DISTRIBUTION / HISTORY
2000s ALTERNATIVE CHANNELS, GDS DEREGULATION & NEW BUSINESS TERMS GDSs weren’t the only ones finding new opportunities via the worldwide web. Online commerce gave airlines an avenue to bypass GDS booking fees and to pursue customers directly rather than through agencies. Carriers developed websites and gave consumers access to schedules and discounted web fares. They also invested in search engines such as Orbitz and Hotwire. A number of third-party technology developers such as Farelogix, G2 SwitchWorks, ITA Software and Travelfusion offered travel agencies and carriers direct connect technologies that funnelled content directly from airlines to the agencies. These companies became known as GDS new entrants, or GNEs. GDS market share fell significantly for the first time in this internet- powered environment, but GDSs diversified their products and services. They began supplying IT tools to airlines, as well as tech infrastructure and content to online travel agents. Critical to their growing concentration of corporate travel clients, GDSs also invested more heavily in corporate online booking tools. Sabre acquired GetThere in 2000, and it launched corporate OTA Travelocity for Business in 2003 as an online competitor to its corporate travel agency clients. Amadeus acquired e-Travel in 2001, gaining a corporate online booking tool, and now offers a newer booking tool, Cytric. Agencies continued to contract with GDS providers for access to travel inventory, but the dynamics changed. GDS providers began paying agencies signing bonuses and incentive payments based on how much volume an agency could push through the GDS channel. On the airline front, content parity became standard between GDSs and large, legacy carriers in exchange for reduced booking fees. The perception of outsize booking fees remained a frustration for carriers, on the grounds that the hefty charges subsidised GDS incentives to travel agencies and don’t provide enough distribution value. But there was widespread appreciation of the value of the GDS channel for its access to high-yield business travellers, for benefits of scale and for better interlining with codeshare partners.
There was widespread appreciation of the value of the
GDS channel for its access to high-yield business travellers
2010s DIRECT CONNECTS AND LUFTHANSA’S BREAK In the 2000s, however, a new issue grabbed the spotlight: the lack of options provided by GDSs for airlines to merchandise to customers and differentiate their products. After 9/11, many airlines dropped their meal services, and in 2005, Delta began selling snack packs and meals in economy class. Then came checked bag fees; ultra-low-cost carriers had introduced them early in the millennium, but legacy carriers quickly followed. In 2010, American Airlines experimented with a fee for passengers reserving the first few rows of economy class. A number of carriers introduced stripped-down basic economy fares to compete with low-cost carriers. Revenue from ancillary fees skyrocketed. Worldwide, ancillary airline fees hit $2.29 billion in 2006, according to IdeaWorks, which tracks ancillary sales annually. By 2008, it was $10.25 billion and in 2019 it hit a record $109.5 billion. The figure was expected to come in at around $102.8 billion worldwide in 2022. The ability to grow that revenue and target the right customers with rebundled offers has become a constant drumbeat behind airline strategy. GDSs have made strides in accommodating merchandising
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businesstravelnewseurope.com | SPRING 2023
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