Why American Wants to Go Around the Reservation Systems

A lot has been written about American’s fight with Orbitz, Expedia, and now Sabre, but I still don’t think that it’s been made very clear for “normal” people. Why can’t you book American on Orbitz and Expedia? What does Sabre have to do with you, the traveler? In the end, there shouldn’t really be an impact on travelers, but the current fighting is putting a temporary wrench into things. It will pass, eventually.

The first thing to understand is that this fight is NOT with retail sites like Orbitz and Expedia. Yes, they are now involved and do not currently show American’s flights, but it’s not their fight. The real fight is between American and the reservation systems (known as global distribution systems, or GDSes) that retail agencies like Orbitz use to make bookings. (It’s no coincidence that the company that owns two of those systems also owns Orbitz – see why they’re involved?)

Here’s the current lay of the land when it comes to airlines bookings.

Current Airline Distribution

As you can see, when you book with an airline directly, you eliminate the middleman, the GDS. That middleman, of course, costs money and the airlines pay for it, so airlines like when you book direct. But that’s not the only reason they like when you book direct. The airlines are also unhappy that the middlemen haven’t been very progressive at including ancillary fees (bag fees, priority boarding, etc) in the reservation process to make them easier to sell. They really want there to be a shopping cart, something that is ubiquitous everywhere else on the web today. In addition, they want the ability to be able to vary those fees for frequent fliers. If you’re an elite member, they don’t want to try to charge bag fees, for example. The GDSes just aren’t providing this quickly enough, so it’s time to fight.

But the airlines (at least, the legacy airlines) know that you aren’t going to just go straight to the airline to book every time. That’s good for your basic leisure traveler, but what about complicated itineraries involving many different airlines? Or what if you have a corporate travel agent that books everything for you? The retail sites and travel agencies are still important. The airlines just want to change how they exchange data with those companies.

With data transfer being so cheap and easy today, what the airlines are proposing, and American is taking the lead with, is that they set up a direct connection to cut out the GDSes. That saves money for the airline and it provides the ability to better sell their ancillary products in the process. Makes sense. So here’s what they want.

GDS Setup Proposed

You’ll notice that there are now a lot more lines coming directly from the airline reservation systems. In reality, there is an XML data connection that the airlines will have sit on top of their systems (I spoke in depth with Farelogix about this, one of the companies that creates these). That connection will then be offered directly to the agencies, retail sites, and even the GDSes. Why the GDSes? They aren’t just going to to go away. Let’s say you need to go from LA to Mfuwe, Zambia. To get there, you might fly American part of the way, but you’ll need to fly on Proflight Zambia from Lusaka. You think they’re going to have a direct connection set up? Yeah right. They’ll still rely on the GDSes, at least for awhile.

But as you can see, I’m not just talking about the GDSes as the intermediaries but suggesting there could be others. If the GDSes wanted to get with the times, they could corner the market on being the intermediary. They could collect direct connections, combine it with traditional connections, and all would be good. They would just have a new way of connecting with the airlines, they would be able to handle the new “merchandising” that airlines have gone to in the last few years, and the costs would drop dramatically. But since they’ve been mostly fighting this (I think Amadeus may be the most open to it), that opens the door for others to step in.

Sure, the big online travel agents and corporate agencies could afford to take the direct connections and do the development work themselves, but not everyone can afford that. What about the little guys? For that, Farelogix (they aren’t alone) has actually created a basic front end system that an agency can download and use with ease. The agency just needs to get the airlines with direct connections to open the spigot and they’re ready to go. Farelogix can even integrate with the GDSes so that they can mix flights from those systems along with direct connections so that it’s all easy for the user to see in one place. As you might imagine, the GDSes don’t like this, so they won’t let most agencies actually mix their results like this. But technically, it’s completely possible.

Can you really compare all these different feeds? Yep. There are a lot of scare tactics being used out there to make people think that a direct connection is going to mean that every airline will offer information differently and you’ll never be able to compare. That’s bull. The big legacy carriers have actually created the Open Axis Group which has a standard airlines can use. (No, I don’t recommend using “axis” in any name when people are fighting.) That makes it easy to start integrating new airlines into a single interface as they create direct connections.

It’s just like you see on sites like Kayak or Fly.com. They take data from multiple sources and display it for you in one interface. The only difference is they don’t do the booking – they send you to each site to do it. This new fight just takes it one step further.

In the end, it’s the reservation systems that stand to lose the most here, and you as a consumer don’t stand to lose anything. If anything, you stand to gain when these new systems start allowing for more robust shopping cart capabilities to help you buy everything you need before you go.

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