American Airlines Takes on GDS Charges with New Distribution Model

American Airlines plans to deal directly with corporate travel managers and is attempting to cut out the middleman by putting up pay wall for Global Distribution Systems, Online Travel Agents and Travel Management Companies (TMCs) to access the content on AA.com.

“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.

Now co-located with The Travel Distribution Summit in London on 17-18 June, this sales specific event will hear from the likes of IHG, Disney, Expedia, Avis, Hertz, Starwood and more. Network with the best salesmen in the industry and hear their thoughts on sales structure, strategies, forecasts and everything else sales related.

He added, “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 don’t 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.”

The AA Direct Connect is a direct link into AA’s host reservation system for the facilitation of availability, shopping and pricing, booking, ticketing, and post-ticketing servicing transactions. The AA Direct Connect utilizes modern technology links and XML messaging, which can handle more robust and flexible transactions. The AA Direct Connect is designed to support future merchandising and ancillary services. The AA Direct Connect provides the technical flexibility to provide enhanced offerings and customized services.

Commenting on savings with Direct Connect, Centre for Pacific Aviation says: “Still, this leaves many questions, such as how much the airline is expecting to save in distribution costs with Direct Connect; how much does it expect to raise in revenue from the pay wall; and why this is happening now? Perhaps most importantly, what will its response be to critics such as Business Travel Coalition (BTC) and American Society of Travel Agents (ASTA).”

“Despite the lack of detail, the discussions have already prompted so much concern from TMCs, OTAs and GDSs that the BTC and ASTA were barraged by complaints late last year that what American wants to do would “flip the distribution system economic model” on its head - from one in which the airline pays GDSs and OTAs to include its content, to one in which major distribution systems pay American for access to its unbundling, merchandising and selling activities, according to BTC’s “Dear Colleague” letter currently being circulated. The letter already has 100 signatories.

American’s move is just the latest signal in a battle that American CEO Gerard Arpey illustrated a year ago, envisioning a day when sales intermediaries would pay American for access to that product. That is now exactly what the airline proposes.