Wrong: It’s actually about XML standards and schema.

Enter the OpenTravel Alliance, which has just published enhanced schema messages which would enable golf reservations systems and golf facilities to send messages back and forth to suppliers, facilities and other intermediaries.

For example, OpenTravel’s 2011A Golf schema messages allow for the transmission and receipt of data about course closures, score card and payment information, including promotions and loyalty programs.

And, a Golf Facility Information message pair enables golf-supplier facilities to help a trading partner to keep its database and cache up to date in regards to pricing, tee times and course design, for instance.

OpenTravel’s publication of the golf schema messages was part of a broader rollout of new “2011B message and business functionality” XML schema for airline merchandising, hotels, tours, ground transportation and rail.

In terms of impact, the airline schema undoubtedly will be more important than the golf messages.

On the airline front, the OpenTravel air merchandising project team created a message pair which enables “an offer processing system to target relevant offers,” OpenTravel says.

For example, a Get Offer request message may handle data about offers already presented or purchased, baggage quantity and seat information.

And a Get Offer response message facilitates communicating about relevant offers, including exchange rates, redemption-mile pricing and booking instructions.

It is interesting to note that while the Open AXIS Group positions itself as the XML standards organization for airlines, OpenTravel continues to do XML standards work related to airlines and airline merchandising.

The OpenTravel air merchandising project team included United-Continental and US Airways, as well as Travelport, Sabre, Amadeus, ATPCO,  SITA, IBM, HP, OpenJaw, Datalex, TravelGuard and Berkely Group.

Airlines have done a bunch to make personalized offers to their own loyalty program members through email marketing and some pledge to do likewise through direct-connects, but now they are pushing to take what they term “traveler authentication” to metasearch sites, where perhaps they can attract new customers and more efficient bookings.

The effort is all part of a new Open AXIS Group committee dubbed the Customer-Centric Meta-Search Working Group, which is being sponsored by flight and hotel metasearch company Hipmunk and has additional participation commitments from American Airlines, Air Canada, US Airways, United Airlines, Skyscanner, MindTree, Goldenware Travel Technologies and others.

“Hipmunk is the lead-sled dog on this and could get some first-mover advantage,” says Jim Young, executive director of the airline XML standards group, Open AXIS.

If tasking airlines and metasearch companies with the seemingly complex task of serving up personalized airline offers to travelers seems like pie-in-the sky, then Young counters that the organization already has been working on the initiative for a few months and hopes to see a beta in place with a couple of airlines and a metasearch company by March 2012.

The way Young envisions it, metasearch companies would furnish airlines with their users’ profile information — assuming consumers okayed such data-sharing — and then airlines would provide consumers with personalized offers for amenities or ancillary services, perhaps based on their zip codes or other data.

“Large carriers are getting carpet-bombed for search requests and they are not able to bring back anything, but the lowest fare,” Young says, adding they would love to have more information about who’s asking them for information so they can provide more relevant results and engage in more effective merchandising.

With such personalized merchandising, metasearch companies, such as allied members Hipmunk or Skyscanner, would benefit from increased conversions, Young says. Kayak is not part of Open AXIS and so far is not participating in the standards effort.

Asked about the initiative, John Gustafson, US Airways’ managing director of e-commerce and distribution, says, “We support traveler authentication, or more simply, delivering relevant products to customers at the right time.”

And, a spokeswoman for American Airlines confirmed it is “interested” in the working group and will indeed participate.

Young says the working group would create XML standards to accommodate traveler authentication for airline queries in metasearch, but that wouldn’t be where the heavy lifting would take place , and would amount to perhaps 20% to 40% of the group’s efforts. The XML standards would be published when completed.

However, the main focus of the working group would be on coming up with the business requirements for airlines and metasearch players to bring the proposition to life, Young adds, noting that deciding on how each airline would be able to merchandise their products would be high on the agenda.

