BTN Europe presents an overview of business travel and MICE predictions for this year
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In January, United Airlines held a two-day event in America to extol the virtues of the new alternatives to the traditional GDSs to its corporate and agency clients.
New entries including G2 SwitchWorks, ITA Software and FareLogix attended the event at which United's senior vp for worldwide sales and alliances Graham Atkinson spoke of the “very real opportunities of these emerging channels.”
It is a market that has been globally dominated by four players, Sabre, Galileo, Amadeus and Worldspan for decades. But these new entries, called GNEs, are having a growing impact in the States.
In April G2 announced that seven US airlines had signed agreements designating G2 as their provider of alternative distribution services. Under these long term deals, the airlines would distribute their inventory through G2's TRUE connect network to agents.
Last month, G2 signed up its first low cost carrier, AirTran Airways, to its TRUEconnect network.
But so far, apart from Alitalia using ITA's QPX system on its website for bookings, they have had little impact in Europe. Industry experts believe this is unlikely to last.
Andrew Solum, consultant with Travel Industry Associates, was unequivocal. “The travel industry in Europe is concerned about reducing the costs of distribution and G2 claims that they are 81% cheaper than present GDS system so yes, I can see them coming here, the same as many things that happen in the US come here.”
The cost factor is, without doubt, the GNEs' trump card. Airlines have been desperate to cut their distribution costs for some time. Some industry analysts put distribution costs at 7% of a major carrier's outgoings which is extremely high. Even with deals like those signed with Sabre which offer 12% discounts to airlines, some carrier feel these payments to GDSs are still far too big.
Hence their determination to push customers onto their direct sell websites.
These costs are, of course, something the GNEs harp on about. G2 claims they are “simply too high” and that its prices are a “fraction” of the average $12.75 per ticket paid by airlines to GDSs.Farelogix, for its part, claims that its prices are one tenth of what traditional GDSs charge.
The other argument of the GNEs that its technology is cutting edge compared with the “dated and cumbersome” technology of the established GDSs is less hard to sustain.
Sabre and Amadeus have spent a large fortune is keeping their technology up to date and it is difficult to believe that the GNEs are offering any technology that these players could not match.
So it is back to the war on prices. What lends extra spice to the probable battle between the old style GDSs and the GNEs is twofold: the rise in the low cost carrier and the end next year of many of the agreements signed between the airlines and the GDSs.
What most travel managers and their travel management companies want is access to as many fares and inventories as possible so they can pick the prices they want, often on the day. With the number of low cost carriers (LCCs) in Europe growing along with their use by business travellers, it becomes more important for both these airlines and potential buyers/travellers to have full access to fares.
Mr Solum believes that the GNEs could be attractive to the LLCs, like Wizz Air where the higher priced GDSs were off limits to their business model. LLC which do use the GDSs might also find the prices of the GNEs more suitable.
What would be a breakthrough into Europe for the GNEs is a decision by the Star Alliance to use them. It announced last month that it would be assessing the value of GNEs before deciding whether to use them over the traditional GDSs.
It may be just a gambit to keep the GDSs on their toes during the next round of price negotiations. But it may also be serious. If it is and Star goes ahead, the chosen GNE will have more than a foothold in Europe with one of the continent's biggest carriers, Lufthansa, on its books as well as six smaller ones.
It may be just a matter of time before the GNEs pitch their camp in Europe.