Distribution at American Airlines 1 Case 6: Distribution at American Airlines Ali Shour Course Dr. Name Wednesday, November 16, 2022 Distribution at American Airlines 2 1. Although it was undoubtedly more affordable to distribute over the internet and call centers, many customers continued to purchase their tickets from travel agencies. There are several causes for that: First, the interaction with people was worth the trust than computers. To illustrate, people often do not trust computers and prefer to engage with people since they feel more at ease doing so. Because of this, using the internet to make reservations was less common than using a travel agency. Thus, people tend to prefer calling and chatting with a person regarding a flight rather than searching and booking through the internet. Second, adherence to company travel guidelines and problem-solving Internet and contact center usage was widespread among leisure customers. Third, bookings made through travel agents continued to be preferred by business travelers. To ensure adherence to company travel standards, allow efficient payment and accounting, and provide individualized assistance with complex or changeable trips, many businesses mandated that their workers utilize travel agencies. Therefore, making it easier on businesses, travel agencies aided all this work. Forth, costs and Sales Tickets were costeffectively distributed over the internet and a contact center. However, people prefer booking through travel agencies than doing it online for trust issues and preferably human manager than computer-based booking. Consequently, 70% of American tickets were purchased through travel agencies in 2004. It is important to mention that regarding the internet and customer service channels, travel agencies were covering most of their expenses and maybe generating some revenue for certain airlines, but not in the overall scheme of things. Hence, these are some reasons behind the use of travel agencies. There are several advantages and disadvantages that can be tackled in this case. To start with, one of the advantages can be to reach new customers. Through travel agencies, Distribution at American Airlines 3 customers are able to preserve places on airlines and enjoy the journey. When a customer is satisfied, he/she will return back other times giving the airlines new purchaser. Furthermore, several agencies get discounts from the airline company providing for customers cheaper flights. Equally important, explanation and benefits will be added to the customers’ profile as they can use them later which is efficient for customers too. On the other hand, there exist some disadvantages such as paying intermediary’s higher costs to serve the existing customers. To illustrate, in some cases, the agency will not have offers from the airlines, leaving customers with higher ticket prices in order to purchase more. This case is extremely clear during specific seasons of the year. Christmas vacations and summer vacations usually cost higher payments in agencies due to the excessive need. 2. American Airlines used several strategies to pay the hundreds of millions in distribution fees through GDS. These strategies can be summarized as the following: First strategy is increasing consumer costs. To illustrate, the airlines firms were obliged to pay the charges as the GDS's price increases. To do that, business class passengers paid an increased amount for their tickets because of the class they chose to travel in. It is noteworthy to mention that it is always the customer who foots the bill at the end of any project. Second, the applicability of source Premium insurance. To explain, American Airlines launched the Source Premium coverage as compensation for the additional expenses. This method is summarized as a requirement of $3.5 fee by the travel agency for each ticket they provided, according to the rules issued at that time. Consequently, for the leisure client's agent, it was not an issue, but for the business customer, it was a major one. Since business tickets are not taken once of twice per year; however, business managers are usually subjected to various travels per year. If a business man needs to pay the deposit, hence adding them up Distribution at American Airlines 4 together will reveal a huge amount paid for taxes only since the charge must be added as a ticket price by the travel agencies as a result. In summary, the people who will ultimately suffer are the customers in all situations, whether it be a rise in ticket costs or the addition of new taxes. 3. In order to retail and protect GDS’s business model, maintaining and defending their present economic model may be a strategy. This is used by applying more aggressive tactics and position themselves as a need for customers and business. Furthermore, increasing accessibility to travel agents for more bookings should be also enhanced to protect their business. Furthermore, a more efficient booking process can be a method. Enhancing modules and using technological interventions for making it ease the way for customers’ booking will grab airlines to their business and improve their work. Moreover, bundling options for additional travel needs may be a way to grab customers and businesses to their side. It is important to mention that having less expensive than marketing attract customers since budget is also what a customer and an airline thinks about. Finally, integration with property-management systems is by using other software, such a hotel channel management, an online booking system, or payment processing, should operate and communicate with it without any issues. Moreover, initiating long term contracts with airline companies so that they do not leave GDS. To illustrate, contracts can help GDS to stay actively available even with the presence of competitors. New strategies and techniques can differentiate them from others. For example, imposing rules on airlines not to add extra fees for GDS customers is one of the ways that can protect GDS and attract more customers. Hence, using these several ways, GDS can protect their business. Distribution at American Airlines 5 4. Yes, implementing the source premium policy would be in American Airlines' best interest to reduce distribution costs. Since they were trying to figure out the best approach to reduce their GDS expenses, their Source Premium Policy should greatly aid them in doing so. Additionally, even if American Airlines decides not to apply the Source Premium Policy, it will never be guaranteed that passengers will always be referred to them by travel agents because they frequently choose whatever GDS offers the greatest commissions.
