It stands for global retailing system as the technology giants push further into the world of airline ancillaries.

Amadeus now has 17 airlines signed up to its Amadeus Airlines Ancillary Solution, 12 are European carriers.

Perhaps Ggggrrr would be more appropriate as a mark of the frustration many are feeling when confronted with prompts, tick boxes and questions about things they shouldn’t be charged for separately or don’t really want.

The GDS aren’t to blame, they’re just taking advantage of the potential revenue opportunity if they can deliver technology to help airlines unbundle the various elements (read, add value) in getting from A to B and back again.

And the revenue opportunities are very real if a report by IdeaWorks for Amadeus, which reveals that ancillary revenue hit $32.5 billion in 2011, up 43% on the year before, is to be believed.

The context of this post is twofold:

• Two recent flight bookings have thrown up two very different experiences – one with a tour operator airline (never used before, likely to avoid in future) which seemed to make a point of flagging up additional (but not optional) charges and the other with a scheduled airline which is now including everything in the price.
• The second is a discussion during an Open Travel/Travel Technology Initiative session back in November at World Travel Market centred on the impact of Google on the airline distribution landscape.

There was no doubt from the panel, that airlines need to do better in their CRM efforts, but as Timothy O’Neill Dunne of T2 Impact (and a Tnooz node) pointed out, Google has the advantage in that it knows so much more about the context of a consumer’s search.

A quick discussion with Amadeus distribution director David Doctor last week on the evolution of airline ancillaries reveals a view that as long as airlines ensure transparency and improve usability, customers will understand and be more accepting of the process.

The context of search idea was also mulled over during the conversation and while Doctor pointed to strides made by airlines in using their frequent flier knowledge to improve personalisation, whether airlines could ever really hone in on individuals wants and needs is highly debatable.

Here’s a very naive approach – when airlines are gathering all that customer information about our search and buying habits why not fire passengers a quick email and ask them if they want or need the ancillaries.

This would not necessarily have to be right down to an individual level, it could be done by groups of customers with similar habits.

It could be a win-win approach – airlines would get even more information on customer likes and dislikes and have another opportunity to sell to them and customers might feel a bit less aggrieved and a bit more valued.

A proportion of people will want to buy additional services and be prepared to pay. For everything else, i.e. elements that they see as being part of flying from A to B – just include it in the price. Otherwise, it seems like, well, lipstick on a pig.

For the next three years Amadeus and others will continue to invest in and focus on shopping and merchandising technology and says Doctor, airlines will continue to push ancillaries as long as customers adopt them. He also maintains the sector will respond to any backlash.

“We’re seeing a typical learning phase so things that bring value to customers is what you will see. The number one thing is information about the customer. It requires changing the way you address the market, calling them customers instead of passengers, some early adopters are doing really well.”

So, what next in the evolution of ancillaries – hotels where you’re charged for your sheets? Not just a pillow menu but an a la carte pricing one or perhaps a non-negotiable fee for a hot shower?

NB: Image via Shutterstock

That’s the view of Jay Sorensen of IdeaWorks in a new report, sponsored by Amadeus, and entitled Spirit Succeeds with the World’s Only Fee for Carry-on Bags.

And, the theme of the report is that revenue-hungry airlines should ponder Spirit as a model, for investors’ sake.

Despite “an almost endless supply of often vicious and angry commentary about the airline” online, passengers have embraced Spirit Airlines’ ancillary revenue policies and the airline is thriving, Sorensen argues.

And, they are endorsing Spirit Airlines with their flight purchases, if not their hearts, Sorensen contends.

“From a revenue perspective, IdeaWorks estimates the carry-on bag fees deliver approximately $13 million per quarter or more than $50 million in new revenue annually,” IdeaWorks says, adding that about 20% of Spirit’s passengers opt for the overhead-bin fee.

Sorensen ties much of the airline’s success to its imposition of overhead bin fees for carry-on bags on August 1, 2010, and other like-minded policies (such as no hot food on international flights) — despite the fact that the carry-on bag fee policy triggered Congressional criticism and widespread ire online and in the press.

The airline recently has gone a step further and raised some of the domestic flight carry-on bag fees, which now stand at $30 at the time of booking, $35 during online check-in, $40 at the airport and $45 at the gate.

Bags that can fit under the seat are free.

And, checked bag fees for domestic flights range from $28 at the time of booking to $45 at the gate.

Fees for international flights are higher, but members of Spirit’s $9 fare club get discounts.

“The airline flew 24.5 percent more passengers in the 12-month period following introduction of the carry-on fee than in the one-year period when carry-ons were free of charge,” Sorensen writes.

“And all these passengers are generating spectacular financial results: profit margins in excess of 11 percent trample the puny or negative results posted by American, Delta, JetBlue, US Airways, United, and even Southwest. Spirit’s brand of unbundled service has obviously struck a chord with American consumers.”

Spirit’s previous policy — ie. letting passengers load up the overhead bins for free — was inefficient for airport and onboard operations, Sorensen argues, as gate agents and aircraft crews were checking about 17 bags per flight after passengers had discovered bin space was already full.

And, that led to much inefficiency at the airport and onboard the planes — a situation much-improved since the advent of the carry-on bag-fee policy.

Through a variety of fee policies, Spirit’s ancillary revenue per passenger has soared from $4.80 in 2006 to $43 in the second quarter of 2011, according to the airline.

Sorensen writes:

“When price becomes the product, the marketing strategy is made crystal clear. It requires the airline to strip all unnecessary costs and sell a basic airline seat at the lowest fare. Travelers quickly learn to adapt to Spirit’s methods – - or simply don’t return.

“Strict adherence to the business model prevents the airline from chasing every customer. Business travelers not seeking the perks provided by other airlines are enticed by Spirit’s low fares. The carrier boasts a core following of customers that find Spirit’s minimalist approach and Fort Lauderdale hub very appealing.”

Sorensen admits passengers may not like the new fees, but the airline is transparent about the policy and pushes travelers to make a decision about bags as early in the process as possible. Sorensen writes:

“Email confirmations sent to customers indicate checked and carry-on baggage status and solicit the customer to prepay. Consumers might not like the fees, but the abundance of advance notice effectively prevents any claim of “bait and switch” tactics. The carry-on fee does become progressively more costly if the traveler equivocates.

“During booking the carry-on bag fee is $30 or $35 if paid during online check-in. Waiting until the day of departure becomes more costly with a $40 fee at the counter and $45 at the gate. Payment at the gate is limited to credit cards with no cash accepted.”

