Goal-line technology – a shift of the goalposts in the airline vs GDS match
But now that Tony Tyler, IATA’s Director General and CEO, has declared that he and the GDSs are “absolutely not” luvvies, in response to a question during the SITA Airline IT Summit recently held in Brussels, what does that actually mean?
Perhaps it would be good to examine possible results IF (and I stress if) the airlines were able to impose a (impossible?) new world order in distribution.
First let’s consider a few facts. GDS share is dropping and this rate appears to be consistent if not accelerating. IATA quotes GDS distribution down to 60% of sales.
Using a variety of different analysis elements, my own team estimates that worldwide GDS distribution is about 42%. The discrepancy between IATA’s numbers and mine can be explained by the number of LCC non-GDS and direct distribution by the airlines themselves.
Furthermore the growth of the GDS bypass bookings is accelerating, albeit from a low base. Recently the non-GDS owning Passenger Service System (PSS) companies have taken a few mis-steps.
Despite the gain of United to HP’s Shares platform, the withdrawal by American from the HP contract and the recent losses by Navitaire (JetBlue, WestJet, Volaris and Virgin Blue), mostly to Sabre, has made the credible alternative to a pure PSS less so.
So what would happen? The GDSs who own PSSs are not going to wait.
There have been some interesting developments that would indicate that the highly restrictive agreements that prevent the airlines from freely distributing their products via third party channels are now spreading to the PSS side of the house, so there is a strong possibility that new PSS contracts will contain restraints on the airlines as to whom they can connect and how they can connect.
Amadeus opened its non-GDS network to third party distribution via Farelogix, for example. However the form of that link is not without cost or constraint. This is not just a technical constraint – although it might be painted as such – but more of a commercial restraint.
Recent Amadeus numbers show that the company is now making more profit (per unit) from the PSS side of the business than from the GDS side of the business. Thus a migration away from the GDS model would be less of a problem for Amadeus than Sabre.
Of course, Travelport could be impacted as it has only a limited footprint in PSS now that United has migrated its functions to HP.
In Europe, despite being acknowledged by the current European Commission’s review of the GDS Code of Conduct, there is no control over the PSS contracts and this is currently specifically excluded from the regulatory environment.
The conclusion one could form is that the GDSs just move the goalposts from one area to another. Worse for the airlines, there is no regulation and the contracts for PSS services are typically at least five years, often ten.
I wonder if the airlines have fully thought through these issues and if anyone else is concerned about the potential restriction on choice or flexibiliy that can arise from a restrictive PSS agreement.
NB: Goal post image via Shutterstock.
Timothy O'Neil-Dunne is a contributing Node to Tnooz. He writes about travel in particular aviation, technology, startups and innovation in long and short forms.
He has two day jobs: managing partner at travel consultancy firm, T2Impact, where he serves as the lead for the airline, aviation and airport practice. His is also co-founder of VaultPAD, an accelerator devoted exclusively to travel and travel-related startup businesses.
Timothy was a founding management team member of the Expedia team where he headed the international and ground transportation portfolios, before founding T2Impact in 1998 and VaultPAD in 2012.
He has worked in aviation and travel distribution for more than 30 years, including time with Worldspan as head of technology where he managed international technology services from infrastructure to product.
Timothy is also a permanent advisor to the World Economic Forum and writes as Professor Sabena. He sits on a number of advisory and executive boards.