Read the headline again… That’s right, the UK’s official body which represents the interests of travel organisations and consumers has a rather interesting idea.

But first, some background: two key distribution models are emerging in consumer-facing online travel.

Firstly, there is the distributed transaction model – supplier places product, price and availability information into some form of distribution system, consumer buys from an agent (online or off), the transaction details are transmitted to the supplier.

Secondly, media models are coming to the fore. Awareness of the product (including perhaps price/availability) is on a 3rd party website, but ultimately the consumer books with the supplier directly.

Media models are simply a form of advertising with rich data. It is a marketing process, not a sales process.

With flights, hotels and other commodity products distributed transactions work well.

Most leading OTAs sell flights/hotels and consumers are happy enough to book these products via OTAs.

One reason is that collectively we as an industry have worked out what product information the consumer needs in order to make a purchase decision on a 3rd party website.

For flights/hotels the hot news is the media model websites (including meta search, trip planning sites etc).

For escorted tours, activities and some ground arrangements the story is quite the opposite. Take the example of a customer looking to book a white water rafting holiday.

The consumer will want to communicate with the supplier prior to booking. It is the nature of the product. Hence for these products distributed transaction websites have never really taken off and, I argue, are unlikely to.

Instead of automation tour companies focus on efficiency. You know you are going to have human-to-human contact as part of the sales and booking process – how can that be made efficient?

For these kinds of products the media models are king as ultimately it ensures consumer-to-supplier communication takes place directly.

The hot news is where you see distributed transaction models being given a go.

Trouble ahead

In the UK at least, distributed transactions are a core part of what a travel agent does. In flight/hotel sales the travel agents are competing not only against strong online distributed transaction players but with media model sites that don’t need any complex technology nor any consumer protection mechanisms. Is that fair?

Seems the agents don’t believe so and they want to even up the playing field.

What we may have here is the start of a proxy war between the smaller agents who want to maintain the distributed transaction model and the media model people.

However the media model people haven’t really woken up to it yet (probably because the trade press tend to write from a travel agent perspective!).

The proxy war will be fought within the new Package Travel Directive (a European-wide proposal that is under consultation at the moment).

From an ABTA statement this week:

“The ABTA submission to the European consultation advocates that the scope of customer protection should be extended to include all linked leisure travel arrangements, including “click-through” arrangements bought on the internet.”

Now I am not quite sure what this means yet. Does it mean that if you are a travel website and you have an affiliate banner to sell a hotel – and an affiliate banner to sell a flight – you need to be offering consumer protection?

That would be troubling. It would also be troubling to all non-travel websites who have travel advertisers and, if finally incorporated into the new directive, break the media model at least in Europe.

ABTA asked their members the following question:

If a new Package Travel Directive were introduced, indicate which of the following travel-related products or arrangements you think should be within the scope (tick all that apply).

One of the answers was:

• Accommodation, transport andor other tourist services purchased on the internet from different sites which are clearly linked on their web pages.

105 out of the 141 responses (74%) ticked that this should be in scope.

I am somewhat surprised by this position taken by ABTA. Last year when the ABTA chairman was being elected there was a great discussion on the Musings blog about this very topic. John McEwan (now ABTA chairman) stated:

“My view is that ABTA is best placed to represent the industry as a whole and that should include non transactional companies such as Cheapflights, Google etc. The methods of purchasing travel have evolved and ABTA needs to evolve accordingly.”

The European Union is still accepting responses to the open consultation (until 7th February 2010). Consultation website.

If you believe that websites should be able to link to travel companies without taking responsibility for consumer protection then make your voice heard!

NB: I am taking part in a debate about these two models in tour distribution as part of Travel Technology Europe (London, February 9th 2010). Seminar A1. I will be debating these two models with Deepak Jha from Isango.

As revealed on Tnooz two weeks ago – although heavily denied at the time – British Airways and Amadeus have reached agreement to extend their distribution deal until 2013.

Press released today, Amadeus says it has achieved a “full content” partnership with BA to give agents access to the same information that consumers going direct to BA.com would have.

This includes, according to the release, “fares, schedules and inventory” for bookings will be the same as those offered through any “direct or indirect channel, distribution provider or website”.

Only Sabre of the big three GDS networks remains un-signed, although the contract officially runs out at the end of Q1 2010.

The speed in which the two agreements so far (Amadeus and Travelport) have been signed has surprised some seasoned industry watchers behind the scenes – many of which expected a long drawn out process of negotiation as airlines attempted to squeeze the GDSs for better rates and less access.