Spirit’s experiment has proven to be a success and despite the torrent of criticism, investors love it, Sorensen argues.

Other airlines — yes, those with the aforementioned “puny or negative” bottom lines — should consider imposing their own carry-on bag fees, Sorensen suggests, although he notes they should weigh all the factors and proceed with caution.

But Spirit is redefining the meaning of a what constitutes a “good airline,” Sorensen says.

“Some may believe [being a good airline is] … represented by a more forgiving approach to fees and a gentler style of customer service,” Sorensen writes. “This blandly describes the majority of airlines in the world . . . and unfortunately, it’s a model that fails to deliver consistent profits for investors. By definition, this describes a certain path to failure. Let’s next consider Spirit as a definition of a good airline.”

Sorensen neglects to mention that the US Department of Transportation fined this “definition of a good airline” $50,000 last month for misleading advertising.

There’s apparently only one group of stakeholders — investors — which count, in Sorensen’s view.

And, with airfares rising and carriers cutting capacity and merging, how much freedom do consumers really have when making their flight choices?

Take it or leave it in the increasingly consolidated world of US aviation often comes down to a choice of take it — or stay home.

According to a report, technology called Electronic Miscellaneous Documents is bringing a la carte transactions to the travel agency community via global distribution systems and airline reservation systems.

The IdeaWorks ‘ABCs of EMDs’ report estimates airline ancillary revenue could grow to $100 billion annually through travel agent involvement.

In 2011, ancillary revenue is estimated to be worth $32.5 billion but the report shows this could increase to $100 billion as la carte services such as baggage fees, in-flight entertainment and food and drink are made available for travel agents to book.

The report says that more than 60% of airline bookings worldwide are still carried out by agents on GDS, both online and offline, representing a greater market than that already tapped into.

IdeaWorks goes on to say that ‘best results’ for airlines ancillary revenue equal just under a third of ticket revenue despite predictions from some that earnings from ancillaries could one day make flying free.

IATA has said its 230 member airlines should be EMD ready before the end of 2012 and that the technology should become the only way to settle payments with the travel agency community by the end of 2013.

However, other sources believe airlines will continue to sell ancillaries via a number of different technologies.

Of IATA members, three airlines are already using EMDs while a further 25 have developed the capability.

The report shows that EMDs will play a vital role in making the provision of ancillary services similar to e-ticketing for airlines and travel agency back office systems.

IdeaWorks claims Amadeus has made a la carte services available to agents via its distribution system while Sabre unveiled a global roll out of Air Total Pricing last year making such services available to just under 57,000 GDS subscribers.

According to the report,  Travelport will unveil its offering in 2012.

Consider the U.S. Bureau of Transportation Statistics’ latest numbers, covering the second quarter of 2011.

Cancellation and change fees rose 3.2% year over year to $612.3 million in the second quarter of 2011.

Meanwhile airline bag fees declined marginally to $886.7 million in the second quarter.

For both change fees and baggage fees, the BTS tracked 20 U.S. airlines in the second quarter of 2010 compared with 17 in the second of 2011. The missing airlines in 2011 were Colgan Air, Continental Micronesia and Horizon.

So, while baggage fees are considerably larger for the airlines, change fees are substantial and vital.

Here are BTS bag fee numbers through the 2011 second quarter:

Delta, American, US Airways, Continental and United were the top five in bag fees.

Notice that although Southwest allows two checked bags for free, it still took in $8.4 million dollars in bag fees for things like third and fourth bags at $50 each and ranked 14th.

And, JetBlue, which allows the first checked bag for free and charges $35 for the second and $75 for the third, ranked 10th and took in nearly $16 million in bag fees in the second quarter.

Here’s the BTS tally of airline change fees through the second quarter of 2011:

The top five leaders in bag fees are among the top five leaders in change and cancellation fees, as well, although their ranking is somewhat different.

Tnooz and Collinson Latitude hosted a webinar to examine next-generation ancillary revenues and how the travel industry can add value to the customer’s overall travel experience.

The 60-minute session gave attendees a better understand of how using data more effectively can build on customer loyalty through positive interaction and engagement.

The webinar featured presentations and a Q&A involving:

• Janet Titterton, Collinson Latitude, business planning director
• Alexander Meili, ICLP, European planning director
• James Berry, The Collinson Group, director product and planning

Moderator:

• Kevin May, Tnooz editor and co-founder

Here is the webinar video:

And here are the slides:

Ancillary services are a prominent part of modern life, illustrated primarily by the Euro 15.11 billion of ancillary revenue generated by airlines in 2010, a growth of 96% since 2008.

Nonetheless, particularly in the travel industry, these programmes have certainly not yet realised their potential. To look closely at these programmes is to see unfulfilled possibilities.

Just like Web 2.0, the time has come for ancillary services to take the next leap forward, becoming dramatically more effective, widespread and relevant to customers.

The travel industry can look to other sectors, such as retail, to see the success Tesco and Amazon have achieved when it comes to clear segmentation, targeting and indeed engagement of customers.

Of course, increasing customer spend whilst also increasing customer satisfaction can be quite a challenge. Each company needs to find unique, sophisticated, tailor-made solutions.

In the future, I would expect to see more “fare packages”, where distinct benefits are associated to each fare brand. Customers can therefore enjoy the flexibility of choosing the particular fare with the associated benefits they want.

BMIbaby, for example, now offers several flight fare options, including “FamilyFly” for group trips and “FlyPlus”, which offers more flexibility than the standard flight package and includes benefits for the traveller, such as the use of executive lounges.

Equally, Air Canada provides an “On My Way” service, with benefits including automatic flight information updates.

However, without the insight of your customers’ needs and habits, providing relevant and compelling ancillary propositions could be a minefield. Just as data is critical to loyalty programme performance, so it remains business critical to drive and enhance ancillary revenue programmes.

A better ancillary services programme may not necessarily mean a radical overhaul of a business plan; it might begin with nothing more than better data analysis and utilisation of the insight that may already be at your fingertips.

Direct Connect dramas

Anyone doubting the commercial value of data need only take note of the tensions and conflicts we have already seen this year, in the airline industry, over the so-called ‘direct connect’ philosophy. Data is a key prize in this battle.

Travellers tend to book flights first, only choosing other travel requirements such as hotel, car hire and insurance after flight confirmation. An airline directly selling the flight, therefore, is at the top of the food chain and the first point in the travel booking process.

This primary position brings the advantageous opportunity to offer customers other travel requirements through the airline’s travel industry partners and, as such, securing the consequent ancillary revenues.

