One by one, airlines are waking up to the sobering reality of the modern Global Distribution System (GDS) model, which they created decades ago. Two carriers have now taken legal action, and this is only the beginning. If more airlines want to see changes and lower costs, they should join forces instead of watching from the sidelines.
Judge Miriam Goldman Cedarbaum of the United States District Court for the Southern District of New York is about to become an expert on airline data distribution — in the 82nd year of her life. You can see her name stamped on a complaint (pictured above) filed last week by US Airways against Sabre, the largest GDS in the United States.
Sabre should take this lawsuit very seriously. Cedarbaum is not just any judge, and she is certainly not to be trifled with. One of the many high-profile cases she has overseen was against would-be Times Square bomber Faisal Shahzad, who was sentenced to life in prison without parole in October.
The most important reason for Sabre to prepare for a serious fight is the actual merit of the US Airways complaint, which the GDS predictably dismissed in a press release after the court filing. The airline accuses Sabre of monopoly, unfair practices and stifling competition by “locking travel agents” into using the GDS, so they “effectively become unable and unwilling to provide their customers with alternative, more efficient” booking channels.
“Rather than compete on the merits, Sabre has used its massive power over airlines such as US Airways to entrench its antiquated and inefficient technological systems, to preserve its supra-competitive booking fees, and to harm competition,” the carrier wrote in its complaint.
“Sabre’s technology has hardly changed from your grandfather’s distribution system, and was long ago left in the dust by new, innovative solutions that are web-based and take advantage of the networked economy,” it added. “These new offerings, however, have been stifled by the GDSs’ grasp over travel agencies and the exercise of their market power over airlines.”
The airline is referring to the technology I’ve written about before, known as a “Direct Connect” model, which allows carriers to host their data and make bookings independently of a GDS. Airlines prefer that model because it lets them control their data and offer non-airfare products, and it also saves them lots of money.
As I explained in February, about 60 percent of the roughly 1 billion tickets issued worldwide each year are sold through a GDS, according to Farelogix, a technology company mentioned in the US Airways filing. The average GDS fee paid by the airlines is about $12 per ticket, or more than $7 billion a year in distribution costs, Farelogix CEO Jim Davidson told me. In contrast, Farelogix’s “Direct Connect” allows carriers to spend only between $2 and $3 per ticket, saving about 80 percent of the current costs.
In its court filing, US Airways said that 35 percent of its revenue, “amounting to
over $3.5 billion annually, is booked through Sabre.” That’s exactly why no airline wants to be taken off a GDS — whether Sabre, Travelport or Amadeus. That’s also the reason why US Airways is only the second carrier — after American Airlines — to stand up to a GDS.
Having just written about a hybrid model that would make it possible for GDS portals to provide access to a carrier’s “Direct Connect” channel, I was surprised when US Airways signed a new agreement with Sabre several weeks ago. Instead of joining in America’s efforts to change the GDS model, US Airways is simply caving in, I thought.
Earlier this month, American reached an agreement with Expedia to implement a hybrid model, and then sued Travelport and Orbitz, claiming violation of antitrust laws. Online travel agencies like Expedia and Orbitz rely almost exclusively on GDS use, and some of them are owned by GDS companies.
Now US Airways has reconsidered and decided in favor of a fight. In its complaint, it says that Sabre forced it into their latest contract with “numerous oppressive and
anti-competitive terms.” The carrier “had no choice but to sign the agreement, which it did under protest, or face a complete shut off from Sabre’s network,” it said.
One of the most draconian clauses is that US Airways is banned from offering fares on its website unless it also makes them available to Sabre. In addition, Sabre penalizes travel agents who book tickets through any other channel.
As my record in this column shows, I’m a frequent critic of the airlines. But their complaints against the GDS companies are legitimate and need to be addressed. What the GDS management teams are doing is nothing short of business bullying. Worse yet, they pretend to be victims, trying to trick consumers into supporting them by falsely claiming that their model is the only way to ensure comparison-shopping.
Instead, they should be less greedy and let go of their unrealistic dreams of enormous and easy profits. Resisting inevitable change as a result of advanced technology is a recipe for extinction, not prosperity and longevity. The sooner the GDS companies realize that, the better for all parties in the air travel system, including consumers.
For their part, airlines should unite in their opposition to the current GDS model if they want to see results they like. They shouldn’t leave it to American and US Airways to fight their battle alone and then benefit from the outcome — and I’m sure the outcome will ultimately be more favorable for the airlines than the present state of data distribution.
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Most of us don’t think we are cut out to be doctors or engineers. Then why do so many of us believe we can be diplomats? Does one need training or a particular background to become a U.S. ambassador? I find myself asking these questions every time I hear about a failed non-career ambassador.
President Obama promised change in Washington, but he continued the decades-long tradition of dishing out ambassadorial posts to people whose only “qualifications” were their big donations to his election campaign. As I’ve written before, the American Academy of Diplomacy and the American Foreign Service Association have called him out on this disgraceful practice.