Hipmunk, which is sponsoring the working group, “hasn’t decided on any particular products that would use personalized queries and certainly hasn’t decided on any timing,” says Adam Goldstein, Hipmunk co-founder. “The purpose of our attendance is to help understand what’s possible and then help formulate things that will make an even better experience for our users.”

This personalization push will be a key future direction, Goldstein says.

“We think personalized travel search is going to be increasingly important,” Goldstein says. “There’s no sense in showing people options that aren’t relevant to them and that we know they’d never want to take. That’s been our philosophy since the beginning and why we sort by ‘Agony’ to provide the best options. However, it’s relied entirely on business logic on our end. We look forward to potentially integrating what our users tell us they want with the APIs of our suppliers.”

Sounds like traveler data could be replacing business logic as a more effective and personalized marketing tack.

In a section of the announcement dubbed “Notable First Quarter Accomplishments,” US Airways cited its distribution agreement with Expedia Inc. in which Expedia commits to offering the airline’s Choice Seats on Expedia websites in the future.

In contrast, there is no mention among its notable first-quarter accomplishments that US Airways signed full-content agreements with Sabre and Travelocity in February.

Instead, although the action occurred in April, well after the first quarter ended, US Airways notes among its accomplishments that it filed an antitrust lawsuit against Sabre.  US Airways stated:

Additionally, on April 21, 2011, US Airways filed an antitrust lawsuit against Sabre Holdings Corporation and certain of its affiliates (collectively, “Sabre”) in Federal District Court for the Southern District of New York. The lawsuit alleges, among other things, that Sabre has engaged in anticompetitive practices to preserve its monopoly power by restricting US Airways’ ability to distribute its products to its customers.

It isn’t often that a travel company points to a lawsuit filing as a notable accomplishment.

Including it as such speaks volumes about some raw feelings.

The public display of venom toward Sabre isn’t surprising when you recall that US Airways issued a press release in early March to challenge a Sabre press release of a few days earlier and the way it characterized their rekindled partnership.

Of course, in an email to Sabre customers sent April 12, Chris Kroeger, senior vice president of marketing, is referring to traditional GDS Edifact connections to airlines, and not to the direct-connect XML tie-ins — sometimes bypassing GDSs — that American Airlines advocates.

American Airlines seeks to alter distribution economics and merchandising roles with XML direct-connects, and Sabre and Travelport, in particular, are vehemently seeking to block the initiative.

The trigger for the Kroeger email appears to be American Airlines’ direct-connect agreement with Expedia, which gets GDS services in the U.S. from Sabre.

“Expedia said it plans to access American’s fares, schedules and customized travel products and services via American’s direct-connect link by using aggregation technology provided by a GDS,” the Expedia-American announcement said.

Tnooz reported that Expedia has committed to establishing the direct-connect within 12 months.

The details of how Expedia will establish the direct-connect to American Airlines have not been disclosed.

Kroeger wrote to customers:

The most important thing to note in the Expedia/AA announcement is that GDS technology is and will be at the core of their arrangement, in the short-term and beyond. The companies’ joint press release makes clear that AA content has been restored to Expedia’s sites using GDS technology and that Expedia plans to access AA’s content using GDS technology in the future.

Sabre, of course, is a vehement opponent of AA Direct Connect, and finds itself in the awkward position of having a major customer, Expedia, pledging to establish a direct-connect with American Airlines. Kroeger says:

While we certainly can’t speak for Expedia, Sabre already has a direct connection in place with AA, just as we do with hundreds of other airlines globally. Using ‘aggregation technology’ to enable efficient comparison shopping, booking and fulfillment across hundreds of direct connections is at the heart of what a GDS does.

Of course, there are XML direct-connects which better accommodate airline merchandising, according to American Airlines, and “direct connections” GDS-style which confront major challenges and workarounds to do so.

Kroeger alleges in the email that American Airlines is threatening travel agencies with a Content Commitment Policy, which imposes a $5.50 per segment fee and offers less than full content for GDS bookings if agents fail to sign-up for Direct Connect.