Furthermore, third-party bookings deny the airline visibility of the wider customer spend at the time of transaction. The airline knows of the flight booking, of course, but has no visibility of other related purchases passengers may have made, such as car hire, guided city tours or winter sports insurance.

Without such customer specific data, airlines will struggle to offer the kind of customised loyalty and rewards programmes that allow them to build long-term, profitable relationships with passengers.

Thus the key to better loyalty and ancillary programmes is to adopt a customer-centric view, which is dependent on solid database marketing and customer feedback and tracking.

Maximise customer touchpoints

If you want to offer customers benefits that spread across many areas of their lives, programmes should find channels of communication that reach across their lives too. By offering wider lifestyle rewards within frequent flyer programmes (FFPs) stretching beyond traditional travel redemptions, you can increase the opportunity for consumers to interact with your brand more frequently.

FFPs and hotel frequent guest programmes (FGPs) help maximise the touchpoints brands can have with their customers. Ubiquity of message is needed to ensure the customer is constantly engaged in a relationship with your business, whilst always being reminded of the brand at the centre of the programme.

By ensuring multi-channel contact with customers – from their desktop computers in London to their mobile phones in Beijing – you maximise opportunities for customers to earn and redeem loyalty points, for example.

Mining the data you hold is fundamental to offering relevant and timely offers. If you know your customer loves golf, having subscribed to one of your membership packages with a golfing theme, why not offer that customer a means to earn loyalty points by buying golf equipment from a partner supplier, through your website?

In this way, you can achieve the holy grail: seamlessly combining ancillary services and customer loyalty – creating strong complementary programmes, not conflicting ones.

Targeted ancillary services programmes can help you meet customer expectations of the personal touch. And the closer you are to your customers all the time, the greater your chance to build long-term profitable relationships.

NB: This is a guest article by Janet Titterton, director at Collinson Latitude.

This Tnooz-Collinson Latitude webinar will focus on next-generation ancillary revenues and how the travel industry can add value to the customer’s overall travel experience.

The 60-minute session will give attendees a better understand of how using data more effectively can build on customer loyalty through positive interaction and engagement.

Other areas covered in the webinar:

• What is next-generation ancillary revenue?
• What is value creation and how can brands add value to the overall travel experience?
• Building on existing ancillary revenue programmes.
• What the travel industry can learn from other sectors (eg. retail).
• Adding value to loyalty programmes.
• Utilising data effectively (more relevant and personalised targeting)
• Case study.

Panelists are:

• Janet Titterton, Collinson Latitude, business planning director
• Alexander Meili, ICLP, European planning director
• James Berry, The Collinson Group, director product and planning

Moderator:

• Kevin May, Tnooz editor and co-founder

Attendees will be able to interact live throughout the event using the webinar’s chat facilities.

This FREE 60-minute webinar takes place on Thursday, October 20, 2011 at 11am US/4pm UK/5pm Central Europe (all times local).

You can reserve your FREE seat at this webinar HERE.

The webinar is powered by GoToMeeting. System requirements: Windows7, Vista, XP or 2003 (PC users) or Mac OS X 10.4.11 Tiger or newer (Mac users).

We will record the webinar and publish on Tnooz following the event for those who cannot attend live.

Space is limited. Register for FREE now!

Flight prices are being squeezed to an all-time low, and airlines from all corners of the globe are looking for ways to protect and enhance their revenue streams.

At the same time, technology advances are making revenue management a more powerful tool than ever before.

Revenue management is at the heart of all commercial airlines’ strategies, and the dynamics of today’s market makes it more critical than ever for you to have a robust understanding of your customer segments, pricing power and competition.

We recently carried out an interview with Hugh Dunleavy, EVP for strategy and planning at WestJet, where part of his portfolio is the pricing and revenue management. He will be speaking at our conference in London on 22-24 June 2011.

1. What do you feel are the major challenges for airlines in terms of implementing new revenue management (RM) initiatives?

That is a tough question because so much depends on the local competitive environment. At the simplest level, the major challenge is isolating all the many market variables that interact to determine the outcome of an initiative.

The next logical difficulty is being able to isolate the cause and effect from all the noise in the system (many moving parts) and being able to directly measure the impact of a specific initiative.

2. How much of an effect is the low-cost carrier model is having on legacy carriers in terms of pricing and product offering?

I believe the LCC model has and continues to have a huge impact on both the pricing and product offerings of the legacy airlines.

Classically, the Low Cost carriers establish incentive fares (low prices) in the market to achieve a small profit margin.

However the stimulating effect of the lower fares also leads (typically) to higher load factor operations that result in a significant PRASM that is sufficient to generate good profits for the LCC.

The legacy carrier typically will match the LCC at the low fare end of the market and use revenue management to control the number of seats it sells at these deep discount fare levels.

The legacy then protects a reasonable proportion of its seats for the higher fare segment (a segment that is not a traditional target of the LCC) and is able to capture a significant yield premium from the frequent business travellers.

The net result is that the legacy carrier will in many cases transport as many guests after the LCC has entered the market than it did before the LCC entered the market. The stimulating effect on consumer demand grows the market for both competitors.

In this environment, the legacy carrier may still generate a higher PRASM than the LCC but this higher PRASM is not as high as it was before the LCC entered the market.

So although the Legacy carrier experiences similar loads before and after the LCC entered the market, the average yield extracted from the market is significantly reduced. In many cases the reduction in yield results in the Legacy carrier operating in a loss situation.

Similarly, the LCCs have sometimes been able to utilise more advanced and sophisticated products on-board their aircraft that were far superior to the product and quality offering from the Legacy carriers. Some classic examples have been:

• Modern aircraft in the LCC fleet compared with aging (and tired) legacy fleets
• Improved seat pitch on the LCC compared with the Legacy. This is probably a market specific phenomenon as many LCC’s have gone to very high density configurations
• Live satellite TV at each seat
• On-board services on a pay per use basis

3. What tip would you give an airline looking to improve its revenue management strategy?

Focus on the inputs (people, processes and technology). My experience across many airlines indicates that Organisations tend to be focused on the outputs such as daily sales and PRASM build which is largely impacted by market dynamics.

It is vital that the airline really understands its own business model, what are the drivers of cost and revenue and ensure that the metrics are in place to measure those at the level of detail and frequency that is appropriate for that driver.

If you don’t understand what drives your costs how can you control them? Similarly on the revenue side, does the airline really understand the nature of the business model?

