Even non-CO or UA executives publically exclaim, as non-merger participants, the benefits to their airlines from the capacity removed, and attendant pricing power achieved, by this proposed merger. Rationale to support a CO-UA merger would include that in the 2 years since DL-NWA (1) low cost carriers have continued their growth, (2) network airlines balance sheets have continued to deteriorate, (3) jet-fuel prices are on the upswing again, (4) business travel volume and yields still have not recovered and (5) low cost new entry is poised to increase as parked aircraft and crews are available and capital markets are loosening. Some analysts argue that 3 major network carriers are all that the U.S. market can handle if supply is to be right-sized to demand for the purpose of enabling these carriers to recover their cost of capital over a full economic cycle. However, these same analysts agree that due to low barriers to entry for low-cost carriers (equipment, crews, capital) there will always be excess capacity in their view and thus airlines will never represent attractive long-term investments. These two arguments are contradictory. Mergers and consolidation, aside from a near-term valuation play, are not usually effective industry solutions and could cause significant problems for many stakeholders. These analysts likewise argue that 3 strong national network airlines would provide effective competition for all consumers. However, this does not recognize the unique hub-market dominate structure of the industry and that corporations located in hubs do not always have the ability to successfully play one supplier off against another as is the case in other industries. No one of these 3 national network carriers would be able to meet the vast majority of most corporations air travel needs, thus corporations parity at the negotiation table could be greatly impaired. In contrast, Boeing or Airbus can meet virtually 100% of an airlines wide-body aircraft needs; thus, airlines benefit from near-perfect price competition with just two suppliers. Consolidation to 3 network carriers would enable these firms to further fortify their hubs to the possible detriment of corporate buyers. With 3 mega-network carriers and their alliance partners acting as a single buyer there is the risk of these groupings exercising monopsony power, i.e. driving pricing for all manner of services below competitive levels. At risk are travel agents, global distribution systems, airports, food service providers, labor, equipment manufacturers and many other services providers. As a consequence, it could be easier by an order of magnitude for these behemoths to shift distribution and other costs to the consumer. With 3 mega-network carriers and their alliance partners acting as a single seller there is also the risk of these groupings exercising monopoly power, i.e. driving pricing for air services above competitive levels. For example, under current airline alliance antitrust immunity provisions, an alliance can refuse to deal with a corporate buyer unless that buyer agrees to deal only with the alliance, versus individual members. Radical consolidation would likely further strengthen these alliances in dealings with corporate customers driving down the value of their contracts. With one less major network carrier, in an oligopolistic industry, the Coordinated Effects Doctrine becomes relevant as there would be one less veto vote available to reject system-wide fare increases, or fare surcharges for peak summer travel. Once consolidated to 3 major carriers, concentration at the national, hub and city-pair market levels becomes less relevant as across-the-board fare and fee increases would be much more easily facilitated. Analysts argue that the alternative to mergers and consolidation is a slow liquidation for network carriers. Antitrust law does allow for the Failing Firm Doctrine under carefully specified conditions, however, the laws are not concerned with shareholders interests or the fact that an industry is unprofitable. Rather, antitrust laws are purposed to protect competition and the consumer against combinations that will likely lead to higher prices, less output and lower quality. Moreover, one or two failures would in fact allow more efficient airline operators to acquire the assets and deploy them at higher and better economic uses to the consumers benefit. This outcome could be superior to structurally institutionalizing failed businesses on the backs of consumers. Evaluation of the CO-UA proposed merger would need to assume the collapse of network carriers to 3. Remedies would need to be considered that reflect the unique competitive structure of the industry wherein in mega carriers would be able to more easily wield their power against consumers as well as supply chain participants.

