The age of hybridization does not seem to be confined to airlines. We now have a new form emerging – hybrid intermediaries.

Strictly speaking it really isn’t that new – for the past 15 years, since the first online travel agencies appeared, there has been open warfare between most of the traditional travel agencies and the traditional agency intermediary.

This is a battle that the smaller independent agencies have largely lost.

In the early days of Expedia, a joint venture was formed called AXI – created to provide Expedia Technologies combined with American Express’s back-end and customer services.

It eventually foundered due to widely differing expectations of the two parties, then Microsoft and American Express Travel Services.

In the early part of the new century – the OTAs started to evaluate how they might leverage their expertise in the traditional agency space.

So the major players – Travelocity (who already had purchased a corporate entity and renamed it GetThere), Expedia (who purchased a Seattle based agency amongst several others, now named Egencia) and Orbitz (who started Orbitz for Business from scratch) put down a TMC footprint.

And now the latest incarnation of the tentacles of the OTA is based on the model that the OTAs are offering their services to the traditional agency community.

Expedia has offered for many years a program that allows agencies to make commission on selling some products – such as hospitality – from the Expedia supply chain system.

Orbitz was first out of the box last week with their Orbitz for Agents program launched a few weeks back.

Not to be outdone Expedia has brought to the US market its UK travel agent-friendly offering TAAP (standing for the catchily named Travel Agency Affiliates Program), which of course should not be confused with TARP (which we all now know stands for Troubled Asset Relief Program.

[There is of course no truth to the rumour that internally at Expedia’s offices in Bellevue that the original Expedia project name was to be TARP for Travel Agent Resuscitation Program.]

The programs work on the basis of a fee for the access to the program (£40 or $100). In return for this the programs offer access to the OTAs buying power.

Orbitz is offering for the first 500 agencies who sign up and transact, preferred rates for one year, thus indicating they don’t have lofty goals for the project.

Expedia is waiving the fee to those who sign up and transact before the end of April. The Expedia program is also rolled out worldwide with offers in Asia-Pacific as well as The Americas and Europe.

No word from Travelocity who might feel a tad conflicted on the subject.

Just chalk this one up to more fragmentation and more co-opertition in the intermediary space.

With the big OTAs now offering just about every possible version of an intermediary – is there anything that they do not touch?

And that is just on-point for their strategy – to be the big 800-pound gorillas in the intermediary space.

As we can see from the US based ARC Reporting, the non-mega and non-OTA business is not doing as well as the big guys.

Those signing up for the program might want to ask themselves how these programs can help them differentiate their products and services, or are they becoming just another cog in the giant machine.

I am completely stumped with what ABTA, the UK official travel body that represents the interests of a large proportion of the UK travel industry, is up to.

Seems they want to regulate airline websites in a way I don’t understand at all.

Now I admit I don’t understand what they are doing. Last week when I wrote about it I got back-channel comments saying it was perfectly obvious what they were doing and I shouldn’t be writing about if it I was confused.

Maybe it is others who are perplexed, but just do not realise it – illustrated by recent public comments.

Here, for example, is what the ABTA chief executive Mark Tanzer said this week (via Travel Weekly UK)

“If this review is to truly and fairly extend the scope of consumer protection then airlines who operate click-through bookings on their sites must be made to face up to their customer responsibilities.”

So what on earth is a click-through booking?

Now I asked ABTA last week what they defined a click-through booking as. I know I am not a journalist but still try to research things.

Here is what an ABTA official said:

“We are looking at aiming to agree principles and we believe ‘in principle’ that linked arrangements should be protected, but we don’t know what the definitions will be at this stage.”

So, even ABTA has no idea what a click-through booking is – yet they are making it a key part of their submission to the European Union.  Travel agent Broadland Travel (Nicholas Lee) stated on Twitter about the previous post:

“Load of rubbish… When ABTA members voted they vote on travel click though air-land etc. (It’s the way we think).”