Is the airline an ultra LCC with an unrelenting focus on driving costs to the lowest possible level and then driving ever lower fares to continually stimulate demand  and drive profits on the basis of low fares, low cost and high passenger volume?

This means that the airline has to also operate at the highest level of efficiency to achieve a high degree of consistency in OTP.

4. What one change or development do you believe will push revenue management forward more than any other?

With the rise of the OTA market over the past ten years, the consumer has gained an increased measure of control in the market place that had previously been out of their reach.

As a result, many of the tactics historically employed by airlines to maximise revenue are at best less effective and at worst not effective.

Learning how to effectively operate in this environment of high transparency is one of the most critical skills that an airline can develop.

This increased transparency will also force the airlines to consider the longer term impact of specific pricing actions; since the guest can now see how fares behave over time, they will learn which airlines are ready and willing to attempt to extract the maximum price from each ticket and as a result they may be willing to “punish” those airlines that prove to be too greedy.

RM works best when there is surplus demand; however this is a factor that is largely outside of the control of the industry.

Getting the world economy back onto a stable foundation with steady and consistent increases in GDP across all of the world economies is an obvious desired state. The recent volatility in the world economy (financial crisis of 2009, surges in oil prices, the geo-political crisis in 2011 and yet another round of oil price volatility) are not in the interests of any economy.

The airline industry is unfortunately plagued by being a high fixed cost business with extreme sensitivity to external events that can quickly destroy consumer demand for air travel.

Naturally certain emerging markets will grow quicker than more mature markets but this will be addressed by the growth of the local airlines to fill their increasing consumer demand. Rational behaviour by airlines focussing on return on invested capital and driving profitable operations rather than the traditional focus on market share will certainly help the industry.

In this context the oversupply of airline seats that get parked during a crisis but rapidly come back into the market once the crisis is over is a classic demonstration of the profit-loss cyclicality in this industry.

NB: This is a guest article by Jodie Cohen, programme director at the Revenue Management for Airlines conference. Organiser Hanson Wade is offering an exclusive 10% discount off the registration fee. Visit the conference website and quote “TNOOZ” when registering.

Ancillary sales are one of the most debated issues in the travel industry today. Forrester (with Amadeus) project that by 2015 ancillaries will account for up to 18% of travel suppliers’ revenue.

In their January 2011 study, Cross-Sell Your Way to Profit, they reveal that while traditional third-party services such as insurance, car rental and hotel room sales are expected to remain popular, travel providers see great potential in a range of ‘extreme’, as yet unexploited, products and services.

By 2020, more than half of travel providers expect to offer virtual reality services that can help passengers experience airports, hotels and cruise ships before arrival, digital concierges to improve the in-hotel or airport experience and in-journey spa treatments.

It’s clear that travel suppliers need and want to grow and diversify ancillary revenue. What consumers want is not so clear, and opinions are divided.

Depending on who you ask, consumers want the lowest possible fare with everything unbundled, or they want simple logical bundles and reasonable fares, or they want more value-added options and third party services or they are sick to death of being nickel and dimed to death, and want the whole mess to just go away.

While travel suppliers work to find the right balance for their brand and their customers long term, mobile offers an immediate opportunity to turn the problem on its head.

Front-loading optional ancillary services in your booking process can be effective for some services, but the mobile phone in every travellers pocket means that suppliers can interact with customers at every step of the journey (including planning and pre-trip preparation), and can choose to offer the right ancillary services at the time when the customer is most likely to need or want to buy.

Done well, ancillary sales via mobile will be seen by customers as valuable service, not sales.

Let’s look at some examples:

• At time of booking offers on ground transportation and airport parking are logical options.
• At mobile check-in, especially on the return leg of a trip, an offer to skip the queue at security and use the VIP lane could be well received. I know exactly what to expect from the security queue at my home airport, but I might well pay to sail to the front of the queue at O’Hare. This might also be a good time to remind me that I didn’t opt for an in-flight meal.
• Your flight is delayed for three hours – how about a day-pass to the lounge for a glass of wine with free wi-fi?
• Just before boarding an airline could push a mobile only offer for extra leg-room or seat upgrade. The extra fee may not have seemed attractive at time of booking, but after an hour in the airport a little extra space seems like a dream come true.
• A guest booked an executive room and checked-in after midnight; a quick tap on their mobile could order room service coffee for the morning.
• Guests who book family rooms may appreciate direct mobile booking for local amusement parks or family activities.  Maybe even a reminder about the in-resort babysitting service and available (grown-up) dinner reservations.
• It’s the night before check-out. The kids are hyped up on sugar and you can’t find little Sally’s left shoe. Would express mobile check-out and a car to the airport tomorrow morning help?

There are a thousand possibilities.

A well developed mobile channel, integrated with your business systems, allows you to offer your customer what they want, when they want it and when they are willing to pay for it.

And that’s something that both travel suppliers and consumers want.

NB. This is a guest post by Gerry Samuels, founder and executive director of Mobile Travel Technologies (MTT). MTT develops comprehensive mobile apps and channels for airlines, hotels and travel intermediaries like AirAsia, EasyJet, Sol Melia, and Pegasus Solutions.

Despite the temporary truce between American Airlines and some of its GDS providers, the prospect of a breakaway remains a very real possibility.

If one airline succeeds in enticing customers to its own direct connect bookings facilities, other big-name brands will surely follow.

The result? A renewed focus on the customer value proposition.

The potential split between American Airlines and GDS provider Travelport can be seen as a test case for the industry – at least for the big-name legacy carriers.

Inevitably the result could make a radically different world for the airlines, the GDS providers and the customers alike – one which will continue to evolve long after the initial wrench of separation.

In reality it will only be the big-name legacy carriers who break away from the existing GDS operators – meaning a maximum of 20 airlines in an industry of hundreds.

Doubtless the GDSs will then focus on the majority who, while they may be smaller carriers, might be able to get customers to a given destination more cheaply or conveniently than a big-name legacy brand – thereby putting the wider customer value proposition at a premium for the legacy carriers.

From the perspective of a legacy carrier such as American Airlines, it makes sense to try and maximise revenues by cutting out the GDS providers in the short-term and no longer having to pay their fees, but only on the proviso that they can draw enough traffic to their own booking systems.

Success therefore depends upon each airline’s commitment to deliver an appetising package to the customer that will generate brand loyalty and sustainable revenues.

One beneficiary from airlines seeking to ‘go it alone’ is likely to be the traditional High Street travel agent.

Although the days when approximately 80% of bookings were made via travel agents are long gone, they still command a fair slice of the market and doubtless many airlines will target this sector as part of their plans to break away from GDS suppliers.