Asked to comment on the Content Commitment Policy, Ryan Mikolasik, an American Airlines spokesman, says airline salespeople began visiting agency and corporate clients after “Sabre announced in January that it intended to remove American Airlines’ fares from its system” to inform them about their options should Sabre or another GDS disrupt the airline’s content distribution.

Mikolasik said salespeople also informed agencies and corporate customers that changes to American Airlines’ Booking Source Premium policies would take place this Summer to accommodate expected changes to GDS agreements.

“We continue to negotiate in good faith with Sabre and others to deliver the expanded content that our direct connect supports, and that a number of our agency and other travel partners are already using,” Mikolasik says.

Meanwhile, Kroeger says Sabre is ready to come to American Airlines’ assistance, holding no grudges. Kroeger writes:

Despite AA’s actions, Sabre remains ready to help AA broadly and rapidly deploy its new merchandising offers at zero incremental cost — just as we do already for a number of airlines around the world, including United Airlines, Aeromexico, Qantas and WestJet. For us, it’s simply part of doing business: helping airlines sell their full range of fares and providing agencies efficient access to full content.

In the high-stakes world of travel agency point of sales tools, some travel management company and online travel agency attendees of the Desktop 2.0 conclave may not be ready to publicize their participation in an Open AXIS Group event, says executive director Jim Young.

“It gets you into a little bit of trouble with the GDSs (global distribution systems),” Young contends.

Young says the working group meeting will take place within 30 days, although the date and the names of all the invitees have not been established.

Full-fledged members of the airline standards body and allied members will be invited to the desktop pow-wow and the list of nonmember invitees has yet to be determined, although Travelport, Sabre and Amadeus certainly would be welcome participants, Young says.

The working group will take on “understanding the distribution, content display and selling needs of airlines and their agency partners,” the organization says. “With the rapid deployment of new airline products and services through airline websites, Open AXIS members have expressed concern ovder the inability of travel agency desktop platforms to meet the display and selling requirements of both the airlines and travel agencies.”

Of course, this critique of the capabilities of travel agency desktops comes despite the recent launches of the Sabre Red Workspace andTravelport Agencia, both of which purport to have graphical and traditional green-screen features as part of their Web-based shopping and booking tools. And, the Amadeus desktop likewise is called the Amadeus Selling Platform [pdf].

There are plenty of other desktops on the market, including SPRK from Farelogix and Pass Consulting’s Virtual Traveler Organizer 2G.

The airlines’ beef with the GDS agency desktops in particular seems largely to be commercial rather than technical in nature.

Young says these existing GDS desktops for travel agents would “fit the bill” if the GDSs were willing to take XML feeds and agree to accept both a standardization of how airlines want their products to be displayed and modified airline business rules allowing for some merchandising differentiation.

The idea of the working group would be to formulate some standards and provide guidance for desktop developers about these issues.

Young points to the Farelogix desktop SPRK as a model, although he adds that Open AXIS wants to see a proliferation of desktops that can handle airline ancillary services in the manner the airlines desire. Farelogix is an allied member of Open AXIS and licensed its XML schema to the group.

The SPRK desktop is multisource, taking availability information via XML directly from airline systems instead of from the GDSs.

That is evident from the multiple airline sources on display in this SPRK screenshot, as depicted in an Open AXIS presentation:

Note that although there is some standardization in this display, AirTran chooses to present its fares somewhat differently.

This next display from the Farelogix SPRK desktop shows American Airlines bundling its offerings into FLX Saver, FLX Select and FLX Business fares:

Notice how an agent could mouse over FLX Select to see that the American Airlines fare includes elements such as priority boarding and Admiral’s Club lounge access.

And, in this next SPRK screenshot, consider how this AirTran display shows the base fare and also offers a merchandsing opportunity for the airline as it tries to upsell a premium seat to an individual traveler:

American and apparently AirTran, too, seek to usurp longtime GDS control of airline merchandising, as limited as it is, and plan to begin marketing different offers to individual travelers based on what the airline knows about them — i.e. frequent flyer status and travel habits etc.