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Indianapolis Airport Authority Selects iQueue Team for Registered Traveler Re-Launch

Thu, 06 May 2010 12:31:00 GMT

FOR IMMEDIATE RELEASE Press Release Registered Traveler to Take Flight Again: Indianapolis Airport Authority Selects iQueue Team for Re-Launch May 6, 2010 Indianapolis, IN The Indianapolis Airport Authority (IAA) has selected iQueue to re-launch Registered Traveler (RT) at Indianapolis International Airport (IND). iQueue is a partnership of Cogent, Inc. (NASDAQ: COGT), ARINC, FLO Corporation and International RAM Associates. iQueue will provide members with expedited access to the screening checkpoint enabling greater predictability in travel schedules. IND is the first airport to re-establish RT services for travelers since the RT program shut down last June when former RT provider Verified Identity Pass, Inc. (CLEAR ) ceased operations. iQueue begins pre-enrollment for travelers today at <a href="http://www.flyiqueue.com">http://www.flyiqueue.com</a> and will commence operations at IND at a date to be announced shortly. iQueue is also currently in discussions with several other airports for re-launching RT services. We selected iQueue based on their extensive RT experience and Cogents successful implementation of similar programs, said John Clark, IAAs Executive Director & CEO. "RT is consistent with our commitment to deliver exceptional customer service," added Mr. Clark. "Cogent and the iQueue team are excited that Indianapolis is the first airport to re-launch RT services," said Jim Jasinski, EVP of Cogent. "We're delighted to be working with IAA to provide this valuable customer service and look forward to providing this benefit to travelers across the nation." After completing an easy online application, an iQueue member proceeds at their convenience to an in-person enrollment at IND or one of Cogents enrollment locations in the Indianapolis area to provide biometric data (fingerprint and iris images) and approved documents. Once processed, a travelers biometric information is stored on their iQueue Card. When arriving at the security checkpoint, the member presents their card for verification at either of the iQueue lanes at IND Concourses A & B to receive expedited access to the screening checkpoint. Additionally, iQueue plans to provide convenient, local enrollment for members utilizing Cogents over 1,000 biometric enrollment sites across the U.S. iQueue will be another value-added service for our passengers as we continue to explore innovative new ways to provide our passengers with a superior airport experience, noted Mark Hedegard, IAAs Senior Director of Business Development. iQueues national RT program will offer benefits beyond the airport lanes including preferred parking, airport club access and airport retail discounts as well as local restaurant, golf, spa, tennis, health club, mortgage and auto lease/purchase discounts. A future iQueue Platinum Membership level will also include identity theft protection and enhanced travel insurance as well as worldwide travel assistance, medical services, lounge access and concierge services. Annual iQueue membership is $149 with discounts for families, multiple-year memberships and negotiated volume corporate purchases. iQueue will offer a special introductory annual membership rate of $99 during the first 90 days of lane operations at IND. iQueue will also provide former members of the defunct CLEAR and Preferred Traveler Programs an additional six months of complimentary membership in the iQueue RT program as credit for the time remaining on their previous memberships. With the re-launch of RT, 200,000 former RT members, as well as many prospective new members can enjoy the predictable checkpoint experience that had previously been in place, said Fred Fischer, iQueues Managing Partner. ### About the Indianapolis Airport Authority The Indianapolis Airport Authority (IAA) owns and operates Indianas largest airport system. In addition to Indianapolis International Airport (IND), its facilities include the Downtown Heliport, Eagle Creek Airpark, Hendricks County Airport, Metropolitan Airport, and Mt. Comfort Airport. Indianapolis International Airport was named the best North American airport by J.D. Power and Associates serving under ten million passengers per year in 2010. INDs economic impact in central Indiana is more than $3.3 billion annually and about 10,000 people work at the airport each day. According to U.S. Department of Transportation data, INDs average domestic airfare is one of the lowest in the nation. IND averages 154 daily departures to 35 nonstop destinations. Home of the second-largest FedEx Express operation in the world, IND is the eighth largest cargo facility in the U.S. About Cogent Cogent is a global biometric identification solutions provider to governments, law enforcement agencies, and commercial enterprises. Cogent provides the highest quality identification systems, products and services with leading technology, accuracy and speed. Cogent's Automated Fingerprint/Palmprint Identification Systems, or CAFIS, enable customers to capture fingerprint and palm print images electronically, encode prints into searchable files, and accurately compare a set of fingerprints/palm prints to a database containing potentially millions of prints in seconds. For more information, please visit www.cogentsystems.com.