As a result, competition to generate travel agent sales is likely to be fierce, meaning that airlines will need to review their current customer offering.

So how can airlines achieve this goal of sustainable, maximised ancillary revenues whilst also ensuring that their customers feel a rising sense of value from, and therefore loyalty to, the carrier?

This year marks the 30th anniversary of the first frequent flyer programme and the first step towards airlines truly understanding who their customers are.

Today it is possible for airlines to offer customised third-party lifestyle benefits and offers beyond the travel service, either through complementary offers, such as insurance, or enhanced loyalty programmes, be they reward schemes or subscription-based membership packages.

The closer the relationship between the airline and the customer – through a direct connect bookings facility, for example, rather than a GDS – the greater the opportunity for airlines to market ancillary services to customers at the earliest possible stage in the booking process and also to customise those ancillary benefits being offered.

The airline knows, for example, through basic data analysis that certain customers regularly fly to ski resorts and could therefore offer those customers winter sports-themed loyalty rewards and membership packages.

Even when out on the slopes, the customer is enjoying a sense of engagement with, and benefit from, the airline. With that sense of value comes loyalty: everybody wins.

NB: This is a guest article by Janet Titterton, a director at Collinson Latitude.

First, the numbers.

The forecasted $22.6 billion (Euro 18.4 billion) in global airline ancillary revenue would translate into some 4.8% of airlines’ $473.6 billion in global operating revenue.

A prior Amadeus-IdeaWorks report, released in July, estimated that airline ancillary revenue in 2009 was $13.5 billion (Euro 11 billion), but this previous report relied only on disclosures from 47 airlines which reported their ancillary revenue numbers.

The latest report, “2010 Amadeus Guide to Ancillary Revenue,” used additional sources, including alliance websites, to forecast 2010 ancillary revenue from 150 airlines.

The report unabashedly supports airlines’ drive to gain ancillary revenue and points to certain increases in 2010, noting “Our baby is growing up” and “Long live the revolution.”

The report lumps airlines into categories: Ancillary Revenue Champs (Allegiant, Flybe, Spirit, Ryanair and Tiger Airways, for example); Major U.S. Airlines (American, Delta and United); Low Cost Carriers (Air Arabia, Air Berlin, SpiceJet, Spring Airlines, Virgin America and WestJet); and Traditional Airlines (Aero Mexico, Asiana, British Airways, Egyptair, Scandinavian and Silkair).

The Ancillary Revenue Champs — or tyrants, depending on your perspective – are estimated to average getting 19.4 percent of their revenue in 2010 from ancillary fees, according to the report. The Major U.S. Airlines average 7.2%, LCCs 5.4% and Traditional Airlines 2.9%, the report estimates.

Thus, ancillary fees may be a mainstay in the U.S., but that isn’t necessarily the case throughout the airline world.

The $22.6 billion mark in ancillary revenue in 2010 undoubtedly will be shattered in 2011, the report says.

“For example, coordination among alliance partners has compelled Europe-based airlines to adopt baggage charges on transatlantic routes,” the report says. “Traditional airlines are boldly experimenting with new a la carte initiatives. All Nippon Airways, KLM, and United are testing the sale of upgraded meals to economy class passengers on long-haul routes.”

And the report authors expect new Ancillary Revenue Champs to emerge in 2011.

“In addition, carriers may move up a category – - some low cost carriers might become better practitioners of the ancillary revenue art and upgrade to ―champ status,” the report says.

However, there are some ominous signs in the ancillary revenue crush, the report warns.

“A surprising number of LCCs throughout the world continue to provide complimentary beverages or have yet to assess fees for checked baggage,” the report says.

You can’t always get what you want.

httpv://www.youtube.com/watch?v=wxkdmL3iMCY

—–

Disclosure: This report was released during the Amadeus Horizons 2010 conference in San Francisco. Amadeus paid this writer’s flight and hotel expenses for the conference.

While the experience is not pleasant for the majority of people – if we believe the surveys that asked the loaded questions – it does seem to drive more suppliers to set up solutions that allow them to capitalize on the revenue opportunities.

Latest up is Thomas Cook (UK). Check out its new ancillaries service on a standalone site.

Something, however, sounded strangely familiar. I remember that as a kid I could go into the local Thomas Cook office in Cambridge, UK, and buy a whole raft of travel ancillaries.

So I did a quick search and, using the ubiquitous Wikipedia, here is a lovely tidbit, lest you think that this is all something new for the Anglo-German conglomerate:

“With John A Mason Cook [Thomas Cook’s son], he [Cook] formed a partnership and renamed the travel agency as Thomas Cook and Son.

“They acquired business premises on Fleet Street, London. By this time, Cook had stopped personal tours and became an agent for foreign or domestic travel.

“The office also contained a shop which sold essential travel accessories including guide books, luggage, telescopes and footwear.”

So the pioneer in organized travel was actually also the innovator in ancillaries!

Under the agreement, Orbitz Worldwide, with iSeatz as its technology partner, powers hotel and car rental search and booking on the Alaska Airlines website.

Using the iSeatz OneView In-Path Plus platform, the partnership enables Alaska to offer standalone or packaged hotel and car inventory in the airline’s flight-booking path, and to earn ancillary revenue.

For Orbitz Worldwide, the agreement is a win for its fledgling private label business and its 6-month old hook-up with iSeatz to get that business rolling.

Market leader is Aircell, providing services to the likes of American, Delta, Airtran and many others.

According to Aircell, 1,009 commercial aircraft are equipped with wifi access from Aircell called GoGo Inflight Internet.

Meanwhile, Row 44 announced this week that it has raised $37 million, this only eight months after Aircell raised $176 million.

While others use ground based antennas, Row 44 leases telecomm satellites which can provide wifi access globally.

This is great news for the aviation industry as well as for passengers. Wifi is therefore perhaps the killer ancillary that people are actually prepared to pay for without feeling cheated.

Keeping passengers occupied with stuff that matters to them most will have them using their plastics like never before.

The ancillary business in aviation is exploding and last year the global airlines made more than $13 billion. Inflight wifi is so far a minimal revenue source.

But, lest we forget, so were check-in fees and other forms of ancillaries in the beginning.

However, a closer examination reveals that the basis of the anti fee coalition’s case is not based on fact.

The website MadAsHellAboutHiddenFees.com represents a coalition of American Society of Travel Agents (ASTA), Business Travel Coalition (BTC) and the Consumer Travel Alliance (CTA).