Many of those political appointees actually do a fine job. Although the two weeks of training they get at the State Department’s Foreign Service Institute are grossly insufficient, they work hard to understand what it takes to handle the international relations of the United States, and what the daily conduct of diplomacy requires from them as civil servants.
But then there are those who think they already know what an ambassador should do and care little about tradition and bureaucracy. None of us admits to liking bureaucracy and we all express disdain for bureaucrats from time to time.
That’s exactly what Douglas W. Kmiec, the U.S. ambassador to Malta, did last week. He blasted a report by the State Department’s Office of the Inspector General (OIG), which criticized him for neglecting his overall duties and engaging in “outside activities [that] have detracted from his attention to core mission goals.”
Instead of focusing on broader foreign policy and national security issues, Kmiec has been spending most of his time promoting his Roman Catholic faith, mainly by writing various articles and speaking about religion, as well as issues such as abortion.
Following the OIG report, Kmiec offered Obama his resignation, vehemently rejecting the investigation’s findings. “I doubt very much whether one could ever spend too much time on this subject,” he wrote in a letter to the president.
Unwittingly, Kmiec hit the nail right on the head. No single issue, with the exception of very few vital national security matters, deserves the time and attention the ambassador has apparently spent on religion. He is certainly not the first political appointee to make one issue the sole emphasis of his tenure.
Previous ambassadors have dedicated themselves to very noble causes, including raising awareness about terrible deceases. A prime example is the focus on fighting cancer that marked Nancy Brinker’s stint as ambassador to Hungary at the beginning of the George W. Bush administration. While that was enormously helpful, many of Brinker’s subordinates and other State Department employees felt that other important issues suffered as a result.
Kmiec is a well-respected law professor and former legal adviser in the Reagan White House. I don’t know him, and I usually try to avoid criticizing people who are my father’s age for no good reason. But just because he has been successful in his field and donated a lot of money to Obama’s 2008 campaign doesn’t necessarily make him a good ambassador by default.
The U.S. Embassy in Malta, which I have visited, may be small, but it still has representatives of many federal agencies with sometimes competing interests and needs to be run by the ambassador in the best possible way. Supporters of appointing political ambassadors often laud their personal relationship with the president, but what good does that relationship do if it’s not put to an effective use?
Obama deserves credit despite his failure to end the longtime practice. He has just launched his re-election campaign and needs support from conservatives like Kmiec, so his resignation is an unnecessary distraction. However, Obama has not tried to defend Kmiec, who said he would leave his post in the summer.
One would hope that the president will think twice before rewarding campaign donors with embassies if he wins the 2012 election. Kmiec is not Obama’s first political ambassador to be embarrassed by an OIG report. As I wrote in February, Cynthia Stroum, ambassador to Luxembourg, was forced to resign because of her poor management style and serious damage done to her embassy.
Kmiec has said he was not pressured to resign and made the decision without outside intervention.
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My previously high regard for Singapore Airlines has been sinking quickly in the last week. Dealing with its agents regarding an award ticket has been one of my worst airline experiences in years. Now we learn that the carrier did little to help a passenger who suffered a heart attack during a flight last month.
When I wrote about Singapore’s “maddening perfection” in September, I pointed out that it deserves all the accolades it gets for its on-board products and in-flight services. However, the airline hasn’t quite understood that being a global first-class company means much more than that.
I usually try to stay calm with airline agents on the phone and give them the time they need, even when it’s clear they are not very good. That turned out to be a serious challenge last week with Singapore agents assigned to the carrier’s frequent-flier program, KrisFlyer. It’s stunning how poorly trained they are, even though they are based in Singapore — not India, as their accents suggest. A few years ago, the carrier closed its Los Angeles call center, where agents were much better.
I wanted to change the dates of three out of four flight segments on an award ticket entirely on Air Canada, Singapore’s partner in the global Star Alliance. I booked it a few months ago with the last KrisFlyer miles I’ll ever have. As usual, I’d done my homework using the All Nippon Airways’ website, which is the only site showing award availability on every Star carrier. All flights I requested had an open seat.
Normally, if a Star airline has provided a seat for mileage redemption on StarNet, the alliance’s “middleware,” any member has access to that seat on a first-come-first-served basis. You probably know how that system works from my columns about United’s StarNet blocking.
Still, there is a small chance an agent may not see exactly what I see, due to using different systems, time delays and other variables. So when I called Singapore, I gave the agent my first segment and asked him to check for availability. He wanted to know all three flights. I said I couldn’t book the return unless I knew for sure on what day my outbound flight would be. He responded that he couldn’t look for seats one by one, but had to collect all the information from me before searching.
Most airline agents can tell you immediately whether an award seat is available on a certain flight — they either look at inventory or, in rare cases, request a partner seat and see if the other airline confirms it. I later verified with several other Singapore agents that what my first agent told me is indeed how they do things over there. So I gave him all my three new flights. Having written them down, he wanted to read them back to me before starting his search. That took over a minute of odd stumbling over what one would have thought was someone else’s handwriting.