The reality is that airlines – at least in the case of BA – are probably eager to stabilise their distribution agreements before heading into what could be another tough 12 months.

With the U.S. Dept. of Justice making inquiries into allegations by Farelogix that Sabre engaged in anti-competitive practices, Farelogix President and CEO Jim Davidson answered counter-charges by Sabre that Farelogix was encouraging “content fragmentation” and seeking a “free ride” on the back of the Sabre global distribution system.

Davidson says Sabre’s content fragmentation argument actually is a smokescreen for Sabre’s abhorrence of “lower-cost competition.”

But, before providing Davidson’s statement below, some context is necessary. In the run-up to airline-GDS negotiations in the U.S. in 2006-2007, major airlines threatened to drop out of GDSs or to levy exhorbitant surcharges on travel agencies if they didn’t agree to givebacks of part of their incentives.

Alternative distributors, such as Farelogix, emerged and travel management companies and consolidators began signing contracts with them as a form of content insurance and as a way to lower their distribution costs. Farelogix and others needed access to the GDSs so the TMCs could integrate GDS and non-GDS bookings and keep their back-office systems zipping along.

Farelogix signed a developer’s agreement with Sabre to accomplish these ends, and Sabre terminated the agreement in March.

Farelogix alleged to the DOJ that Sabre was using its market dominance in the U.S. to wipe out a much-smaller competitor. With no developer’s agreement, TMCs that use Sabre content would be highly reluctant to do business with Farelogix, the company contends.

This week, when informed that the DOJ was contacting Farelogix customers, some of which are also Sabre customers, about the issue, Sabre spokeswoman Nancy St. Pierre said Sabre had not been contacted by the DOJ. St. Pierre stated:

“However, as we said earlier this year, the termination of the developer agreement with Farelogix only affected a handful of Sabre subscribers and we have worked hard to ensure their needs have been taken care of. Our action was taken in light of the evolution of the Farelogix business model to one of content fragmentation, and what became clear was an attempt to free ride off of our database and systems.   The termination was fully compliant with the terms of the agreement and with any applicable law. Sabre has not told any of its subscribers not to do business with Farelogix.”

The following is a statement by Davidson of Farelogix in response to Sabre. Davidson says:

“I landed in the Middle East on Tuesday morning (local time) and my Blackberry awoke to a surge of messages about an article published by Tnooz about the DOJ making calls to certain Farelogix customers.  After reading the article, I felt compelled to respond to the comments made by the Sabre representative.

To the Sabre comment about the “evolution of the Farelogix business model to one of content fragmentation,” I offer the following 3 points:

• I can confidently say that the Farelogix business model has been consistent from the first day I joined the company, over four years ago.  As a matter of fact, on two separate occasions, Farelogix invited and hosted Sabre product managers and executives in our Miami office where we provided full-disclosure product demos. We clearly reviewed with Sabre how the FLX Platform technology accesses and manages multiple content sources, including all GDS, Web, private fares, and direct supplier content.  So maybe the “evolution” comment was related to the fact that since that time, Farelogix has actually developed some solid customer traction with our business model. Perhaps “fragmentation” is simply a code word for “lower cost competition.”

• The Farelogix FLX Platform for travel agencies doesn’t create fragmentation…rather, it is a response to it. The FLX platform provides a low-cost solution to solve the challenge of industry content fragmentation, which by the way has existed in our industry for years, despite the “GDS single-source claims.” Managing multi-content sources is a high-cost and complex challenge faced by literally every travel agency, TMC, and consolidator who is attempting to do business on a global scale.  To say otherwise, is simply a slight to those companies struggling with this challenge every day. Each year, these travel management companies spend hundreds of thousands of dollars in added personnel and technology overhead that must be passed on to corporate and leisure consumers as higher service and support costs.

• Let’s face it, content fragmentation is only going to get worse, especially with suppliers and agencies working diligently to differentiate themselves and their products.  And, for anyone to assume that Farelogix is a major cause of this increased industry fragmentation, however flattering it would be, is simply quite overreaching to say the least.

And, as response to the Sabre comment, “what became clear was an attempt to free ride off our database and systems,” my initial response is: “I don’t understand the comment.” Perhaps there is perception out there that somehow Farelogix is utilizing the Sabre system to shop and search, gather content, and then use that data to make bookings in another source system? Or that the Farelogix system integrates as a “sniffer” application connected to the Sabre GDS and only “activates” when certain agency transactions are requested? If any of this were the case, I would actually agree with Sabre that those actions, in my opinion, would in fact constitute a “free ride.” But, the reality is that the Farelogix FLX Platform technology does none of the above.