This jockeying for control of airline merchandising is at the heart of the current battle between some airlines and GDSs over direct-connect technology and XML standards.

It wouldn’t be surprising if the GDSs, which unsuccessfully sought a slot on the Open AXIS board, boycotted the Desktop 2.0 working group meeting.

Kurt Ekert, chief commercial officer of Travelport GDS, says Travelport is well-equipped to handle airline merchandising and he takes a shot at the way Open AXIS operates.

“We are well positioned and have the technology and desire to enable airlines to sell and merchandise all of their products and services to and through travel agencies, to include providing airlines the significant financial upside available in selling ancillary products through third parties,” Ekert says. “Open Axis in its member exclusivity does not seem to account for the needs and abilities of travel agencies and key agency partners.”

Sabre, too, isn’t enamored with Open AXIS’s perspective on travel agency desktops.

“The implication that current desktops don’t meet the needs of agents and airlines means they clearly haven’t seen the significant innovations Sabre has made over the years, including being first in the industry to provide airlines the ability to market and sell their ancillary fares through the global distribution system and travel agents,” says Sabre spokeswoman Nancy St. Pierre. “The  Sabre Red Workspace absolutely meets the needs of travel agents and airlines as it currently displays ancillary fare content that is made publicly available and will be prepared to book and fulfill ancillary fares in the coming weeks.”

“We look forward to more airlines making these ancillary fares available so we can help them increase revenue and allow agents to efficiently sell on the airlines’ behalf,” St. Pierre adds.

In other news, Open AXIS Group is expected to announce next week the additions of new allied and full members, including airlines outside of North America.

The founding members of Open AXIS are Air Canada, American Airlines, Continental Airlines, Delta Air Lines, United Airlines and US Airways. The Airline Tariff Publishing Co. is a founding allied member.

What Air Canada views as a pivotal moment in travel distribution comes in the form of a new full-content agreement between the airline and the GDS.

Under the contract, Travelport’s Apollo GDS accesses Air Canada content through a new Air Canada API called ac2u, which went into production just before Christmas. The new API is licensed from Farelogix and is compatible with the emerging Open AXIS Group XML standards.

Just as American Airlines is in the midst of a fervent battle with the GDSs, Air Canada was an early mover in airline merchandising, with its family of branded fares, and is a veteran of such skirmishes.

Air Canada battled the GDSs and saw its flights biased — American Airlines-style — in 2006 when Air Canada withdrew its Tango fares from the GDSs, arguing that the GDSs didn’t have the technological capability to display and merchandise its inventory properly.

But, that was then and this is now, according to Air Canada.

Under the new Air Canada-Travelport agreement, Travelport commits to launching an enhanced version of its Agencia travel agent desktop in Canada in the first half of 2011, and Air Canada will provide agencies with all of its fare families, seats and availability, as well as optional services, including paid seat assignments, pre-paid meals and Maple Leaf Lounge access.

In the process, over the last five years, Air Canada has evolved from a staunch GDS critic — one of the most outspoken among airlines in North America — to a carrier which has a lot of good things to say about Travelport as a GDS vendor that is willing to adapt to the times.

Graham Wareham, Air Canada’s senior director of product distribution, hails the agreement as the starting point of Distribution 2.0.

He doesn’t refer to American Airlines and Sabre specifically, but Wareham says other carriers and GDSs might take note of what Air Canada and Travelport have accomplished.

“There doesn’t need to be mud-slinging and lawsuits,” Wareham says.

In fact, it appears that in this new full content agreement with Travelport that Air Canada has achieved many of the aims — short of the economics, perhaps — that American Airlines is pursuing with the GDSs as far as asserting control over its merchandising efforts.

Using the ac2u API connected to the Travelport Agencia desktop, Air Canada provides more “authenticated shopping,” as Wareham describes it, than is currently the norm in the airline-GDS model.