Er, fine. Rubbish it might be, but has Lee got a definition when ABTA does not?

So here are my key questions:

• If it really is about flights and not about packages then shouldn’t ABTA be talking to the Civil Aviation Authority about ATOL and leaving the European Union out of it? (NB: remember the Package Travel Directive is about packages which doesn’t actually mandate a flight, just two travel components.)
• How do you handle delayed contract bookings? Say an airline website links to a hotel website – and a consumer clicks through and books a hotel. Say that booking was actually an offer to buy rather than a contract. Then the offer is converted into a contracted booking subsequently. Well, immediately you do not have click-through bookings but click-through enquiries/quote requests. Stopping that would require mandating that any offsite links on airline websites would be prohibited because this is advertising, and not sales.
• And, finally, how would you handle websites that are operated by airlines but are not the same actual website as the flight sale site (such as MetroTwin, VTravelled et al)?
• If the proposals are to be wide-ranging can we expect to see ABTA trying to put legislation onto airlines as well?

So, before I go completely mad – perhaps you would like to comment saying what you think a click-through booking is.

Look – I am here in public saying I have no idea, ABTA officials say they have no idea – they want the European Commission to define it (sounds a bad idea to me) yet the ABTA Chief Executive want to keep saying its key to their strategy going forwards.

What a mess! Over to you – put your legal hats on and define what a click-through booking is. Thanks!

Company-employee disputes are not like they used to be – if the latest spat between British Airways and a union representing cabin crews are anything to go by.

The long-running face-off between BA and Unite has gone from being ugly to downright vitriolic as Twitter accounts are launched to spread their message through social media.

Unite has already created a video for YouTube outlining its position against the company, but the use of Twitter marks an new approach and is aimed at building support from the flying public.

The airline is battling cabin crew over changes to working conditions, pay and job cuts, but its ill-fated and hugely unpopular strike action planned for the Christmas period in 2009 is widely believed to have damaged its campaign.

A Twitter account [@amicuscabincrew] launched late last year charted events and procedures for members leading up to the first strike ballot and into 2009.

The second account, under the name @unitebaupdates is far more opinion-led and tracks mentions in the mainstream media as well as using services such as Twitpic to poke fun at BA.

Neither account has thousands of followers but posts are presumably being created to appear in live search results within Google and Bing and on Twitter Search for British Airways/BA.

This week the union balloted members over strike plans for March 2009 after promising not to disrupt the Easter Holiday period.

Technology, design and modern printing methods can be used to make the airline boarding pass so much more appealing to the eye and helpful for the brain.

Or at least that is what Tyler Thompson, creative director at New York-based agency SquareSpace, says after studying the functionality and design of the ubiquitous cards given to passengers after check-in at airports around the world.

Thompson took to his task after receiving a Delta pass on a recent trip from JFK to Seattle, Washington.

Here is the original pass:

The intrepid designer then examined each element of the pass, such as gate number, boarding time, seat information and flight number and turned the old design on its head – with amazing results.

The musings of a talented designer, a waste of time, or something airlines should consider?

NB: With thanks to Thompson for permission to reproduce his designs. Follow him on Twitter.

It has become an interesting conundrum that the GDS market for airline segments has been seeing cuts that outpaced the capacity and traffic cuts from the airlines.

Some of this is obvious but some is subtle and not being noticed. What is more interesting is that the GDSs should be seeing pretty significant reductions in airline based gross revenues.

So I won’t focus on the obvious points that reductions in traffic should result in reductions of GDS bookings and hence corresponding reductions in revenues.

Well they are not – quite. Bear with me. There is a point I will get to.
 
The changing profile of traffic has resulted in more leisure bookings in proportion to those of GDS staple which tends towards corporate traffic.

This shift has also resulted in an a proportional move  to LCCs and also to harder searching on the OTA sites.

A greater usage of airline direct services such as airline.com and call center services is part of this shift.

Scott McCartney of the Wall Street Journal opined last week that the capacity reductions will mean less convenience and more crowded planes.