Of these, the only professional membership organization would be ASTA representing the interests of the US travel agency community.

The other two organizations are individual pressure groups. The former is run by Kevin Mitchell and the latter is fronted by three writers, Chris Elliott, Edward Hasbrouck and Charlie Leocha.

But deeper scrutiny of the campaign begins to unravel the coalition’s story, as the website makes some strong claims.

The nub of what the coalition is asking for, despite all the rhetoric, is contained on the FAQ page.

Buried in the text is the following statement on which they base much of their case:

9. Aren’t you just opposed to ancillary fees as a matter of principle?

No. The airline business model has changed, and optional fees are here to stay. What every consumer deserves is simply a chance to compare prices on an apples-to-apples basis. That’s what makes the free market work. We are only opposed to hidden fees that more than 50% of travelers never see until they reach the airport. It is simply not fair, and it needs to change.

Elsewhere the organization acknowledges that the technology exists and that the traditional players are ready to implement it.

8. Does the technology exist today to disseminate ancillary fees through existing sales channels, like the travel agencies?

Yes. The same organization that distributes the airlines’ airfares has developed a system to disseminate airline fees. Better yet, the solution can be used for only a nominal fee. The technology is ready to go and has been tested by the airlines themselves. The major computer reservation systems that power the world’s travel agents and online travel sites are ready to use this technology to allow travelers to compare the total cost of travel.  With it, passengers can pay for airfares and fees at the time of purchase, rather than doing it in multiple places ranging from initial purchase to check-in at the gate. (If a passenger wants to purchase ancillary fees at a later point, like check-in, of course they will have that option as well.)  As soon as the government requires airlines to share this information, consumers will be able to search and compare the full and comparable price of their travel, regardless of whether they purchase their tickets through the airlines, reservation systems, online travel agents, corporate travel managers or the travel agency down the block.[See Note 1]

[NB: ATPCO is also a founding member of OpenAxisGroup]

Sadly the coalition has not examined the current processes in place inside the industry and normal accepted practice.

They seem to be rubbishing the capabilities of the travel agency community to interact with the existing sources of information available to every agent, and every consumer who has access directly or indirectly to the internet.

A quick review of the four major GDSs shows that airlines have in general placed most of their travel agent information online for travel agents to access in private websites which are stored away from the general public.

This makes the dissemination of agent pertinent information easily accessible in a more timely manner. Clearly a web page is more useful than a GDS text-only co-host page.

For example, Delta has a portal for agents.

An example of a display from Amadeus shows that American Airlines no longer lists its information on the GDS pages but also rather via the web in multiple languages.

Here is a screen shot. This information has been presented like this since December 2006. So this is not new.

Some airlines still maintain a full GDS presence as well as their own pages – Air France, for example.

However the majority of US carriers use the web to display their information in the form that Delta and American do.

Most travel in the US is researched online; 50% is booked direct and 50% indirect via travel agencies of which the majority is not going through some online tool.

Full terms and conditions for travel are agreed to with a simple click. However the actual terms and conditions of carriage and fees explanation are very arcane.

I doubt that anyone has had the full rules and conditions of a standard fare read to them in recent times.

This information – as with so many other business sectors – is stored on the web. True, not everyone does a good job but the display results are consistent.

So while the coalition is making a big deal about hidden ancillary fees it does seem that the standard processes for the information are currently available and made so using standard channels that are well established and heavily used.

Thus the fees are not hidden. Sadly this seems to disparage the work that many, if not the vast majority, of Travel Agents do in their day-to-day lives.

Does anyone like fees? Probably not, but they are here to stay.

Are they displayed in the easiest format? Also probably not, but anyone who deals with fares on either a regular or occasional basis cannot help but recognize that airline fare rules are at best described as complex.

It should be carefully considered that additional regulation in this area will actually be detrimental to the process of selling travel and create additional work for no additional compensation for these agents.

The old adage of “be careful what you wish for” might actually be very appropriate here.

Note 1: While the technology exists and many of the processes are in place to deploy the solutions, sadly the traditional big four GDSs have not deployed them in any meaningful way.

So this statement is not quite correct. Indeed the airlines are very frustrated in that they cannot disseminate the information to their agents and formed their own organization OpenAxis Group to do just that.

NB: Disclosure – O’Neil-Dunne is acting CTO for Lute Technologies, an organisation which has joined the OpenAxis Group.

UPDATE: Comments on the post are suspended. This post is not the place for parties to air grievances that are not related to the subject matter above. Ed.

But really is there an issue or it is more a question of perception?

One of the more obvious questions that gets asked is do passengers like being charged individually for items versus a bundled ticket.

If you ask the vanilla question “Do you like paying for extra services” it is bound to elicit an immediate reaction of “NO”. Or probably more accurately: “HELL NO!”

However I keep wanting to see someone ask the question in context. Such as:

“Would you be willing to pay for an unbundled fare if you could chose a lower price than the bundled services you don’t use?”

I am sure that would elicit a different response.

A recent piece from Bloomberg digs out the usual objections to some of Ryanair boss Michael O’leary’s latest ancillaries ideas.

At the moment he is pushing two ideas. These are: reducing the number/Paying for toilets and offering a very cheap fixed fare – both for short flight standing room only on 737s.

The outcry from “consumer” advocates are the usual anti ones. One comment I particularly like is this one: “He insults the dignity of the flying public every time he opens his mouth,” says Kate Hanni of Flyersrights.

According to the Bloomberg article, Hanni claims to have raised the issue during a meeting with the US Transportation Dept.

DOT officials told her they had verbal commitments in place from all the major US aircraft manufacturers that they will never have pay toilets, she says.

I find this hard to believe as it is the NTSB which has jurisdiction over safety issues. The captain of the aircraft has the ultimate authority over what goes on during the time the aircraft is in service.

But I digress.

The issue is that should the airlines be allowed to unbundle the airline product – and the answer is they should be.

But clearly O’Leary is one bad dude wolf in this. His ripost:

“If you don’t approach air travel with a radical point of view, then you get in the same bloody mindset as all the other morons in this industry: This is the way it has always been, and this is the way it has to be. So nothing changes.”

Clearly he has shown the way to profits in his approach. Indeed some of the most ardent of objectors to the ancillary services model have been the big three legacy GDS companies.

They have been one of the most focused on the business model through their unbundling the GDS segment fee.

Perhaps more germane to the issue at the moment is what the user community thinks about this.

Both the agent community and the GDSs are largely against the idea of ancillaries. I was finally able to get my hands on some data from NBTA during which the topic was hotly debated.