Using the Farelogix Fare Management System, Air Canada can authenticate shopping questions and conduct merchandising based on whether the traveler falls under a corporate contract, has elite status, or is a client of a preferred travel agency, for example, Wareham says.

Thus, Air Canada responds to the travel agency on behalf of their clients rather than in the traditional way where it is the GDS responding to the travel agency on behalf of the airline, Wareham says.

Under this scheme, the GDS becomes more of an integator of supplier responses and merchandising rather than running the merchandising show, Wareham says.

Wareham gives credit to Travelport for its willingness to adapt to technological change.

“You can’t put your foot on technology forever,” Wareham says.

Air Canada hopes to strike similar deals with Sabre and Amadeus.

“This is, for us, what we’ve been trying to achieve,” Wareham says. “We would gladly be willing to do this deal two more times.”

So, how can Air Canada come to terms with Travelport, yet American Airlines finds itself facing the open wrath of Travelport and Sabre, with Amadeus possibly fuming on the sidelines?

There are multiple factors, but Air Canada doesn’t seem to be wielding as heavy a stick as American Airlines apparently is when it comes to American’s goal of trimming its distribution costs.

Wareham says Air Canada is focusing as much on the revenue side of things as it is on costs, adding that Air Canada “wants to be on all shelves.”

To be fair, American Airlines, too, says it wants its inventory distributed through GDSs, albeit through AA Direct Connect.

“It is critically important for us is to get the revenue upside that merchandising affords us,” Wareham says.

The struggle for Air Canada to improve authenticated shopping and distribute through Travelport didn’t proceed on an even keel.

Wareham says an earlier version of the Travelport Agencia desktop “kind of landed heavy,” but the fault was not Travelport’s alone.

Air Canada’s merchandising efforts didn’t integrate with profiles and back office functionality, Wareham says, and it was slow.

But Wareham says the primary reason response times were slow was because of shortcomings in an earlier verson of the Air Canada API, which was too dependent on the airline’s Web offering.

He says the new API, using Farelogix FMS, is more dyanamic as the fare management system enables Air Canada to determine who’s making a query and what that individual shopper means to Air Canada.

In working with Travelport and reaching the full-content agreement, Wareham says the two worked on a list of 36-40 items that needed to be improved.

Reaching an agreement with the Travelport GDS was important to Air Canada because the airline believes “foregoing revenue is not something we want to sustain,” Wareham says. “We get great uptake on our ancillaries.”

For now, Air Canada and Travelport are focusing on bringing these new merchandising capabilities to the Canada market, but the agreement is global in scope.

Whether authenticated shopping through Air Canada’s new API and the Agencia desktop works as well as the picture Wareham paints remains to be seen — because the enhanced version of Agencia has not been fully launched.

Meanwhile, much of the travel distribution world is watching developments in the American Airlines-OTA-GDS battles.

Might there be something in Canada worth finding out about, as well?

The airline, in announcing the licensing deal, says the “new availability engine” will improve customers’ selection of products, enabling travelers to customize their travel experiences.

The Inventory Control module is part of ITA Software’s overall passenger service system, and the American Airlines’ deal marks ITA’s first res system deal since Air Canada withdrew as a customer a couple of years ago.

The Inventory Control module, ITA says, consists of Dynamic Availability Calculating System and Inventory Control server.

ITA says the module “significantly reduces query volumes on your [an airline's] legacy host system and lets you inventory and sell any combination of products and services at a far lower cost.”

American says the agreement, which represents an expansion of its relationship with ITA Software, fosters its goal of “enhancing its customers’ travel experiences by offering products and services that can be customized and distributed through a wide range of distribution channels,” including the airline’s direct channels, as well as GDSs, metasearch engines and travel agencies.

With all of the publicity about the Google-ITA Software deal and its QPX airfare shopping and pricing solution, observers often overlook the fact that ITA remains committed to building its airline res system business, which would have ITA hosting airlines’ internal reservations systems.