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ASTA - BTC Advocate Partnership with Airlines Over Merchandising, Distribution Strategies

Wed, 14 Apr 2010 00:26:00 GMT

<blockquote> PRESS RELEASE For Immediate Release   <blockquote> <blockquote> <blockquote> Corporate Travel Departments And Travel Management Companies Seek Partnership with Airlines Over Merchandising, Distribution </blockquote> </blockquote> </blockquote> WASHINGTON, DC April 14, 2010 -- More than 200 corporate travel departments, travel management companies and travel groups from 10 countries on April 13 wrote to major U.S. airlines offering to partner in an effort to support innovative distribution strategies and to maximize traveler uptake and resulting airline revenue growth from ancillary products and services, such as additional fees for checked baggage and pre-reserved seating. The coalition of organizations is endeavoring to elevate and inform industry and public-policy debate surrounding the rapid evolution of airline product unbundling and ancillary-fee strategies, including impacts on supply-chain participants and corporate customers. “The success of managed travel programs is reliant upon travel management companies having efficient access to the full range of airline options for any particular trip, and being able to monitor, track and report on the comprehensive final-cost of airfares plus related services purchased,” stated Michelle de Costa, Global Travel Manager for Sapient. “The verified workflow processes of travel companies and online booking tools that feed into our corporate systems rely almost exclusively upon the airline booking and servicing capabilities of global distribution systems. We are looking for airline partners that acknowledge and respect our needs.” Unbundling and repackaging strategies bring both promise and risk for corporate managed travel. Corporations, airlines’ most important customers, want a seat-at-the-table and a say in how distribution system changes proceed. They are proactively coming forward with their views calling for a dialogue that will lead to equitable strategies that ensure the success of all supply-chain participants. Corporate travel managers are calling for adoption of industry <a href="http://businesstravelcoalition.com/principles.html">principles and standards</a> that, for example, encourage airlines considering unbundling strategies to: <ul> <li>not undercut the value of corporations’ contracts with those airlines; </li> <li>make available their unbundling initiatives in a manner that does not discriminate against a corporation based upon its choice of reservations or fulfillment processes that best meet its needs; and </li> <li>to proceed in a manner that respects the efficiencies of prevailing travel procurement processes utilized by corporations. </li> </ul> “Major and far-reaching changes to airline business models, occurring in real time, will have significant impacts on all participants in the supply chain. Corporations that buy billions of dollars in air transportation services, and that keep the lights on at airlines’ headquarters, are making their consumer preferences known when it comes to how they want to buy these services,” said Business Travel Coalition Chairman Kevin Mitchell. “Forward-thinking airlines are listening to what we have to say; some carriers have come to realize that to secure more high-yield business travelers, they must respect the modern procurement and travel management practices of their best customers.”    “Consumers expect the travel agents they depend on to have complete and transparent access to booking information to do their jobs,” said Chris Russo, President and Chair of the American Society of Travel Agents. “Travel agents do not favor separate silos that will make booking air travel more complicated, opaque and expensive. We urge the airlines to work with us to adopt standards that give fair and equitable access to booking information to all of our members for the benefit of those consumers who choose to buy their air travel through us. Together we can create a win-win-win for travel agents, their customers and airlines.” The full text of the CEO letter with signatories can be found below.  