7 years ago

American Airlines details direct-connect plans, says user-pay model is urban myth

What user-pay model?

Contrary to assertions from the American Society of Travel Agents and the Business Travel Coalition, American Airlines says it has no intention of charging travel agents, corporations or global distribution systems to access its base fares or optional services.

American Airlines spokesman Stephen Schlachter characterizes such talk about a user-pay model as “urban myth.”

Cory Garner, American’s director of merchandising strategy, outlined plans for American Airlines Direct Connect, which would impact travel agencies and corporations globally.

The airline already distributes a small percentage of its transactions through its XML direct-connect with Farelogix.

This direct-connect has been in place for a couple of years and currently some agencies use it to book flights, but they cannot book American’s ancillary services, including checked bags, lounge access, onboard WiFi, meals, drinks, and pillows and blankets.

Today, in fact, these services can’t be booked on AA.com, and must be purchased at the airport or onboard American’s fleet.

But, Garner says all this will change several months from now when American will start making its optional services — or merchandising capabilities — available to travel agencies and corporations exclusively through the direct-connect.

Garner says agencies and corporations will be able to access American’s fares and optional services from the Farelogix direct-connect through third-party aggregators such as BookingBuilder, AgentWare, TravelFusion, or agencies’ own proprietary-aggregation platforms.

These add-on services, which will be available on AA.com and through the direct-connect, will not initially be available through the GDSs and will be subject to negotiations with the GDSs, which have already begun, Garner says. American’s GDS contracts expire in 2011.

The airline says the GDSs — Sabre, Amadeus and Travelport’s Galileo and Worldspan — have not yet committed to accessing American’s merchandising capabilities through American Airlines Direct Connect. They currently access the airline’s content through EDIFACT connections with American.

Garner says travel agencies and corporations won’t have to pay American or Farelogix, the airline’s direct-connect subcontractor, to access the base fares and ancillary services. Instead, the agencies’ aggregation tool of choice merely would have to perform a technical integration with Farelogix and there would be no need for a commerial relationship between the two, he says.

Garner says the airline currently is negotiating optional services packages with TMCs and corporations in North America, Europe and Asia as part of their overall relationships and the contracts will vary from agency to agency.

He says the airline is using various means to incent travel agencies to transition to the direct-connect “on a case by case basis.”

American has offered to make optional services available to the GDSs for free, Garner says.

“I don’t think this should be viewed as purely a GDS bypass strategy,” Garner says.

Garner claims the primary driver for American’s direct-connect strategy is that the airline can engage in merchandising, using its customer segmentation data, through Farelogix, but ATPCO and the GDSs don’t use such data.

“That’s the big tech reason,” he adds.

Garner says merchandising to customer segments can lead to “hundreds of thousands” of combinations of optional services.

In fact, in a presentation for travel management companies over the last few months, American compares the variety of optional services to made-to order burgers at the Whataburger chain.


American officials say they met with travel agencies and corporations in headquarter-city Dallas and around the country over the last few months because they want to give them adequate time to handle “the tech changes that need to happen” to mid- and back-office systems so they can adequately process and track optional services.

Garner says there were no discussions of a user-pay model or attempting to force TMCs to pay for optional services.

But speculation about a user-pay strategy was fed by separate statement from the CEOs of American and Delta Air Lines last year in which they argued that travel agencies and GDSs would one day would pay for airline content rather than the current business model, where airlines pay booking fees to the GDSs.

And, in recent weeks the BTC and ASTA have charged that user-pay is at the core of American’s merchandising strategy.

Meanwhile, Garner says American’s move to make optional services part of its Farelogix direct-connect will get some momentum when ARC completes the process to support Electronic Miscellaneous Documents (EMDs) for settlement. ARC’s timetable to roll out EMD capabilities is in the Fall of 2010.

Garner says supporting an EMD standard is a more-complex process than was e-tickets, which were rolled out over a protracted period.

He refers to the EMD standard as the “key lynchpin” for launching merchandising through American’s direct-connect.

Garner adds that adoption of EMDs will be a “slow burn,” but the merchandising capabilities they will facilitate will bring “full benefits in the long term.”

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Dennis Schaal

About the Writer :: Dennis Schaal

Dennis Schaal was North American editor for Tnooz.



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  3. Dennis Schaal

    Dennis Schaal

    Douglas: No discussion of OTAs in particular, just general discussion about travel agencies, mostly TMCs.

    Norm: I agree about the GDS angle. This is a technological and very much a commercial dispute. Agreed that all the dynamics won’t be apparent until well into 2011.

    Another angle is that American doesn’t see making ancillary services exclusively available through Farelogix as a violation of the airline’s “full content” agreements with the GDSs. And the GDSs may have a different view on this issue.

  4. Norm

    The big question of paying for content will not be resolved until negotiations are complete with the GDS. Sure AA can make this “no content charge” claim when referring to a lower cost distribution platform such as Farelogix, but the GDS fees may dictate a different strategy similar to their One World partner, BA who forces the UK agencies to pay for GDS access.

  5. Douglas Quinby

    Nice round-up from the AA perspective, but no mention of OTAs or meta? Any discussion of where they fit in?

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    This post was mentioned on Twitter by antoinegrillon: Agree RT @denschaal: American Airlines details direct-connect plans, says user-pay model is urban myth http://ping.fm/uWoLj (Tnooz)…


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