In fact, ITA decided to scrap an attempt several years ago to build an alternative GDS so it could focus on building a passenger service system business.

It’s unclear what Google would do with that aspect of ITA’s business, although when the acquisition was announced officials said they would keep an open mind about ITA’s res system business.

The American Airlines deal to use ITA’s Inventory Control module is a relatively small win for ITA — but it’s of symbolic importance, at the least, because it shows that at least one major airline endorses ITA’s product.

“The Case of the New Cookie” gives GDSs, travel agents and other intermediaries something to munch on as the video likens new airline products to a “high-end gourmet chocolate truffle cream cookie” and compares the Travelport, Sabre and Amadeus GDSs to three trucking companies who can’t deliver the cream cookies through travel agencies to appropriate airline customers.

Narrating this distribution epic is Farelogix’s Jim Davidson, who is known for his video escapades and insistence on asking a lot of questions.

Here’s the Open Axis Group video:

httpv://www.youtube.com/watch?v=Kwrq8yA42No

Unfortunately, the GDSs don’t want to draw more attention to Davidson, Farelogix and the Open Axis Group, and have been reluctant to produce their own videos as a counterpoint.

So, as a symbol of new-age travel distribution, the high-end gourmet chocolate truffle cream cookie remains uneaten and unchallenged.

In Dublin last week it was good conversation, some agreement, some disagreement, but not a lot of clarity on how to execute or fulfill merchandising of ancillary products across multiple sales channels.

Datalex hosted its annual conference for its customers and partners, with a focus on merchandising and travel retail.

In attendance were more than a dozen airlines, a few large distribution channels, travel agencies, and other players in the airline distribution supply chain.

The conference spanned two days, and included sessions on channel discrimination, commissionable ancillaries, social media and mobile, loyalty programs, standards, and the never-ending discussion about Google and ITA.

Several points came up over and over again, buoyed by equal parts passion and anxiety so I’ve distilled them down to the following:

1. Merchandising ancillary airline services is a proven business model

Similar to the CASMA conference in March, no one argued against merchandising. Checked bags, seat upgrades, lounge access and other services are being offered and sold to the tune of billions of dollars/euros worldwide by airlines, and while customers grumble about it on blogs/tweets/posts, they continue to purchase the services.

2. But airlines must do a better job at articulating the value proposition to customers

Lots of references were made to retailers – Amazon, Target, Tesco – as models for airlines considering how to market and present these services to their customers.  After all, if billions are being made AND customers don’t understand the value proposition, imagine the turnover if customers did value these ancillary services.

This means airlines have to develop some sophistication in presenting offers so all options associated with a flight are available, bundled (as special offers) and fully unbundled.  There’s nothing sacrosanct about the current booking path – disruption in the buying process can be useful.  Test presentations of offers and if it doesn’t work, do something else and do it fast.

3. To do that, the airlines have to become marketers

Some airlines have done a great job with their frequent flyer programs (Air Canada and Delta were given as examples), and several speakers suggested that these programs could be the starting point for extended marketing efforts.  Successful marketing depends on understanding the customer, and airlines have compiled extensive information about members in their frequent flyer programs.   Why not use it?

4. What’s in it for me?

It’s one thing to present and sell ancillary services on brand.com; it’s another to distribute those services and products to other channels.  Airlines are going to have to figure out how to give incentives to their distribution partners to sell these services, or decide that not all services or products are appropriate to be sold on every channel.  It takes infrastructure to present, sell and report on sold services, and intermediaries don’t have money just lying around to build that infrastructure.

4. By the way, a multi-channel strategy is the ONLY strategy

As one speaker pointed out, the GDSs are not going away. American Airlines’ direct connect initiative is “noble” in the words of another speaker in their desire to better serve their customers’ needs, but a single-channel strategy will fail every time.  Airlines must be prepared to identify multiple appropriate channels and utilize them.

Some of those channels will be direct-connect and some will be through the GDS, so build products that are flexible and can be adapted to various types of connectivity and sales channels.