My patience was almost running out when the real shocker came — he asked on what number he could call me back once he had looked for seats. Seriously? Award seats could vanish in seconds, let alone in whatever time he needed to perform what apparently amounted to a rather complex task. I said I preferred to hold while he was searching.
After keeping me on hold for 15 minutes, he disconnected the call without coming back. I called again and went through the same motions with another agent. Following a 10-minute hold, he said one of the new flights wasn’t available. I went back to the All Nippon website — that seat was gone indeed. After all, it had been more than half an hour since I’d first called.
Make no mistake about it — I lost a seat because of the incompetence and poor training of the Singapore agents, as well as the carrier’s inefficient system. Such lack of professionalism is to be expected from a third-world airline, but not from a carrier that is often named the best in the world in various rankings.
Slightly off point, the second agent also said that another one of the flights I wanted was not available — however, the All Nippon site was still showing an open seat. Even now, several days later, that flight shows as available on the site. I just called Singapore and a third agent said she couldn’t see it. I wonder if Singapore does its own blocking these days, taking its cue from United.
In my September column, I also wrote about Singapore employees narrowly following rules and not applying their own best judgment to specific situations that inevitably arise during air travel. In other words, they don’t really exhibit much humane behavior.
I was still surprised to learn this week about an utterly puzzling Singapore decision in March.
Max Pearson, a co-host of “The World Today” BBC program to which I listen almost every day, flew to London on Singapore on his way back home from covering the Japan earthquake and tsunami. Shortly after taking off from Singapore, he suffered a heart attack. The airline refused his request to return to Singapore or divert the flight to the nearest appropriate airport, so he could get the care he needed.
Singapore says it took the measures it deemed necessary, implying that Pearson’s condition was not serious enough to justify a diversion. Obviously, diversions are very expensive for an airline, but they are covered by insurance. Plus, Pearson had what has been described by media reports as a “life-saving surgery” as soon as he arrived in London.
It remains to be determined if the more than 12 hours Pearson had to endure on the Singapore plane might have complicated his condition.
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Back in November, I wrote about my air travel pet peeves, so now it’s time for my hotel pet peeves. I don’t count my hotel nights each year like I do airline miles, but they are quite a few. As was the case with air travel, my Top 10 hotel pet peeves include behavior by both employees and customers.
Here is the list:
1. Thin walls through which you can hear everything going on in the adjacent rooms.
2. Hotel guests slamming doors and shouting in the hallway, as if they are the only people in the building.
3. Housekeeping staff talking loudly to each other in the hallway during morning cleaning service, apparently oblivious that some guests are still trying to sleep.
4. Clogged sinks, showers and bathtubs that take forever to drain.
5. Finding someone else’s hair on the sink — and other places, for that matter.
6. Paying a room rate that includes “full American breakfast,” only to find out that you can have one item on the menu and must pay extra if you want the buffet.
7. Guests smoking in non-smoking rooms, even after they have signed a piece of paper warning of a fine at check-in.
8. Hotels charging a “connection fee” when you call a toll-free phone number.
9. Waiting for a hotel airport shuttle that you were told was on the way half an hour ago.
10. Receptionists refusing to give you an extra hour to check out when you checked in very late the night before.
What are your hotel pet peeves?
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The new airline data distribution model I predicted in February has just become a reality. Expedia, the most popular online travel agency, agreed this week to carry American Airlines data hosted by the carrier’s “Direct Connect” channel. Expedia’s consolation prize is that it will use Global Distribution System (GDS) aggregation technology.
Since Dec. 31, when its contract with American expired and it decided not to renew it, Expedia had been resisting the airline’s attempts to move to a direct channel. Why? Because it wanted to continue to receive sizable kickbacks from Sabre, the GDS it uses to display and book flights.
American insists on “Direct Connect” for two reasons. First, the channel allows it to control how the data is displayed and offer customized options to travelers, such as priority check-in and boarding, which will increase revenue. Second, the cost of “Direct Connect” is much lower than the GDS fees American used to pay Sabre, which has its own quarrel with American.
After a January visit at Farelogix, a Miami-based technology company that is building direct data-hosting and distribution channels for about a dozen airlines, I suggested that a solution to the dispute between American and Expedia (as well as Orbitz) may be a hybrid model.
As Farelogix CEO Jim Davidson told me, the GDS system is not going anywhere, and it provides the best and fastest data distribution. No airline is disputing that or trying to make the GDS model obsolete. But there is a way to integrate “Direct Connect” in a GDS. All three GDS companies — Sabre, Amadeus and Travelport — have been bad-mouthing “Direct Connect” because they stand to lose lots of money.
Now Expedia has realized that a hybrid model is the future of airline data distribution. Instead of fighting it, the GDS companies should get over the past and help to improve the new model, so consumers have the best possible information when comparing prices across airlines.
Until the new system is in place, Expedia will use the existing GDS model to display and book American flights.
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