A business must have a social purpose and aviation certainly has one. It serves to provide safe transportation of goods & lives. The purpose of aviation must be agnostic to the cost of operation – I don’t care if the airline is low cost or high cost but I do care about safety & punctuality which is my bare minimum expectation from any airline. So when airlines flaunt their on time performances it tickles me a wee bit. Why do they take it so personally? I understand there are various dependencies like the weather , ATC, airport infrastructure etc so instead of gloating over their OTPs may be the airlines should put advertisements thanking the ATC, the airports and even God for helping them fly on time…well most of the time , but they do not. And this exactly is the problem with the airlines – they believe whatever good happens to them is entirely their doing and for everything else …………
For over a century travel agencies and later global distribution companies have been providing the backbone infrastructure for distribution of airline inventory. In fact airlines created the GDS for this critical role. GDSs also provide backward and forward integration to travel agency operations making them seamless and efficient enough to provide competitive services to airline passengers. These two entities were and still are essential service providers which need to be dealt with respect and fairness. With the advent of new technology, airlines suddenly see them as disposables. Yes its true that GDSs are cash rich and profitable and yes they do incentivize travel agencies to book on their platform but that’s their business model. Don’t airlines make money so why should they grudge and complain when the GDSs do? The normal argument is its our money being given away!!! Tell me which airline pays a dividend to its passengers each year they make a profit? Do the passengers say its our money and you have no right to pay for this or that. These are questions that the shareholders have a right to ask and no one else. So why bite the hands that feed you just because you have run out of ideas on how to improve your revenue. How about rationalizing capacity & spending less time wining & dining with aircraft manufacturers who are extremely cash rich by your mega orders. They are the ones you should be bargaining real hard with!!
When the airline announces flash sales and garners hundreds of millions, a big chunk of this money is in statutory taxes and charges which should be going to the concerned airports or governments but the airlines hoard this money and use it as an interest free credit line. And if the airline is lucky and a passenger forgets to use the cheap ticket impulsively bought in a flash sale, then they can gleefully keep all the statutory money too and neither the airports nor the government ever find out. And they do this for all tickets including tickets sold on their own websites. No explanation owed to anyone as all remain blissfully ignorant. Airlines make billions from unused tickets each year and despite knowing the precise point of sale of every ticket, does any airline call & say hey we have an unused ticket to your credit? No!
If new distribution channels provide more cost effective distribution by all means use them and promote them but within boundaries of fairness. There must be content parity and neutral distribution across all channels. Even a distribution fee on GDS issued tickets is fine but fare disparity, blocking inventory and non participation in any GDS by an airline under pretext of commercial policy is vicious and extremely damaging for the industry. You squeeze the GDSs for more and force them to bargain for exclusivity and in the end, everyone is a loser. It promotes unfair competition and destroys the eco system in which travel agencies and GDSs operate.
Now if a travel agency wants to use new technology, spend money and take its business online, airlines have a huge problem with that. They stop giving them incentives, do their best to channelize the travel agency business to their own website and worry endlessly about the market power of the Online Travel Agencies. Just because you are confused about your business model should you destroy all others?
It’s time the regulators step in to put some method into the madness and allow the travel industry to breathe AND its time for airline boards to do a reality check on the steps that they need to take as part of their social responsibility for the larger good of the industry.
Airlines think about how you can facilitate the travel agency businesses and how you can offer a fair playing ground to the GDSs – they are your allies and well-wishers.
We need the gentlemen back in the business.
Aspiring for the Travel Industry
Seema Luthra (www.travelmetrics.in)
After the above was published late August, I did receive some sharp reactions from the airlines
I will quote one which was a direct question “who needs to be fair? The guy who loses billions or the guy who makes billions? Airline vs GDS”
First of all, Airlines are not losing money due to GDS. Airlines have always asked GDS for neutrality & set standards for display which are governed by strong competition laws but for themselves they want partiality & play one GDS against the other. That's not correct in my view.. because it means an airline can choose which GDS it wants to be on but GDS cannot be biased on how it displays availability because that’s unethical/illegal. Is that fair? Basic level of participation must be mandatory on all GDS.
Secondly, airlines have made money despite paying IATA commissions and undiscounted GDS fees. This is a fact so the losses are coming from distortions in demand & supply and excesses in other areas. Distribution costs are good costs especially when you are selling a highly perishable commodity. And despite all the drama over eliminating the middle men, airlines are still losing money so the solution to the airline woes lie within, not without.
Lastly, the principles of doing business must remain in tact. Does an airline give special fares to under privileged citizens or loss making companies? If an SME comes and says we cannot afford to pay the same fares as the blue chip companies or the EWS (economically weaker section) person wishes to travel in airplane, will the airlines please offer a reduced SME air fare or a Junta fare and oblige those who cannot afford the published ticket price? These are impossible arguments, and no business can afford this logic.
Also I do firmly believe that the government instead of fixing fares & capacity which is extremely detrimental to the airline business as it creates artificial demand & supply, needs to focus on providing a strong economic regulatory environment for all stakeholders of the airline industry.
The Indian Government, like many other governments, has no clue about running the airline business as we can tell from the sorry state of Air India so what business do they have interfering with airline revenue management principles of forecasting demand and managing supplies unless they have this impossible idea of centralizing revenue management of all airlines under the government of India and then selling routes to different airlines at a guaranteed price which ensures profitability for airlines too…that will be truly UTOPIAN.
Looks like everyone is barking up the wrong tree.
Disclaimer – There is nothing personal in my statements and any resemblance to any person or company is purely coincidental and unintended. I am simply rebellious by nature and not apologetic about it. That’s me I am afraid.