5. So what could possibly get in the way of this merchandising nirvana?

Operations was cited over and over again as a sticking point, especially around the complexity of code-sharing and interlining. There are no operational standards around the reporting, fulfillment and revenue reconciliation of selling ancillary services and products of a partner airline, which puts the delivery of services sold at risk, undermining their value proposition and ultimately customer loyalty.  It may be that this level of complexity doesn’t need to be addressed first, but it will have to be addressed at some point, especially if airlines are required to offer all services through all channels.

Which brings us to regulation, also cited as potential issue (although it’s difficult to understand if politicians in the US are just posturing).  The prevailing (and predictable) sentiment in the room was that airlines and their partners should be able to offer relevant services in the appropriate channels and let markets, not governments, dictate what services and products are offered on what channel.

Overhead aplenty

As an aside, I am so sick of hearing about Google and ITA, but it was a hot topic of discussion, so I’ll dive in. There was a pretty sharp disagreement between attendees about the level of threat presented by Google.

One on side were the airlines, who said no matter what information was presented where, they still controlled and sold the inventory. On the other side were those who said Google would undermine metasearch, the OTAs and perhaps the GDSs.

No one believed Google is interested in actually distributing inventory, but as with all things Google, who can tell?

Another industry conference, another discussion about merchandising, but the conversations at this event were focused not on the concept but on the execution, even if no one is exactly sure how to get it done.

If Sarah Palin and John McCain were mavericks, what kind of team will Al Lenza and Jim Davidson make?

With airline clashes with global distribution systems in the offing, Farelogix has recruited distribution maverick Al Lenza to its board for “both guidance and a provocative perspective on the changing role of distribution in the travel industry.”

Lenza has always been known for his independent and sometimes ahead-of-the-curve thinking on distribution matters and Davidson, the Farelogix CEO, pulls no punches, either.

Lenza, who headed distribution for Northwest before Delta acquired it and currently consults for United Airlines, says Farelogix’s technology is “real” and will give airlines the ability to offer ancillary services and to control whom the content is displayed to and at what price.

“This is not just a PowerPoint presentation,” says Lenza, taking a swipe at former alternative-distribution platform G2 SwitchWorks. “They [Farelogix] have stuff that works.”

Lenza made lots of headlines in 2004 while at Northwest for his ill-fated attempt to charge travel agents a shared-GDS fee if they didn’t book on the airline’s website.

Although the plan was withdrawn, Lenza says it set the stage for U.S. airlines when they reduced their GDS fees in the 2007 round of negotiations.

Controversy is in the air again as American Airlines plans to merchandise away from the GDSs using Farelogix and other outlets, and the Business Travel Coalition and ASTA allege that the airline has a “user-pay” model up its sleeves.

“The last thing you want to do is have your ancillary product be rendered into commodities,” Lenza says.

He argues that the GDSs would do just that with airlines’ merchandising efforts “and that is not going to work.”

Farelogix’s direction “is much more in sync with what most airlines want,” Lenza says.

Sandler Capital owns a majority stake in Farelogix.

Lenza joins the following other recently appointed Farelogix board members: Michael Marocco, head of private equity at Sandler Capital; Ellen Keszler, past president of Travelocity Business; and Bonnie Reitz, retired senior vice president of marketing at Continental Airlines.

Other board members include Bert Amato, a technology professional and investor; William Bianco, managing director at Sandler Capital; and Rick Gossage, Farelogix founder.

Lenza says he is not an investor in Farelogix.

It’s official – the debate around merchandising has switched from the conceptual to the practical, meaning that it is finally being taken very seriously.

At the CASMA conference in Montreal last month, one of the most interesting sessions was on airline merchandising and ancillary revenue (can’t swing a cat at a conference these days without hitting a merchandising panel).

The arguments for and against (although no one ever actually goes on the record anymore as against) merchandising have been covered extensively, but what was interesting about this session was the audience response.

