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AA Aims For Complete Direct Distribution
American Airlines is gearing up to migrate its indirect volume, including
bookings by corporate travel management companies, to direct channels
facilitated by XML and third-party technology firms, according to executives
speaking here this week during a Computerized Airline Sales and Marketing
Association conference. "Our goal is to have 100 percent of our indirect
volume go through our direct connect XML API," said AA director of
merchandising strategy Cory Garner. "That is what centralizing your shopping
processes means."
Distribution leaders from Air Canada, AirTran Airways and United Airlines
also shared their companies' plans for wider deployment of direct
connections. They cited the need to communicate more effectively with
customers and offer highly targeted products that would allow airlines to
convey their value propositions and back away from product commoditization.
They also said global distribution systems could play a few different roles
in the emerging models.
Around for about three years, Air Canada's API "is connecting to about a
dozen or 15 different people who see some advantages," including a product
from GDS operator Travelport, according to distribution business development
manager Keith Wallis. "It does everything you want to do in terms of making
a booking, and it goes beyond what aircanada.com can do."
AirTran has had a direct connect in place since 2004, according to director
of pricing and distribution planning Matt Klein. "We recognized years ago
that we weren't connected to the indirect channel in the way that we wanted
to," he said.
At United, there are no formal direct connects in place as the concept is "a
new frontier for us," said director of distribution Kathleen Bennett. "We
are trying to figure out what direct connect is. Is it a technical solution
to an economic problem easily solved with negotiations with the GDSs? Is it
a technical solution to respond to how airlines are evolving and offering
ancillary services and how those are displayed to the travel agency? We have
to answer that question ourselves."
AA's Two Direct Connect Options For Agencies
The largest carrier among the foursome, AA has been building its direct
connect for three years. It first achieved limited deployment in the
domestic U.S. market and this year expanded it to international markets,
according to manager of distribution strategy Don Bender. "By switching to a
direct connect using XML messaging, it allows us to do a lot more things and
provide a lot more functionality and value out to customers," he explained. "We are looking at insourcing some of those things because we think that the
information we have within the four walls of our company can allow us to
better personalize offers."
Bender explained that AA "started out by making sure that [the direct
connect] had all the basic functionality that agencies are used to in the
current processes they use today," including availability, pricing and
shopping, passenger name record creation, ticketing and such customer
service functions as exchanges and refunds. The airline also worked to
integrate settlement processing via ARC and Bank Settlement Plan channels,
and now is tackling "advanced functionality." Bender cited more automation,
improved productivity, flight checking, merchandizing capabilities and "decreased exposure to debit memos."
The AA strategy focuses on two options for agencies. "Some agencies, based
upon their level of technological skill and level of customization
requirement, may want to take a direct XML API feed from us," said Bender. "That naturally works better for the larger travel management companies"
already experienced in using new distribution technologies and content
aggregators.
When asked how soon corporate TMCs might start using the direct XML API,
Bender said AA is "in discussions with a number of different players--TMCs,
OTAs, etc. Those conversations are confidential. My sense would be that once
we reach an agreement, there is some time to do an integration and test it.
Three to six months is what we estimate that timeframe to be."
For smaller agencies, Bender said, "we worked with one of our technology
providers behind the direct connect, Farelogix, to develop out-of-the-box
Web-based solutions. Ultimately, the way most agencies want to connect to us
is utilizing some of the technology providers that they use today,"
including GDSs, content aggregators and providers of back-office and
mid-office systems and user interfaces. "We have been engaging a number of
different technology providers to share our plans on direct connect in terms
of those that are taking a direct API feed for us," he added.
Getting Agencies Onboard
Air Canada's Wallis cited "case by case" discussions with agencies about
incentives to use the direct connection. But he also noted that using the
carrier's API comes at no charge to any TMC willing to build something
itself to make the connection work on its end.
Wallis also said that Air Canada's direct connect channel includes "guaranteed content" and all the features available through the agent portal
on the carrier's Web site. "If my direct connect isn't as good as what they
use today, there is no reason for them to use it," he said.
Bender said the AA direct connect would allow the airline to have closer
relationships with agencies and to more flexibly provide content. "As we get
into merchandizing and ancillary services, there are going to be ways to
better personalize the offer," he said. "By insourcing some of that
functionality, it gives us the ability to do that. If we negotiate a
specific corporate bundle with a corporate client, we can better service
that through our direct connect."
Of course, TMCs and the clients they serve constantly pursue access to
airlines' "full content," and technology can be a factor. "We are not
intending to have differentiated content, but if technology is not place to
get at content, it seems there will be a natural differentiation," said
AirTran's Klein. "That goes beyond a GDS or the newer technologies having
the functionality. If there are other booking tools that sit on top of those
platforms, they have to be capable of accessing and knowing what to do with
the content. It becomes an XML hopscotch of sorts."
At Air Canada, when considering the carrier's Flight Pass products, branded
fare families and other ancillary options, "there probably is about 40
percent to 50 percent of our content that isn't in channels with no direct
connect," said Wallis.
Still Room For GDSs
The airline representatives pointed to certain GDS deficiencies in terms of
communicating and messaging that at least helped to prompt direct connect
strategies. "The reality is that GDSs are aggregators of direct connects,"
said AA's Garner. "They are just aggregating direct connects today based on
legacy technology that is not capable of handling some of the things we want
to do in the future."
"Today, a GDS provides value for an airline because we ship them raw
materials in terms of fares and availability and they put the recipe
together and present it to the customer," Bender explained. "They also
provide different functionalities and value to the agency in terms of
aggregating content together, reporting features for corporate clients, etc.
For us to be able to better personalize those offers, we need to take the
functionality and insource it inside the box so we can combine it with
different CRM data and provide more relevant information. That's not to say
we won't be using technology providers and the GDSs in the future to help us
with that; it may be that we contract with them as a technology provider to
assist us with some of that stuff inside the box as opposed to outside the
box.
"We view our direct connect strategy not as a direct connect versus a GDS
strategy, but as a new way to push out content through the GDS or whatever
technology providers agencies want to utilize," Bender added.
The other airline representatives shared a similar sentiment. "Our approach
to the market, with GDSs, TMCs and whoever else wants to use our direct
connect, is one of partnership," said Wallis. "If you sit down and have a
conversation with all the stakeholders involved--GDSs, TMCs and third
parties--you can find the value in the relationships. Air Canada has
demonstrated that."
~ David Jonas
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