08 Jun 2018

Stuck in the mud – when airline distribution partnerships go wrong

Legacy agreements signed with the global distributions systems (GDSs) are giving business airline bmi a headache.

Antony Price, director marketing & customer, bmi, says it is currently stuck in some difficult negotiations to amend “ridiculously long” contracts that were signed five years ago.

Price did not say which of the GDSs – the big three being Travelport, Amadeus and Sabre – weren’t playing ball. However, he did say this:

“Some of our GDS partners have been really good and have evolved with us, but some have been less good to grasp the changing technology and opportunity.”

Although bmi went into these agreements with the best intentions, the industry has undergone rapid technological change in the past decade.

“Some of these are ten year agreements. But what was relevant five years ago, isn’t relevant now and will be even less relevant in another five years.”

The recent codeshare agreement between fierce competitors Air New Zealand and Qantas to work together on domestic routes was just one example of how the industry is evolving. Price, who was speaking at EyeforTravel Europe this week, says:

“This is a relationship that would never have happened a few years ago,” Price says.

Today 20% of bmi’s business is booked direct online, with the balance coming mainly from travel management companies. Price said that while some of that is down to the corporate travel nature of BMI’s business, dated legacy agreements are limiting the airline’s ability to grow the direct online piece.

“We are not a commoditised carrier – we offer free drinks, food and bags. It is very much a bundled product, so we don’t need the platform to that for do us,” he said.

Instead, bmi wants to greater flexibility to control and manage the distribution environment.

Frustration with distribution partners is not unique to bmi. In 2015, Lufthansa became the first legacy carrier to take a controversial stand against the GDS. In a move to drive more direct bookings, it said it would levy a 16% surcharge on all flights booked via the GDS.

Then last year, British Airways, and sister carrier Iberia, said it would levy an £8 fee on every fare booked on systems not using an NDC-led connection.

In another potential challenge to the GDS, Lufthansa and Air New Zealand are among the airlines to sign a deal with Winding Tree, which has big plans to disintermediate the travel industry using blockchain technology.

Photo by Gabriel Sanchez on Unsplash

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