On Monday British Airways and Iberia announced that they had "reached a New Distribution Capability (NDC) related agreement with Hogg Robinson Group".
Under this initial agreement, which applies to all Hogg Robinson Group owned operations in Europe except UK, Italy and Switzerland, "bookings made by Hogg Robinson Group in key European markets for British Airways and Iberia marketed flights will not be subject to the Distribution Technology Charge of €9.50 per fare component, which was announced in May of this year with effect from November 1, 2017".
Does this mean that HRG clients will now see their transaction fee for bookings on the two carriers drop by €9.50? Well, they might not rise in November as they certainly might for clients of TMCs that have not done a direct deal by then.
And the number of those may shrink by 1 November since the industry rumour mill claims that more large multinational TMCs would shortly follow HRG and announce NDC agreements with British Airways and/or Iberia.
HRG's direct connect strategy looks as if it is about to deliver some hard savings rather than merely efficiencies for the TMC and a more up-to-date offering with which to woo potential clients. But the move should also prompt existing clients to ask questions about the potential consequences for their business of their TMC's distribution policy.
First, fees on BA and Iberia bookings might in theory rise for customers from November. After all, the TMC, unless they have made an NDC arrangement, will be paying more per booking and intermediaries are likely to pass this additional cost on to their clients.
But some intermediaries will swallow costs in order to retain old or lure new customers. Old customers might well be reminded, as HRG does at the beginning of HRG at the Forefront, its guide to its distribution policy, that it pioneered the open book approach for working with clients way back in the 1990s. It might be time to see what the financial repercussions of the NDC initiative are and if the benefits might be shared.
Potential new customers will understandably expect to see lower fees when they read HRG's bid. It is a way not just of undercutting the competition but of highlighting a brand value of being ahead of the curve and looking to the future rather than the past.
This introduces the question of how to choose your industry partners. BA has long prided itself on its relationships with mid-sized UK TMCs but it looks as if its NDC partners might well be the international mega agencies. Will the national agencies still want a preferred partner relationship or is there an opportunity for other carriers to increase business with that layer of TMCs just below the big boys?
Of course, when customers look at that open book they might well be advised to see if the GDS incentive HRG receives has decreased because the BA sectors will no longer be contributing the same level of income. That might, or might not, lower profitability. It is undoubtedly a ledger entry that all with access would want to scrutinise.
Distribution is changing and all must keep an eye on what works best for their business but the bigger and longer look has to be at what's happening with which numbers. Time to ask.