Paul Coby, chairman of the SITA board of directors and former chief information officer of British Airways, told delegates to the SITA Airline IT Summit in Brussels in late June that “if you extrapolate the trend, by 2014 58% of tickets will be sold directly. This channel shift will reduce the share sold through GDSs and online travel agents.”
Coby based his predictions on responses to SITA’s annual Airline IT Trends Survey, produced jointly with Airline Business Magazine.
But, although there is little doubt that airlines want to increase their direct distribution, the airlines’ survey responses may have been more aspirational than predictive.
Direct distribution varies widely according to type of airline and region.
In Europe, network carriers get about 25% of their bookings from their websites, but in Asia, online booking penetration is around 10% to 15%.
Low-cost carriers, on the other hand, get about 75% of their bookings through their websites, and a few, such as Ryanair, get about 99%.
U.S. network airlines typically get about a quarter to a third of bookings through their websites. Call centers and ticket counters add another 5 to 10 points.
Other factors
But websites are not the whole story. The SITA survey found that the biggest chunk of airlines’ IT investment in the coming months and years will be in the mobile channel.
Half the airlines surveyed said they are seeing their IT budgets increase, and they are “ready to spend big” on passenger mobile services and other “transformative” technology, SITA said.
Nine out of 10 responding airlines plan to invest in mobile device-based services for passengers over the next three years. The current focus is on check-in, flight status notifications and electronic boarding passes.
Focus on mobile technology
Distribution is on the airlines’ radar as well when it comes to their investments in mobile technology. A third already sell tickets through the channel, and another 52% plan to by 2014.
Most airlines also plan to extend mobile functionality to include ticket modification, upgrades and sales of onboard services. The airlines see the channel as a way to provide customers with personalized services and offers.
Impact on agents
What does this mean for travel agencies?
In Europe and North America, the high-yield corporate market remains firmly in the hands of travel management companies, whose preferred method of booking is through the GDSs. (American Airlines, perhaps the most avid pursuer of direct distribution among U.S. network carriers, is famously trying to change that, but it has met with resistance from TMCs and their customers.)
Other airlines have expressed a desire for direct connections as well, but they generally have taken a less combative stance.
For the most part, the GDS channel delivers the highest revenue to network carriers. In its lawsuit against Travelport, for example, American noted that about 60% of its revenue is booked through GDSs – 51% of that through traditional brick-and-mortar agencies. But what about that other 9%?
Some airlines are bothered not so much by traditional agency bookings; it is the online agencies’ bookings, which deliver low-yield passengers while incurring the same GDS segment fees, that rankle.
Delta began quietly severing its ties with second-tier OTAs last year, about the same time that American went to war with Orbitz.
Author : Michèle McDonald
Source : travelmarketreport.com
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