CONTACTS ASTA || Paul Ruden | (703) 915-2481| <a href="mailto:PRuden@astahq.com">PRuden@astahq.com</a> BTC || Kevin Mitchell | 610-341-1850 | <a href="mailto:mitchell@BusinessTravelCoalition.com">mitchell@BusinessTravelCoalition.com</a> +++++ SAMPLE CEO LETTER This letter was distributed to United, American, US Airways, Southwest, JetBlue, Alaska, Delta and Continental. Apiril 13, 2010 Dear [          ]: As <a name="OLE_LINK2" id="OLE_LINK2"></a><a name="OLE_LINK1" id="OLE_LINK1">corporate travel departments, travel management companies (TMCs), online travel agencies (OTAs) and global distribution systems (GDSs), </a>we write you to offer our partnership in extending your ancillary products and services in a manner that is consistent with consumer interests and that works optimally with de facto travel procurement systems and practices. We wish to support you in your efforts to maximize traveler uptake and resulting revenue growth from ancillary products and services. To that end, we ask you to ensure the full scope of your products is made accessible and transparent to all travelers, regardless of channel choice. Your airline has shown that it values its corporate customers and respects the requirements of modern procurement programs. Your most valuable customers rely on the services of TMCs; together they have invested significant time and money in technologies that enable efficient shopping, booking, payment and reporting for airline products and services. The prime objectives of managed corporate travel programs have been to enable companies to control expenses and to fulfill agreements with airlines through enforceable travel policies. Going forward, the success of these managed travel efforts is fundamentally dependent upon travel intermediaries having efficient access to the full range of airline options for any particular trip, and being able to monitor and track the comprehensive final cost of airfares plus related services purchased. To illustrate, in order to transact and subsequently report ancillary fees such as seat upgrades and checked baggage, TMCs, and indeed all travel agents, booking air travel must have the ability to deliver such fees transparently in the shopping/booking process. Importantly, the well-established and proven workflow processes of TMCs that feed into corporate clients’ systems rely almost exclusively upon the airline booking and servicing capabilities of GDSs. Similarly, the millions of consumers who shop and book travel on OTA sites every month, which collectively account for some 16% of all U.S. airlines’ revenues, have encountered an increasingly complex landscape of air travel options to evaluate. The current lack of clarity and accessibility of a la carte products prohibits widespread consumer adoption - a hindrance to achieving the revenue generation objectives that predicated your airline’s implementation of an unbundled pricing strategy in the first place. Your airline, your distribution partners and your biggest customers have a responsibility to enable travelers to compare both the true costs and benefits of their full scope of air travel options. The only path to near-term, broad availability of your airline’s ancillary products is to develop and deploy merchandising capabilities within the existing technology framework of your distribution system partners and corporate customers. As those partners and customers, we have developed <a href="http://businesstravelcoalition.com/principles.html">principles and standards</a> which we ask you to review and commit to through a public statement of support. We are requesting that you help us help you by working cooperatively, diligently and in good faith with TMCs, OTAs, GDSs, and corporate travel managers on the rapid development of industry technical standards to ensure that your unbundled products are easily accessible by all travelers via any GDS in which you participate. We look forward to hearing from you at your earliest opportunity. Sincerely, Fujitsu America, Inc. Sapient Oracle Merck KGaA Assurant, Inc. SAP AG Manhattan Chamber of Commerce Wells Fargo & Company N.A. NetApp Grant Thornton LLP Brown Brothers Harriman & Co. Moog, Inc. BASF Corporation UnitedHealth Group HealthCare California Symantec University of Texas Campbell Soup Company Freudenberg-NOK Autodesk, Inc. BB&T Tognum AG Nexion Watlow Electric Manufacturing Company NetJets Europe, Ltd Cox Enterprises, Inc. CSC Lowe's Companies, Inc. Dollar Tree Eaton Corporation UCB Pharma The University of British Columbia Guild of Travel Management Companies Scottish Passenger Agents Association Interactive Travel Services Association Finnish Business Travel Association Advantage Focus Partnership American Society of Travel Agents Institute of Travel & Meetings