For large airlines such as British Airways and Virgin Atlantic, a question from travel professionals which keeps occurring is, 'will these airlines carry on using GDS or will they follow American Airlines into the world of direct-connect, so that contracts with GDS can end?'
I think this is a very interesting story, a large number of travel services rely on GDS but larger airlines believe they can create the business without being tied into contracts with GDS.
British Airways in under the microscope over its distribution strategy as GDS negotiations start to appear on the horizon and sister carried American Airlines continues to push the direct-connect model.
When this article was released, Willie Walsh stated:
"We will continue to distribute our products through the global distribution systems, but i am conscious that many airlines around the world look at the value chain and see profitability in other areas when they are suffering losses. One area highlighted was the profitability of the global distribution systems, but at BA, we have no issues with our GDS partners at the moment".
It would be sensible to presume the next 18 months will see a jockeying for position by BA and its GDS partners, Amadeus, Travelport and Sabre, it happens ahead of every round of GDS negotiations by major airlines. The difference this time is the situation in the US with American Airlines. With BA previously trying to sit quietly on the sidelines but because of its relationship with the carrier, they are unable to do so.
With this in mind, this statistic was recently released:
'GDS make margins of up to 30%. They have priced themselves as distribution gatekeepers, using other people's money to fund unsustainable market share battles. Many in the industry would privately admit the model s broken, but they are struggling to make the transition'.
From reading the article, i think that large airlines will see a drop in their sales if they were to use direct-connecting services rather than the well known global distribution systems. Airlines will have to consider the impact, as Willie Walsh said other competitors are able to see all of the prices, so profit can be made whilst other airlines are suffering.
http://www.tnooz.com/2011/05/16/news/british-airways-moving-into-the-spotlight-over-distribution-model/#comments
I suppose that it is all about profitability for all the airlines and if they can find a better way instead of using GDS then they will! I just hope they make the right decisions as they don't want to stop the contracts with GDS then find out that they have major problems with direct connects. Hopefully we can find out more soon. Interesting article Katy!
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