Assignment: GDS and airlines
Travel agents face a day of reckoning in 2004 as airlines become ever more desperate to cut costs. Only those agile enough to adapt to the sweeping changes will survive. More and more airlines are reducing or eliminating the agents' commission, while the incentive payments agents receive for bookings from the global computer reservations systems are under threat. Add competition from the Internet, plus a new tendency for customers to book direct with tour operators, and change looks likely even for agents who rely on package holidays for most of their income. Travel retailers are being forced to change from their role as agents of suppliers to agents of their customers. Some, especially those managing travel for corporate clients, have already adjusted by charging their customers for services such as analysing staff travel patterns. But such is the pace of change that most agents, whether handling business or leisure travel, will have to charge customers for some bookings.
Lufthansa will stop commissions for German agents completely on 1 September, having already reduced it for agents in some other countries. In Germany, the airline will market net fares to which it will add e30 to domestic and short-haul tickets and e45 to long-haul flights, representing the cost of handling bookings made direct with the airline. Agents will be free to add their own mark-up to cover costs and profit but matching Lufthansa's e45 for a long-haul flight would not come close to the 9% of most longhaul premium fares they currently receive from Lufthansa. Agents will be under pressure to retain the loyalty of corporate clients by ensuring they get the best negotiated or spot fares. Gerd Rieke, spokesman for Germany's Association of Business Travel Management, says some small independent travel agents will have a hard time. ‘I would not be surprised if the big chains grew and many of those smaller agents were drawn under the umbrella of franchise organisations.'
Airlines have also focused on the cost of selling seats via the global distribution system operators whose airline ticket reservations and distribution terminals are used in travel agents' offices. First, the airlines lured customers from agents with cheaper fares available only via the airlines' websites. Now some have reached agreements with GDS operators so that agents can book the cheaper fares via their GDS screens but receive lower fees. British Airways has such a deal with Saber and Galileo. Meanwhile, UK agents hooked up to the other two GDSs, Amadeus and World-span will pay £3 extra for every flight booked.
Galileo will also charge agents 50p per BA flight. Although Galileo still makes incentive payments to agents for reservations with other airlines, it does not expect that to last. Sabre will not charge agents but says incentive payments - ‘our largest single expense line' - are under review. But the news for agents is not all bad. If the BA deal is pursued by other airlines, agents will have more low fares to sell. If they can compare such fares with offers from no-frills carriers, or if the deal persuades more of those carriers to sell via the GDSs, they will save customers valuable time that would help justify charging them. Ian Reynolds, Association of British Travel Agents' CEO, notes: ‘There are still excellent opportunities for agents who can genuinely add value to customers' travel plans and provide a service that a customer can see is worth paying for.'
Question
1 Why are travel agents under threat?
2 How are they trying to adjust to their new situation?
3 Who might be the winners and losers from the new GDS technology?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.