Delta prefers Sabre, G2, but others may be
'disadvantaged' (04/24/2006)
By Dennis Schaal
NEW YORK -- While major airlines and the four traditional GDSs jockey for
position and negotiate new content deals, Delta could soon become the first major
U.S. carrier to reduce its GDS distribution.
American, Continental and others have talked about
dropping out of a GDS, and Southwest has only
partial participation with Sabre.
But Delta now appears ready to pull the trigger and announce in the
next two or three weeks that it will significantly limit its participation in
one or more of the four major vendors.
One of the vendors that Delta won’t downgrade is Sabre. The two
companies revealed April 21 that they reached a seven-year full content
agreement, including a new marketing pact with Sabre’s Travelocity
division, and a new participation agreement with Travelocity’s Site59
last-minute package unit.
Sabre said the agreement means that Delta has designated Sabre as a
preferred channel.
Christopher Phillips, Delta’s director of business development and
strategic planning, told TravelWeekly.com that the airline plans to
participate in G2 SwitchWorks, which the carrier invested in, as well as
Sabre, Galileo, Amadeus and Worldspan.
But although Delta will give full content and designate G2 SwitchWorks
and some GDSs, including Sabre, as preferred partners, the airline
likely will downgrade its relationships with others, Phillips said.
“G2 will be there,” Phillips said. “Some will not be there as preferred”
partners and will be “disadvantaged” in terms of content.
Phillips said GDSs that aren’t Delta preferred partners would not have
optional ways to access full content through Delta.
Several weeks ago, Sabre and Amadeus reached a deal under which
each would give the other access to an airline’s content if the airline
dropped out of either GDS.
While Delta’s tough talk could be negotiating bluster, Phillips seemed
definitive in his statements. He said some of Delta’s GDS deals will be
revealed in “two to three weeks,” and the distribution landscape for
Delta will be clear at that time.
Phillips’ statements came after his participation in an April 19 panel
discussion on distribution at the TIA’s TravelCom 2006 conference at
the Hilton New York.
The backdrop was a flurry of airline-GDS participation renewals in the
last few months that has led to strong sentiment in some quarters that
the alternative distribution systems -- G2 SwitchWorks, ITA Software
and Farelogix, among others -- have been a bust and merely were used
by the airlines for negotiating leverage.
Sabre signed five-year content agreements with AirTran, Northwest and
US Airways; Galileo contracted with United and US Airways (announced
April 20); and Worldspan approved pacts with American, Continental
and United.
Worldspan’s agreements appear to be fundamentally different in that
they contain two unspecified optional programs for agencies to grab full
content.
Standing by the alternative GDSs
But, during the panel discussion, Phillips disputed assertions that
airlines have retreated from the GDS new entrants. He said Delta had
made a significant investment in G2 SwitchWorks and would “continue
to invest in this type of technology.”
G2 has long-term content commitments from American, US Airways,
Continental, Delta, Northwest and United.
Panel moderator Joan Lowell of Hyatt asked Phillips if Delta would have
done anything differently since early 2005 when it and other airlines
began pushing the alternative distributors.
Presumably alluding to a United meeting last year in which the airline
prodded key accounts to begin using G2, ITA and Farelogix, Phillips
said his only regret was that events took place in the industry that
unrealistically painted the new players as “ready for prime time.”
Phillips compared the start-up distributors to the fledgling Expedia.com of
a decade ago, with its relatively limited functionality of that time.
He said that G2, which is using live Delta inventory for a large travel
management company and some corporations, will reveal significant
enhancements in the next few months.
“We believe it’s going to be a great investment,” Phillips said.
Phillips said Delta gravitated toward G2 because of President and CEO
Alex Zoghlin, who was Orbitz’s first employee and the architect of its
technology development.
Phillips said Delta’s limited bandwidth and resources -- the airline filed
for Chapter 11 bankruptcy protection last year -- kept it from further
developing ties to ITA, which Delta considers a viable solution from a
long-term perspective.
Meanwhile, distribution executives are following developments in
Sabre’s negotiations with United.
United last year entered into a strategic IT relationship with Amadeus
and reached a full-content agreement that expires at the end of 2006. It
recently signed five-year participation contracts with Galileo and
Worldspan.
But, with their three-year content agreement set to expire April 14,
Sabre and United extended the pact while continuing negotiations,
Sabre said.
Chiding the airlines
United’s Galileo and Worldspan agreements were signed months ahead
of their expiration dates, but apparently coming to terms with Sabre has
been tougher.
Speaking at the TravelCom conference on April 18, Sabre Travel
Network President John Stow chided the aggressive intent of airlines
that want to eliminate incentives and limit the ability of agencies and
corporations to access certain technology tools and services.
Stow said Sabre’s negotiations with U.S. network carriers hinge on long-term
access to full content; parity with other vendors; certain protections against airlines
charging service fees; the ability to pay incentives, even if they are lower than today;
and agency flexibility to retain tools and services.
As many in the industry await the outcome of the Sabre-United
negotiations, there is also widespread speculation about Worldspan and
the details of its deals. While those details remain unknown, competitors
fear that Worldspan may be giving away the farm.
“Worldspan is hopping and skipping through the marketplace and
seemingly making the airlines very happy,” said Peter Von Moltke,
Amadeus North America’s senior vice president of its airline business
group.