United we stand.....or fall? Mike Platt looks at the controversial decision of United Airlines to charge TMCs Merchant Fees
The only thing that surprises me about United Airlines starting to charge TMCs merchant fees in the US is that anybody is surprised......and like swine flu it may become a global epidemic. This "initiative" has been a nailed on certainty for the past few years and ties in neatly with other significant costs which many airlines have passed on via their intermediaries.
In fact this is the greatest value agents give airlines at the moment - the ability to transfer cost indirectly. Except, finally, they have gone for a big one that is visibly less stealthy than the others!
It is all part of the commoditisation of air travel. In the past airlines have been able to avoid having their service product viewed as a commodity but now, as in other commoditised products, they have to get their lead price down whilst retaining what margin they can by "extras".
The same is happening with TMCs which are using the same tactics to avoid these extra costs sticking to them. Put simply, if you take any reduced price ticket and add "extras" such as distribution premiums, card fees, fuel surcharges and the cost of credit increased TMC costs, you end up with pretty much the same cost as it was before prices supposedly went down.
Main legacy airlines HATE the onset of commoditisation that has made them do this but the almost obsessive demand for "transparency" by buyers, combined with seemingly highly marketed low upfront prices from new entrants like easyJet and Ryanair, has made them embrace the concept. They simply now have to do this to compete and buyers, who thought they had got low price and increased transparency, simply have not.
Why has United done this now? I suspect that it is probably through desperation and opportunism.
Why does it think it will get away with it? Because it knows that every other mainstream airline wants to do same and United is banking on all of them adopting the same strategy.
As I said in my past Comments and without making me sound like some kind of prophet, I saw this coming. You would have to have been blinkered not to. The next one that is well on its way in Europe is airlines cutting agency credit terms from 27 to 7 days which the agencies will immediately pass on to corporations. Simultaneously airlines will continue to dictate which GDSs must be used to get their fares without premium being charged.
On top of that they will be beefing up their own websites to encourage direct booking for own and third party products. After all you only have to observe what the low cost carriers are doing and then play "follow my leader". Finally, they will accelerate the use of their industry association IATA to apply leverage on TMCs to reduce further their distribution cost at the expense of Joe traveller.
To me, an industry veteran, all this sounds pretty disheartening. But is it? OK, the way this industry has run in the past reminds me of a Mickey Mouse Disney cartoon but it did run rather well despite its vagaries. What bugs me about these new changes is that they are all rather panicked and knee-jerked. There is no balanced thought about it and certainly too much bias and precious little consensus going on.
To me this is now the time when a global body such as ACTE or NBTA (or preferably a merger of both) grabs hold of this issue and gathers the key players together to try and find some sort of future best practice. I cannot think of anything more important for them to do. Can you?