According to Amon: predicting the future

I’M NOT ONE TO BLOW MY OWN TRUMPET. Actually, that’s not true: I am, so here goes. In my Nov/Dec 2015 column for this very organ, discussing Lufthansa Group’s newly introduced Distribution Cost Charge (DCC) for global distribution system-routed bookings, I predicted it would be “very hard for other airlines to copy the DCC until their GDS contracts come up for renewal.

So don’t expect a flood of copycat charges over the next few months. Conversely, don’t think it’s all over if nothing happens straight away. Lufthansa’s competitors could be waiting to pounce as soon as their current deals expire.” And lo, that came to pass a few weeks ago when IAG ran down its old GDS deals and introduced an £8 charge per “fare component” for bookings on British Airways and Iberia.

Instead, IAG wants to channel indirect sales – such as through travel management companies and corporate booking tools – via application programming interfaces (API) configured to IATA’s New Distribution Capability (NDC) standards.

MORE DISTRIBUTION GAINS As a non-techie myself, allow me to translate. API connections allow an airline not only to make indirect sales displays resemble what it offers on its website, they also let it assemble the offers itself rather than inside the GDSs. That means carriers can, potentially, earn more by selling additional ancillary items, and can create customised packages for corporate customers with features like meals, lounge access or airport valet parking.

APIs also help avoid the significant cost of GDS distribution, although travel tech experts believe the GDSs will increasingly adopt NDC-enabled API distribution, too. Unlike when Lufthansa introduced its distribution charge back in 2015, IAG has got its NDC connections ready to  go. In fact, Concur and HRG actually trumpeted their NDC readiness for BA and Iberia the day before IAG announced its distribution charge.

THE API DEBATE And so to the essential question: is this good or bad news for travel buyers? That’s tough to answer, especially as TMCs disagree on the issue. In late April, the GTMC complained that “direct connects” (an inaccurate but much-used synonym for API connections) do “not offer a positive, efficient customer experience” and lead to “inefficient fragmentation”.

It released this statement in direct response to one of its own members, Clarity, announcing exactly such a connection  to Lufthansa. HRG, too, is  a GTMC member. Pro-API TMCs and other supporters believe the new technology can deliver greater choice to their corporate clients. I agree, but I also spoke to a German travel manager who is building an API to Lufthansa, not because he wants to but because he feels the market will soon force him that way anyway.

His experience of building the API has been unhappy, involving far greater complexity than he hoped for, especially in flowing data to his TMC for vital functions like 24-hour traveller assistance. I also note that IAG made its distribution announcement one day before BA’s bank holiday computer meltdown left tens of thousands stranded. There is no direct link between the two issues, but it reminded me that, much as airlines feel the GDSs are ultra-expensive, they have also proved ultra-reliable for decades.

WATCHING THE TMCs One more thing I believe buyers should consider carefully. Airline commissions to TMCs disappeared two decades ago, making (by and large) TMCs servants of their corporate clients instead of the carriers.

But the fees TMCs charge are heavily subsidised by incentives received from GDSs. The question I have kept asking over the last two years is what will happen to those fees when the GDSs inevitably reduce incentives in line with their airline income? An answer is emerging.

In recent weeks TMCs have commented that they will be remunerated, in unspecified ways, by airlines for distributing customised content to corporate clients. Whether this is a benign or malign development I’m not yet sure.

If TMCs return to being servants of two masters, that will need careful watching to ensure TMCs offer flight options in the client’s best interests,  not the TMC’s. At the very  least, buyers should start asking detailed questions about the invisible money that flows behind anything TMCs serve to them via API connections.  

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