During a session run by Jim Davidson CEO of Farelogix – who is somewhat of a lightning rod on the subject matter – he ran a poll of 125 travel managers who were in the audience.

It provides some good insight into the current issues. What was very interesting to see was where do the pain points lie – ie. what are the obstacles to deployment.

Clearly echoing these comments, one of the big four travel management companies on a panel, Carlson Wagonlit Travel, said:

“From an agency perspective, we’re clearly hearing from our clients that there is a definite need to start controlling, or at least being able to understand and control, the costs aligned with some of these fees.”

This was from vice president for client services Brian Hace, who later went on to sing the hymn of the need for standards.

From the supplier side, another bad wolf dude is Air Canada. Keith Wallis, manager of distribution business development, said:

“We understand that reporting is a big issue. We did this on dot-com first because that’s a channel that we control. Now it’s time to do things in channels when you shop. This is just technology grunt work. We can make it happen.”

Who exactly is the “we” in his statement could be open to interpretation.

However it does seem to be a large technology issue throughout the intermediary airline supply/distribution chain.

Clearly this is a point made by the audience corporate travel managers who cite integration with their TMCs and their booking engines as one of their highest concerns.

However the GDSs seem to pooh-pooh that position.

“I assure you this is not a technology issue,” reckoned Sabre Travel Network senior vice president of marketing, Chris Kroeger.

One of his counterparts at Galileo, Travis Christ, however seemed to politely disagree with him. Travelport Americas president Christ was clearly promoting new some upcoming enhancements by saying:

“I think we’re on the cusp over the next few months of a great deal of progress with the new desktop products, new corporate booking tools, etc. There’s a lot to look forward to next year.”

Perhaps where the airlines have not done a good job is sitting down with their agency and corporate partners and coming to terms with the whole issue both technology and commercial wise.

While some airlines are taking a unilateral approach, I suspect in part because of their frustration with the lack of progress, others are taking a more pragmatic stance and working out some of the more complicated issues with their partners.

Frankly, the objections both outspoken and muttered are rather like the folks on the train in the Abilene Paradox.

I think that once people get their heads around it there will be a real sense that this is not that hard and that some of the most vehement naysayers are those who are fighting change.

So, yes there are clearly a group who are the Luddites in all of this. And they know who they are. For the rest of us – let’s just get on with it.

No big bad wolf, just a way to service the customer/passenger and provide solutions that make sense.

After all you don’t hear a huge outcry of the pricing of automobiles. Nor event tickets where ancillary charges have been the order of the day for many decades.

NB: I will be speaking on the subject at the FVW Kongress in Cologne Germany on September 15th at 14:05.

Social media, distribution channels, web investment, discounting, being risky and target-setting – it couldn’t be easier as an independent hotel owner, right?

1. Everyone’s listening.

Social media, what exactly is it? Ignore the myth that social media is just Facebook and Twitter, these days the internet is social media and a strategy for managing it has never been more important. Facebook and Twitter are important, but don’t forget the numerous other channels including TripAdvisor, Foursquare, YouTube and local websites and blogs.

Communication on the internet takes place everywhere; make sure someone is monitoring it. Revenue managers often don’t have time to monitor social media and over the next few years, the position of social media manager will become an important role. Don’t get left behind and ensure you implement an effective social media strategy. There are many partners available who can help you build an effective strategy if your resources don’t allow it.

2. Choose the right distribution channels.

How do you choose which e-distribution channels are right for your hotel? Several factors need to be taken into consideration, from channel contribution potential, distribution spread and cost to how easy the channels are to manage, what types of marketing exposure they can provide and the sort of technology they use

If you want to target the mobile-commerce market, choose a distribution partner that has access to these channels. Demand is slowly improving, and it has never been more important to ensure your hotel is seen everywhere.

Identify the right channels for you, manage your rates dynamically and don’t lose sight of rate parity across those channels. If you’re currently distributing rates manually to a number of different channels, a channel manager may be a suitable option for you, making your life easier and leaving that all important time available to make vital strategic decisions.

3. Invest in your own website.

A good revenue management strategy should be carried through to the hotels’ most important revenue channel, their own website. At least 10% of revenue should be generated from your website and it should generate at least 25% of your revenue in the next couple of years.

One of the key factors to achieving this is through search engine optimisation (SEO) and Pay Per Click (PPC) campaigns and as a revenue manager you should already be thinking about these strategies.

Consider your target market, identify what keywords your audience is searching for and ensure your website is optimised for these keywords. Take a look at the competition – what key words is your competitive set appearing for in the search engines?

Think seasonally – are your key words changing when you promote new rates and offers? Talk to your webmaster and ensure they are doing this properly. It they’re not working on this at least three times a week, you’re not optimising your website as much as you should be.

A good representation company should be able to help you devise an effective SEO and PPC strategy.

4. Value is king.

Following a recent analysis of the hospitality industry, research shows that the supply of new build hotels is slowing due to the long suffering global economy.

However, figures show demand for hotel rooms is slowly improving but the ADR (average daily rate) weakness continues and is set to do so for the next few months. A moderate improvement is set to happen by the end of the year and a good growth is anticipated for 2011.

To drive hotel ADR, we need to remember one thing – Value is king. In a price sensitive market, value is the most important factor but this doesn’t mean you have to compromise on your prices. Look at offering value added packages, free nights offers and length of stay discounts.

Whenever you implement a rate strategy, keep this in mind and make sure your rates are brave but can also guarantee good value for money.

5. Better relationships, better profits!

One of the key factors these days in the world of revenue management is relationships. Don’t try and do everything on your own. Invest time in building strong relationships with all of your distribution partners including online travel agents, consortia programmes and corporate accounts.

A good representation company will be able to give you best practice tips and will help you to set the most effective revenue management strategy as well as expanding your relationships with additional channels.

6. Early birds or leaving it until the last minute?

As the economy slowly emerges from recession, it is likely that not only your target market has changed but also they way they are now booking their holidays, so ensure you reassess who your core customers are.

Are you targeting the right clientele? Could you attract higher spenders?

Once you’ve identified your target market look at how they book their holidays – are they booking last minute or are they looking for early bird deals? Are they booking through travel agents or through their mobile?

Don’t assume your customer’s habits are the same as they were two years ago and ensure you adapt your strategies to respond to the changes.

7. Look to the future.

Booking patterns can change dramatically, whether it is with the seasons or the economic environment. Although revenue management relies strongly on historical data, in a volatile economy, it’s important to look ahead and understand how economic and seasonal changes will affect the way people book your hotel.

