29 September 2008

TravelMole eWire Comment by Dinah Hatch

The misery continues unabated in the airline industry with everyone from IATA to Lord Marshall declaring consolidation is a must and over-capacity a problem that needs tackling urgently.

It makes sense Ã¢â¬' for years the aviation industry has been bogged down by this post-war notion of sovereignty that demands every country have its own flag carrier which has resulted in a fragmented sector that provides far too many seats.

So itÃ¢â¬â¢s not surprising that market forces have finally emboldened the industry to start thinking of constraining capacity, pulling aircraft off routes and cutting back on schedules.

And the next focus, once that streamlining has taken place, is how to maximise yield from every single one of those precious seats you are selling.

The answer? Could it be those good old backroom boys, Sabre, Amadeus and Travelport? According to these technology providers, the GDSs and their clients the travel agents have consistently delivered higher yielding seats than any other distribution channels.

Over the past few years the GDSs, all three of whose combined business, by the way, is second only to Google in terms of daily useage across the globe, have had to fight their corner, with the likes of Jetblue exiting the distribution channel and deciding that direct selling online was the way forward. But the airline u-turned in 2006, coming back to Sabre and Galileo, and a new victory followed the next year when Easyjet targeted the corporate travel market head on and began distributing its product through the GDS channel.

But thatÃ¢â¬â¢s when things got sticky again Ã¢â¬' with the low-cost carrier shaking up the market once more, this time by charging GDS users by sector when they booked.

Of course, this got everyone thinking about the possibility of charging agents to book their product. Why should Easyjet be the only carrier to make money this way?

But now the worldÃ¢â¬â¢s rocky economies may swing favour back towards the GDSs. Once the dust has settled on industry consolidation and the airlines look to maximise seat yields, they might well think twice about adding surcharges onto a channel that makes them the most money.