The session itself was straightforward: Jim Davidson of Farelogix, Tony D’Astolfo from Rearden Commerce, Paul Rose from PR Revenue Management and Stefan Frank from ITA Software presenting their views on merchandising and ancillary revenue.

This part of the session was about 45 minutes, and was a fairly standard company-by-company presentation of each participant’s take on the topic.

The next hour-plus was audience and panelist interaction. The most striking aspect was the tone of the questions, comments and discussion.

Unlike at past discussions at CASMA and other conferences, no one seemed to question the validity of merchandising or ancillary fees; what airline attendees and technology providers were asking were questions starting with “How do I”:

1. If I charge for baggage, what’s my liability when it’s lost?
2. Should I use the frequent flyer number as the basis of all personalization efforts?
3. How do I change our workflow to support new services?
4. What new inventory controls will we have to implement to guarantee availability of pre-sold items (blankets, meals, etc.)?
5. How can we convince consumers this is a good thing?

Tony D’Astolfo had a great response to the last point: “It’s not a fee, it’s a value-add!”. Airlines, he says, need to get over their fear of customer backlash and just deliver value.

It was obvious from the discussion that best practices need to be developed by the airlines to support merchandising; based on the questions asked, they seem to be just at the beginning of that process.

As one airline employee tells me: “It takes a lot of effort to turn a battleship but once under steam – it takes more effort to stop a battleship.”

Nevertheless, the biggest question (number six, if you like) still remains:

• When will the technology catch up so merchandising can take place across all sales channels, and in such a way that these services won’t be commoditized?

Given that several GDSs have publicly stated it will be 12+ months before they deliver functionality that can support ancillary revenues, it won’t catch up, at least on the legacy side, this year.

There’s a lot of movement in the technology space outside the GDSs, but given that most travel agents still swear by their GDS desktops, those agents (and other sites that are powered by the GDSs) will not get convenient access to the merchandising data for some time to come.

The two as yet unidentified airlines — both Farelogix customers — would be able to tailor location-based merchanising offers, sometime based on travelers’ frequent flyer status, because Mobiata has integrated Farelogix FMS2 (Flight Merchandising Solution 2)  into Mobiata’s existing FlightTrack and TripDeck travel apps.

The Farelogix client list includes: American, United, Lufthansa, Singapore, Emirates, Virgin America, Northwest, Continental, AirTran  and Air Canada. An African airline also is believed to be in the mix.

Jim Davidson, Farelogix president and CEO, says the two airlines are working on “customer recovery” features for the mobile apps, where they might be able to send passengers free Wi-Fi service if there is a delay or extend them club passes if the airline lounge isn’t very full.

One of the two airlines, Davidson says, plans to launch merchandising services in limited release within three months.

So, how do these apps know the customers’ loyalty status and preferences?

Davidson says “Mobiata passes traveler information to the FMS2 engine, which validates with the airline and then creates the offer, which is then sent back to Mobiata for the presentation experience and transaction interface.”

FMS2 consists of a pricing engine and a rules engine, with hundreds of criteria, connects to airline CRM, frequent flyer program and properietary databases for inventory, validation and scoring, Davidson says.

Asked if the airlines are actively working on implementing features like free Wi-Fi during delays or airport lounge passes, Davidson says: “This isn’t PowerPoint. This is real.”

The service is available to Farelogix customers using its XML direct-connect adaptor or FMS2. FlightTrack and TripDeck are available on the iPhone and Android platforms and Blackberry availability is in the works, the companies say.

So why did Farelogix turn to Mobiata to further its airline-merchandising business?

Davidson says “we are good at somethings like airline-distribution engines, but have no mobile experience.”

Jack Loop, vice president of business development at Mobiata, says the company, founded a little more than a year ago, specializes in travel apps, which are consistently top downloads at the iTunes Store.

Loops says Mobiata seeks to be the back-end to airlines’ travel apps and will also make them features in Mobiata’s self-published apps.