5 years ago

Goal-line technology – a shift of the goalposts in the airline vs GDS match

As the world football (ahem, soccer) governing body FIFA confirms the introduction of goal-line technology, there is another industry  facing similar changes to traditional processes.

First of all, the pronouncements on high from IATA about so-called new distribution paradigms were fast and furious over the past few weeks.

But now that Tony Tyler, IATA’s Director General and CEO, has declared that he and the GDSs are “absolutely not” luvvies, in response to a question during the SITA Airline IT Summit recently held in Brussels, what does that actually mean?

Perhaps it would be good to examine possible results IF (and I stress if) the airlines were able to impose a (impossible?) new world order in distribution.

First let’s consider a few facts. GDS share is dropping and this rate appears to be consistent if not accelerating. IATA quotes GDS distribution down to 60% of sales.

In the US this number has fallen to around 40% (as quoted during the recent American Airlines vs Travelport and Sabre lawsuits).

Using a variety of different analysis elements, my own team estimates that worldwide GDS distribution is about 42%. The discrepancy between IATA’s numbers and mine can be explained by the number of LCC non-GDS and direct distribution by the airlines themselves.

Furthermore the growth of the GDS bypass bookings is accelerating, albeit from a low base. Recently the non-GDS owning Passenger Service System (PSS) companies have taken a few mis-steps.

Despite the gain of United to HP’s Shares platform, the withdrawal by American from the HP contract and the recent losses by Navitaire (JetBlue, WestJet, Volaris and Virgin Blue), mostly to Sabre, has made the credible alternative to a pure PSS less so.

So what would happen? The GDSs who own PSSs are not going to wait.

There have been some interesting developments that would indicate that the highly restrictive agreements that prevent the airlines from freely distributing their products via third party channels are now spreading to the PSS side of the house, so there is a strong possibility that new PSS contracts will contain restraints on the airlines as to whom they can connect and how they can connect.

Amadeus opened its non-GDS network to third party distribution via Farelogix, for example. However the form of that link is not without cost or constraint. This is not just a technical constraint – although it might be painted as such – but more of a commercial restraint.

Recent Amadeus numbers show that the company is now making more profit (per unit) from the PSS side of the business than from the GDS side of the business. Thus a migration away from the GDS model would be less of a problem for Amadeus than Sabre.

Of course, Travelport could be impacted as it has only a limited footprint in PSS now that United has migrated its functions to HP.

And what of the regulatory positions on this? In the US there is a Department of Justice investigation of the GDS contracts, but it has so far not gone into the PSS contracts.

In Europe, despite being acknowledged by the current European Commission’s review of the GDS Code of Conduct, there is no control over the PSS contracts and this is currently specifically excluded from the regulatory environment.

The conclusion one could form is that the GDSs just move the goalposts from one area to another. Worse for the airlines, there is no regulation and the contracts for PSS services are typically at least five years, often ten.

I wonder if the airlines have fully thought through these issues and if anyone else is concerned about the potential restriction on choice or flexibiliy that can arise from a restrictive PSS agreement.

NB: Goal post image via Shutterstock.

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Timothy O'Neil-Dunne

About the Writer :: Timothy O'Neil-Dunne

Timothy O'Neil-Dunne is the managing partner for venture firm VaultPAD Ventures– an accelerator devoted exclusively to Aviation Travel and Tourism.

VaultPAD also is the parent company for consulting firm, T2Impact. Timothy has been with tnooz since the beginning, writing in particular aviation, technology, startups and innovation.

One of the first companies to emerge from the accelerator is Air Black Box. a cloud-based software company providing airline connectivity solutions and in production with airlines in Asia Pacific.

Timothy was a founding management team member of the Expedia team, where he headed the international and ground transportation portfolios. He also spent time with Worldspan as the international head of technology, where he managed technology services from infrastructure to product.

He is also a permanent advisor to the World Economic Forum and writes as Professor Sabena. He sits on a number of advisory and executive boards



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  1. J Tong

    IATA’s announcement of its new distribution initiative has indeed made the world of airlines and GDS more interesting. I have to mention that while i work for an organization who operates a GDS, i am not from that division, and i choose to remain as neutral and objective as possible. And of course these are my personal views and does not represent my employer.

    I believe IATA’s intentions are good and i watch will great interest how GDSes will react to this. My sense is if IATA executes this intiative with some level of success, we will see GDSes moving towards where airlines have been wanting them to for the longest time. And i am quite sure we will see emergence of new distribution platform/providers. My only concern would be, will this be the beginning of an era where one of the emerging platform/providers, through quick market acceptance and success, turn into yet another GDS-like creature that the airlines will battle against 10-20 years down the road. What can be done to prevent this? These so-called alternative technologies may be lower cost in the beginning, but when the time comes where there is such high demand, and these companies (who will be run by executives who will have stakeholders holding them accountable to continuous grow ROI) start increasing prices, will IATA have to once again step in with yet another paradigm shift? Afterall, we will only see airline seats getting cheaper, so won’t it be a matter of time before airlines cry foul because they see their “new” providers’ revenue soaring while they are again struggling to stay profitable?


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