I can personally attest to this. I have seen some markets where the planes are absolutely full (like this weekend on Qantas from the US to Australia).
 
So what we are seeing is a move away from GDS based bookings. I believe this is going to be a permanent move – ie this is a leakage of bookings that will not return to the GDS when the market picks up.

However those who follow airlines tend to look at headline financial numbers and herein lies the core of the coming battle when GDSs and airlines start their PCA renegotiations starting in 2010.

The GDS reductions in gross revenues are in fact less than the reductions in airline segment transactions. Thus one can conclude that the GDSs have not kept their part of the social contract that was extant in the last lot of PCA negotiations.

The social contract in 2006  (the last major PCA negotiation period) was a simple one. Full content from the airlines in return for capping and hopefully a reduction in GDS costs.
 
In fact, as many of my airline friends tell me, this is not the case. Indeed many airlines are seeing consistently higher total costs from the GDSs since 2006. Where the costs of the GDS have not kept pace with the reduction in traffic, indeed the opposite has occurred.

Thus they can conclude that the GDS segment fee may have been static but that the GDSs (ironically taking a leaf out the airlines unbundled/ancillary revenue playbook) have found ways to charge for things that were previously bundled. This is evidenced in Travelport’s numbers.

Note that since there is no public information on the airlines’ GDS costs you have to look the other direction – ie you have to examine the GDSs based on whether the transactions are rising or falling and revenues from airlines are rising or falling.

If you examine the last four quarters of Travelport’s financials, for example, you can see that airline based revenues have indeed risen in proportion to the transaction count.

At the same time there has not been a noticeable reduction in GDS to agency incentives.

This is buried in the footnotes. Anecdotally in some of my discussions with some intermediary clients they are confirming this trend. I am afraid I am not able to quote numbers as this is a closely guarded secret.
 
Intermediaries are still largely dependent on GDS segment fees.

If we look at the OTAs we can see that since they cut customer transaction fees on both airlines (and in some cases) hotel bookings, their revenue mix has to be dependent on GDS incentives. In fact it might be rising not falling.
 
So my friends there is a battle royal coming. It will be a poker game lasting about 18 months. The airlines on one side of the house and the GDSs on the other. Someone has to blink. There is a huge pot of cash in the game.

We estimate that pot to be in the range globally of approximately $5 billion annually. The GDSs realize that they must maintain the ability to leverage their significant power over the airlines or they will lose huge chunks of this revenue.

As the proportion of GDS based bookings falls there is logically a tipping point where the GDSs lose that leverage. The trick will be to understand if that tipping point will occur sooner or later.
 
That my friends is a subject of another post.

Amadeus UK and Ireland boss Tim Russell didn’t hold back when he said recently that the airline sector had a major problem on its hands because the fundamental technology on which it operates is old and in dire need of an upgrade.

On the one hand this is a rather predictable comment from a company which just happens to provide technology to the travel industry.

But the underlying premise of his comment – “some airline systems are close to breaking point” – is probably true, and many do agree to varying degrees.

Tech provider SITA says it wouldn’t go as far to use the words “breaking point” but reiterates the view that much of the technology the airline industry operates is past its sell-by date.

The reason why Amadeus speaks out so strongly against the airline industry is because three areas of its technology – reservations, inventory and gate despatch – are built on systems put together decades ago.

The first two of these are seeing enormous pressure being placed on then purely due to the high number of transactions or queries being placed on the system.

The GDSs, for example, used to process about 30 transactions for every booking made on their system in the late 1990s. Nowadays, this has jumped to around 160 per booking.

It is believed the systems need to be around five or six times more powerful than they once were.

One figure close to the situation says:

The problem is that these systems – reservation and inventory systems – are large, complex and critical to the business. So airlines naturally proceed with caution when it comes to upgrading them.

Airlines will not, understandably, admit to such difficulties with their technology – but the problem remains and is in serious need of repair, says another.