The internet now gives access to last minute availability and allows people to shop around for the best deal very easily. The fragile economic climate has also changed the way people think about their holiday, with a uncertain employment climate, people don’t want to commit to a holiday too far in advance.

People are still travelling but are happy to book last minute and for a shorter length of stay. Respond to changes such as these with targeted and differentiated rates and packages such as attractive last minute offers.

It’s a challenge for revenue managers to react to how people want to make their bookings but get it right and you’ll notice the results. Your representation partner will be able to help you identify these changes and assess the impact on your business.

8. Make sure you’re in the loop.

The world of revenue management is constantly evolving and is more competitive than ever. Stay ahead of the fast-paced nature of the industry by attending conferences, events, seminars and trainings to keep up with new trends and establish partnerships to gain best practice advice.

If you have access to the expertise of a revenue management specialist don’t be afraid to use them!

9. Dare to take risks!

Revenue management is all about selling the right room, to the right customer, at the right time, for the right price and for the right length of stay.

Nobody gets it right first time and to get all of these factors spot on will involve taking a few risks. How else will you know what works and what doesn’t? Don’t be afraid to take risks, just make sure you’ve thought about the consequences and if it goes wrong, learn from your mistakes!

Keep your competitors in mind, but don’t let them dictate your own strategies and tactics.

10. Set your targets and budgets early.

Now is the time to set your revenue management targets and budgets for next year. Leave your self enough time and try to anticipate any problems that may occur.

Ensure you take into account all the points raised above and include them in your budgets including SEO, PPC and social media strategies.

Understand your current situation and set SMART goals – they should be specific, measurable, attainable, relevant and time-based.

Don’t do all the work yourself, collaborate with other departmental objectives and always communicate your revenue management objectives to your colleagues, in particular the sales department to ensure you are all working towards the same goals.

NB: This is a guest post by Yunna Takeuchi, director of e-distribution at Evolution, reservation system provider to hotels.

The company, normally known for its B2B services with such industry sectors as airlines and insurance providers, has unleashed two iPhone applications this week to iTunes, one covering trip planning and another attempting to make travel more sociable.

The first, Travelplan (costing £5.99) claims to be the only app in the marketplace that has timetable information for 750,000 scheduled flights and access to around 15,000 hotels on a directory.

The accommodation information includes details number of rooms, facilities and contact details. Users can select different elements of a trip and bundle into an itinerary.

Collinson is making great play of the offline status of the app, meaning users do not need to tap into a live data stream to access content.

Air data is provided by FlightStats.

The second app, Fly&Share, works as a trip update system so that users can notify other people in their social networks and address books when they are using a particular travel service.

The user enters the detail of a service and the app automatically sends messages at various points during a flight, for example, allowing people to learn when an aircraft has taken off or landed.

Asked why the company has developed two separate services instead of combining into a single product, an official says:

“Potentially in the future they will be, but they are two single minded products to serve different needs at different stages of the travel journey.

“There is also the logical disconnect in the middle – Travelplan allows you to identify the trip you want to take, but you haven’t booked anything yet. Fly&Share allows you to share confirmed and current travel.”

Collinson says the two apps are the first in a suite of different B2C travel products, primarily as a testing vehicle to evaluate requirements of consumers.

“What do people want? Will they use it, will they pay for it? We are also testing Apple – what are the boundaries? How much data can we put out on a phone etc, and how we connect to Facebook and Twitter.”

In a somewhat novel move by a legacy GDS, Shelley Beasley, Travelport’s point person in the Asia-Pacific region, has gone out on a limb and attacked the low cost carriers for not wanting to pay for the custom development necessary to support ancillary services.

Indeed she is suggesting that the LCCs just don’t want to pay for the cost of the development at all.

At this week’s TravelTech conference, hosted by Martin Kelly in Sydney, Australia, Beasley (managing director for Pacific and head of solutions support in Asia-Pacific) went on the offensive.

Following negative comments on GDSs capability to handle advanced services and to keep up with the demands of LCCs by Jetstar and Air Asia in recent weeks in the region, Beasley countered in a spirited defense of the traditional GDS service model.

Describing the adverse statements as “a smokescreen” she says LCCs are reluctant to spend money on developing a system that handles their complex way of selling.

“The industry has not worked to a standard,” she says, adding a common solution “has to happen.”

Presumably this implies that the LCCs should be paying the GDSs for custom development despite having the capability functioning well on their own sites and in their own infrastructure – in many cases on systems owned and managed by GDS companies.

This seems to be a common cry from the GDSs to the point where it would seem they are reading from the same script.

Perhaps this is somewhat of a jaded argument. It would appear that the GDSs have not invested enough into the infrastructure to support a form of product that has been in the market for more than a few years.

This argument also does not hold up in the light of history. In previous major changes to the infrastructure of airline distribution such as ATB – the GDSs did not charge the airlines for this development.

In the end the agents had to pay for the expensive ATB2 printers either directly or via incentive payments from the airlines.

Depending on your view, it could become a chicken vs egg discussion.

The low cost carriers generally eschewed the use of GDS distribution. Indeed the most successful of them all in terms of profitability is Ryanair and it still steadfastly refuses to use intermediaries to sell its products.

It argues that if the product is to be sold that way then the consumer will be disadvantaged.

Other low cost carriers either charge for content distribution, such as Norwegian, or limit the product that is available for distribution by the more expensive channel – for example GOL.

Thus should the GDSs be providing solutions that support ancillary revenues at their cost or do they sit this one out and wait for a standard?

The airlines appear unwilling to wait to support a GDS sponsored standard but instead are coalescing around a standard of their own – the OpenAxis standard.

But the argument does not just affect LCCs. Full service network carriers such as American Airlines and Air Canada have also adopted the same position.

Clearly for the majority of carriers, adopting ancillary revenue product sales is a profit winning solution.

Most estimates for all of 2010 put ancillary revenues in the $5 billion plus range.

Total profits for the whole industry are (per IATA estimates) only $2.5 billion. In contrast, 2010 GDS fees are likely to be in the range of $10 billion to $12 billion range for the whole industry.

Who will be the winners in this battle? There is clearly a lot at stake.

But it would seem that the GDSs are deploying solutions. Amadeus has announced adoption already.

Even Travelport itself has slated release of enhancements in the September timeframe. Therefore it would seem the protests are ringing a little hollow.

Listen carefully…

httpv://www.youtube.com/watch?v=ZAg0lUYHHFc