Simply stated, FLX does not and is not “free-riding” on either the Sabre content or any Sabre investment in the Sabre product. In fact, the Farelogix software does not use nor in any way depend upon Sabre or any GDS.  FLX’s simple objective is to be able to operate side-by-side existing GDS solutions by providing value-added service and functionality. Instead of serving its customers better and more efficiently, Sabre’s response to this enhanced competition from FLX was to harm its customers by stifling competition–and Sabre is now trying to justify it by claiming that FLX is “free-riding.”

Lastly, for the record, let me state what the Farelogix FLX Platform actually does in its simplest form:  it connects to the customer-requested content sources (GDS, web, direct, private) in a well documented, consistent, legal, and normalized manner allowing the user to apply a predetermined and dynamic set of business rules to the data. It provides a superPNR to manage bookings and reservations from multiple sources, and provides a way for agencies to get all this information into their back office systems.  All of this results in a quantifiable increase in TMC productivity levels and reduced costs for the travel agencies, and not to mention more content choices for the consumer or corporate traveler.

The marketplace impact of the FLX product has been to reduce the ability of the legacy GDSs to lock-in customers due to their incumbency, particularly Sabre’s.  It gives to customers a significantly lower-cost solution that allows them to be more responsive to their consumer needs.  By terminating the developer agreement with FLX, Sabre revealed its true purpose and intent–to protect and maintain its market dominance at the expense of Sabre’s customers and their consumers.”

Sabre declined to comment on Davidson’s statement.

Perhaps the next move is the DOJ’s.

The U.S. Dept. of Justice has begun looking into allegations by Farelogix that Sabre engaged in anti-competitive practices when it terminated a Farelogix developers’ agreement in March.

The Farelogix FLX Platform enables major travel management companies, including Carlson Wagonlit Travel, American Express Business Travel and others, to tap into Farelogix’s direct-connects with airlines, apparently at a cheaper price than the TMCs would get from the established global distribution systems. In this era of GDS deregulation in the U.S., distributors such as Farelogix also serve as a content hedge against carriers dropping out of some of the major GDSs.

Farelogix alleges that when Sabre terminated the Farelogix developers’ agreement with the Sabre GDS that Sabre was using its imposing market clout in the U.S. market to snuff out a competitor. When that agreement ended, it made it much more difficult for Farelogix customers to integrate their Farelogix bookings with other reservations made through Sabre.

And, Farelogix also alleges that Sabre used its persuasive powers to dissuade existing or potential customers from dealing with Farelogix.

Tnooz has learned that the Dept. of Justice has recently begun contacting Farelogix customers about the allegations. Farelogix partner Pass Consulting, as well as Globus and Vayama (also known as Air Trade International), confirmed they have been contacted.

William Niejadlik, chief technology officer of Vayama, says the DOJ contacted the company, and sought information relating to the timelines of its dealings with Farelogix and Sabre. Niejadlik says Vayama is a Farelogix customer and had been seeking to establish a relationship with Sabre, as well.

Major travel companies often use multiple GDSs because when a particular GDS also hosts an airline, there may be advantages on the availability front to using that GDS. Cutting off Farelogix’s access to Sabre, or so the argument goes, proves disadvantageous to Farelogix customers who also want to access the Sabre system.

I contacted the DOJ about the inquiry, and am awaiting a response from the government agency.

When contacted over the weekend, Farelogix President and CEO Jim Davidson confirmed that he has met with DOJ officials several times over the allegations, but he declined further comment.

Sabre spokeswoman Nancy St. Pierre said Saturday that Sabre has not yet been contacted by the DOJ about the matter.

“However, as we said earlier this year, the termination of the developer agreement with Farelogix only affected a handful of Sabre subscribers and we have worked hard to ensure their needs have been taken care of,” St. Pierre says. ” Our action was taken in light of the evolution of the Farelogix business model to one of content fragmentation, and what became clear was an attempt to free ride off of our database and systems.   The termination was fully compliant with the terms of the agreement and with any applicable law.   Sabre has not told any of its subscribers not to do business with Farelogix.”

Farelogix is the surviving “alternate distributor” in the U.S. among three new-entrants of a few years ago. ITA Software gave up its distribution aspirations and turned to airline hosting. And, G2 SwitchWorks, founded by some Orbitz expatriots, was acquired by Travelport, which is using G2 know-how for travel agency desktop development.