Business Travel Coalition Stryker Corporation Tommy Hilfiger Adidas Group Brown Jordan International Carey International Nordson Corporation Schaeffler Technologies GmbH & Co. KG Zetron, Inc. Cannon Design The Remington Group Ltd Crowley Maritime Corporation Frudenberg-NOK United Communications Group (UCG) Regence BlueShield The Regence Group General Council on Finance & Administration of The United Methodist Church, Inc. Hyder Consulting (UK) Limited Converteam UK Ltd Cargotec Corporation Suomen Osuuskauppojen Keskuskunta Lafarge Provisur Technologies, Inc. Freeman Performance Enhancement Incentives CLEANTRAKS, LLC Comfort Inn Sterling Jewelers, Inc. Zimmer, Inc. Hanesbrands Inc. FLO Corporation Goss International Lumbermens Merchandising Corporation    PAR Travel Tech, Inc. Provisur Technologies, Inc. Stephens, Inc. Westfield Insurance Medical Whistleblower ASTA Premium Members A&I Travel Service, Inc. ABC International Travel Accent Travel / American Express ADA Travel ADTRAV Travel Management Advantage Performance Network Aladdin Travel and Meeting Planners All About Travel Inc. All Direct Travel Services, Inc. All Seasons Travel Agency, Inc./American Express All-Travel Azumano Travel Blue Ribbon Business Travel International Bon Voyage Travel Brea Travel Breton Village Travel Services Inc. Bursch Travel Agency, Inc. Casto Travel CI Travel Coastline Travel Advisors Cole Travel/American Express Conlin Travel / American Express Colpitts World Travel Colwick Travel Corporation Condado Travel, Inc. Corporate Travel Solutions     CTA Travel Designs by Strawberry, Inc. Ensemble Travel Group Expedia Forest Lake Travel Friendly Travel Inc. Global Custom Tours LLC Grueninger Tours and Ambassadair Hayes Executive Travel Hess Corporate Travel Hickory Travel Systems, Inc. Hurley Travel Experts Jauntee - Croatia Expert Travel Planning Let's Travel, A Division of Plaza Travel Mann Travels Mansour Travel Company MAST Travel Network Maupin Travel, Inc. Menno Travel Service/American Express Montrose Travel MSP Travel Group Mundi Travel American Express Nexion Orbitz Worldwide Passageways Travel Service Paul Klein Travel Service, Inc. Plaza Tours/Viajes Plaza Inc. Poe Travel Polk Majestic Protravel International    San Diego Travel Group, Inc. Signal Travel and Tours, Inc Sterling Travel American Express Strong Travel The Alamo Travel Group LP Total Travel Inc. dba HNL Travel Associates Travelocity Travel and Transport Travel Leaders Group Travel Leaders/Albertville (Travel Quest) Travel Planners International Travel Time Travel Agency, Inc. TravelFocus      Travelink, American Express Travelleaders/Memphis, TN Travel-On, Ltd. TravelStore Inc. Uniglobe Instant Travel, Inc. UNIGLOBE Travel International UNIGLOBE Travel Partners Valerie Wilson Travel, Inc. Vanguard Travel Unlimited Wayland Travel Wilcox Travel/American Express Willett Travel Williamsburg Travel Management Wings Travel Group World Travel Bureau, Inc. World Travel Management          WorldTravelService Worldview Travel Child Travel / Albany Travel        Travel Leaders/WTA Vacation.com Core ASTA Members Anthony Travel Caldwell Travel, Inc. Central Travel Commonwealth Travel Advisors Express Travel I Want My Travel Jade Travel JourneyCorp Travel Management LXR Travel, (an affiliate of Travel Experts) Millstream Travel, LLC Travel Experts, Susan Ferrell Travel Management Partners, Inc. Travel Partners World Travel, Inc. World Travel Management Non-ASTA Members ABC Travel Time Austin Travel ACCESS Destination Services Advanced Travel Partners (UK) Ltd Blue Marine Travel Buon Viaggio Travel Capitol Travel Service, Renee Christopherson Andavo Travel Corniche Corporate Travel Partners (UK) CorpTrav Cresta World Travel (UK) El Sol Travel, Inc. Eton Travel Agency Klatt Travel Inc. MMC Travel S.R. Travel Service/a BCD Travel Affiliate Sanditz Travel Management Shrivan Travel Service Stone Mill Travel Company Travel Leaders, Mike Van Dyck Travel Management Corporation Travelnetworkers (dba <a name="FNT1" id="FNT1">All Star Travel</a>) Travelwise International Travelworks US Travel Amantz Travel Sundancer Travel Conference & Travel   +++++    Airline Product Unbundling Principles & Standards PRINCIPLE #1 Airline product unbundling initiatives should assure full consumer awareness and choice. <blockquote> Standard: Airlines should ensure that all airfares, along with unbundled products and their associated costs, as well as any new types of bundled offerings with included components, be made available through industry distribution providers in which the airline participates in a manner that enables transparent, easy-to-understand and comparative displays along with offerings from other airlines, so as not to prevent consumers from having complete and accurate information at an early stage of the shopping and booking process.  </blockquote> PRINCIPLE #2 Airline unbundling initiatives should reinforce and not undercut the value of TMCs’ or corporations’ contracts with those airlines <blockquote> Standard: Airlines should not alter mutually agreed contractual principles in terms of discounts, commissions or other negotiated benefits based on the TMC’s or corporation’s use of any particular distribution channel so long as that industry distribution provider is one in which an airline participates to sell its products and services.   </blockquote> PRINCIPLE #3 Airline should make available their unbundling initiatives in a manner that does not discriminate against a TMC or corporation based on a TMC’s or corporation’s choice of reservations or fulfillment processes that best meet its needs. <blockquote> Standard: Airlines should not withhold content or otherwise discriminate against TMCs or corporations with respect to access to airfares or discounts, including unbundled products and services or new types of bundles offerings, based upon the TMC’s or corporation’s choice to obtain such access through any industry  distribution provider in which the airline participates. </blockquote> PRINCIPLE #4 Airline unbundling initiatives should be made available in a manner that increases or at least maintains the efficiencies of the prevailing travel procurement processes utilized by TMCs or corporations. <blockquote> Standard: Airlines should commit at the CEO level to work cooperatively, diligently and in good faith with distribution system providers, travel management companies and corporate travel managers to develop solutions to address existing and potential new challenges related to efficient procurement (from shopping to booking to consumption to reporting) of airline ancillary items and product bundles - including cooperation in development of and adherence to industry-wide technical solutions. </blockquote> PRINCIPLE #5 Airline unbundling initiatives should avoid economic models that create a classic “free-rider(1)” problem wherein an airline has no incentive to use merchandizing and distribution services efficiently or economically because corporations shoulder the cost. <blockquote> Standard: Airlines that choose to introduce new merchandizing initiatives in order to increase revenue should be responsible for the costs of making those offerings available to corporations that buy those services, and to the TMCs upon whose services those corporations rely - and upon whom airlines rely to sell and service their products.  </blockquote> (1) <<MORE ABOUT FREE RIDER>> If airlines get GDS services for free, then economists will tell you that you have created a classic free-rider problem in which the user of the services has no incentive to do so efficiently or economically because someone else bears the freight.  The concept is simple.  Anyone who consumes a service that is paid for by someone else has the inherent incentive to over-indulge.  Airlines themselves recognize this in their business model, which is why they assess a hefty service fee every time consumers using all but the highest priced tickets make a change. Examples of how an airline might “over-indulge” in GDS services if the tab is paid for by corporations could be helpful.  Two examples: <blockquote> a. Today, airlines have a disincentive to make very frequent schedule changes because each time they do, they generate a cancel and a rebook in the GDS, both of which result in an added charge to the airline as both transactions drive added DP costs in the GDS – as well as added costs for the travel agency who must notify the client.  If GDS participation is free to the airline, why would airlines not engage in more schedule change churn to respond to “maximize” fleet utilization? b. More globally, an airline that knows the corporation pays the GDS bill will have no disincentive to demand from the GDS added functionality the carrier may want – like more ability to merchandise and sell unbundled products to corporations, like pre-reserved or special seating for a fee, often in an ad hoc non-standardized way, because for the airline, “price is no object.”   </blockquote>   </blockquote>

