Tomorrow (15 December) Ryanair's GDS agreement with Amadeus ends. More accurately both parties were unable to reach a financial agreement which would have enabled their relationship to continue. Ryanair has been keen to emphasise that its relationship with Amadeus continues because it will continue to use its airline direct booking solution, Navitaire.
That is very different from being on its GDS distribution channel.
Ryanair is admittedly a low-cost carrier (LCC) which was conceived, nurtured and developed at the altar of direct distribution and has always been heavily focused on the leisure market. Like a few other members of the LCC club it forged some GDS relationships late in life because it wanted to develop the business travel element of its business.
Carriers have always yearned for business travel customers because they tend to be higher margin due to their tendency to book late and be less price sensitive. If a client wants to see you, another €20 on the fare is neither here nor there.
However, as Ryanair has probably discovered, higher margin business also usually carries a higher cost of business. Ryanair seems to have collided with what is driving Lufthansa, IAG and the current boardroom agenda of several large network airlines, namely the cost of distribution.
Airlines naturally want customers to be able to access them easily. However, technology has meant that other distribution channels such as their own websites are more capable of delivering the content and kind of booking experience they want their customers to have, eg the ability to purchase ancillaries at the time of booking, and at an ostensibly lower price. After all, the entire GDS business model depends on getting fees from suppliers and the size of those fees varies hugely from market to market and so is subject to intense — and prolonged — negotiations.
The GDS may commoditise its content but screens that show aggregated content do enable easier comparisons of options. The issue isn't about the product or the service as much as it is about the price of that service. Ryanair also says it will continue its relationship with Sabre and Travelport.
More user use of suppliers' websites also means that they accrue more customer data.
Many airlines just simply find GDS fees too high a price to pay in their quest for profits.
Corporates are increasingly making use of different booking channels and the data aggregation tools are getting slicker all the time. This decreasing dependence on GDS content means that changes in pricing or permutations of the GDS business model seem inevitable.
The question is that if that business model changes will the corporate pay more — or less? The possible effects of changes in TMC incentives and supplier GDS fees on transaction fees on the model is something that corporates should be thinking about now and anticipate in their long-term travel management strategies.
It's not just the means of distribution that will change. So too will the cost of it.