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One-Off Direct-Connects: �Simply more efficient and cost effective� for whom?

Tue, 13 Apr 2010 17:31:00 GMT

<blockquote> <blockquote> INDUSTRY ANALYSIS   One-Off Direct-Connects: “Simply more efficient and cost effective” for whom? By Paul M. Ruden and Kevin P. Mitchell As one American Airlines executive recently noted, global distribution systems (GDSs) are aggregators of direct-connects. Typically, over 90% of air bookings through a GDS are on a carrier with which the GDS has a direct connection -- either at the time of sale, or in most cases, at the time of actual availability.  This vast marketplace of aggregated content, sourced primarily through direct connections to supplier systems, is the result of many years and billions in investments. There should be no mystique surrounding direct-connects. We continue to be baffled by the incessant and near-trancelike incantation of XML by Jim Davidson of Farelogix and others. GDSs are deploying XML now. For example, all GDSs support easyJet with the XML protocol for both tickets and ancillaries, including their Speedy Boarding service as well as for checked bags. Let’s not confuse a programming language with a business model. Efficiency for the agency or corporate travel manager comes in the form of aggregated content within preferred workflows (1) enabling cross-shopping to make the most informed purchase decision, (2) enabling the application of travel policy during shopping and booking and (3) enabling data aggregation and reporting for program management. Efficiency for an airline comes in the form of being able to make their product available to hundreds of thousands of agency points of sale around the world, to hundreds of thousands of high yield corporate desktops, to 10s of millions of consumers through travel agencies. Efficiency comes from being able to get their product on the shelf through all these points of sale in order to most efficiently fill up their aircraft. Or, being able to open and close inventory buckets and adjust pricing in real time across these points of sale. And finally, efficiency is derived from being able to receive consolidated data reporting on sales performance through all these points of sale. Indeed, existing business models must be challenged and evolve. And that is certainly true in the world of travel procurement. Corporate managed travel programs have evolved to incorporate strategic procurement discipline – and as a result corporations have invested significantly in designing programs and implementing technology -- encompassing all phases of supply and demand management -- to achieve maximum return on investment. Technology providers, including GDS companies, have in turn evolved to meet these needs. On the supplier side, airlines are increasingly looking to deploy new “merchandising” initiatives in the form of unbundling and re-bundling. This poses significant challenges to established procurement practices, and the key players involved are evolving to meet this challenge. GDSs are already supporting ancillary services and branded fares (a form of bundling) within an aggregated and efficient workflow.  And with the pending launch of new industry standard methods of filing ancillary fees through ATPCO, the foundation will be set to enable broader and more rapid deployment of airline ancillary service initiatives. In fact, many of the systems to enable that comparison shopping and travel management, leveraging the industry standards, are already in place or poised for imminent release. A direct connection is simply that – a direct connection to a supplier. It’s not a way of doing business.  As a way of doing business – a supplier can choose to make its full product/service portfolio available in an efficient manner through the channels in which it chooses to participate.  Or a supplier can withhold products/services from the aggregated marketplaces where travelers like to shop – and instead attempt to force travel intermediaries and high-yield corporate travel departments to incur added costs, inefficiencies and service degradation through a one-off approach to procuring that supplier’s products and services. The latter “way to do business” is certainly not a more cost efficient, cost effective way for intermediaries and travel managers to procure travel.  And to the extent any supplier believes it would realize any cost benefits from such an approach (incrementally improving in an area that costs 2.5% to even below 1% of the product value if looking at the higher fares paid by business travelers) – many industry observers would likely conclude that the revenue impact to the supplier, in terms of foregone sales or price/economic concessions required to incent intermediaries/buyers to adopt a more costly procurement process, would far outweigh any such cost savings – resulting in a lose-lose scenario. Major and far-reaching changes to airline business models, occurring in real time, will have significant impacts on all participants in the supply chain. Corporations that buy billions of dollars in air transportation services, and that keep the lights on at airlines’ headquarters, and the travel management companies that service them, are making their consumer preferences known when it comes to how they want to buy these services. Forward-thinking airlines are listening to what we have to say; some carriers have come to realize that to secure more high-yield business travelers, they must respect the modern procurement and travel management practices of their best customers. ... Paul M. Ruden, Esq., CTC is Senior Vice President, Legal & Industry Affairs, American Society of Travel Agents, Inc. Kevin P. Mitchell is Chairman, Business travel Coalition   </blockquote> </blockquote>

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American Airlines envisions new distribution model

Fri, 09 Apr 2010 15:48:00 GMT

Centre For Asia Pacific Aviation American Airlines takes on GDS charges with a new distribution model and intermediaries fight back 9 April 2010 American Airlines wants to deal directly with corporate travel managers and is attempting to cut out the middleman by putting up pay wall for Global Distribution Systems (GDSs), Online Travel Agents (OTAs) and Travel Management Companies (TMCs) to access the content on AA.com. Predictably there is a chorus of opposition from intermediaries; but Wall Street likes it. Meanwhile, airlines around the world will be watching avidly. At the airline firm level, this probably seems very rational to (American), said Business Travel Coalition (BTC) Chair Kevin Mitchell, who is leading a fight to stop Direct Connect. It generates more revenue while lowering and shifting costs. But it also throws so much complexity and burdens the industry with so many new costs, it is irrational at the industry level. The airlines just dont get it. They want to eliminate the middle man but corporations have a very efficient and time-tested way of doing business and this will undermine that. FULL STORY HERE: <a href="http://centreforaviation.twi.bz/b">http://centreforaviation.twi.bz/b</a> I invite readers to review all the BTC-distributed documents at <a href="http://businesstravelcoalition.com/dc_ceo_letter.html">http://businesstravelcoalition.com/dc_ceo_letter.html</a>. -----

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