<B>Passing On The Bypass</B>
<I>Airlines Aim For Direct Corporate Approach Via Their Web Sites</I>
By By Jay Campbell & David Jonas
Continental and Northwest airlines are launching new business travel booking sites, joining Alaska, Delta and Southwest in efforts to cut distribution costs by working directly with businesses via the Web.
Not only do the airlines see their sites as a way to cut out the agency middleman, but increasingly the carriers are focusing on their sites as the prime mechanism for enabling business travelers to book without the use and cost of a global distribution system--partly at the expense of efforts to do so through third-party online corporate travel tools.
That third-party GDS bypassing now is taking a back seat to the airlines' own sites is reflective of the difficulties in supporting reservations made without a GDS. Airlines have arrived at that conclusion following what amounts to, in some cases, years of third-party development.
"Going truly direct has servicing issues and working with other third parties hasn't progressed too much with us because I just don't think they are there yet," said Elizabeth O'Hara, director of distribution planning at United Airlines.
"We've encountered back-office issues for all air direct links that prevent us from rolling it out in production," said E-Travel senior director of marketing Rob Wald. "We are still pushing forward with air direct links, but work needs to be done on both sides of the link--E-Travel and the airlines--to make it happen. This work may or may not be a high priority for airlines, but we are continuing to push forward with our other direct links and we expect a beta for an Amtrak link and a National Car Rental direct link within the next 60 days."
At GetThere, "Direct connects are not a panacea, but rather complementary to the GDS distribution channel," said COO Jeff Palmer. "It will be a hybrid solution, as far as we can see." GetThere for now is focused on increasing adoption of its corporate booking tool. Despite recently signing its first definitive agreement to develop directs, with American Airlines, a GetThere spokesman said such links are a ways off.
Continental Airlines, the earliest airline pioneer of third-party GDS bypass, said it has put its development with E-Travel "in neutral, and we're coasting for a while," said director of distribution strategy Jim Young. "We've got the E-Travel link and we can make bookings, but we're waiting for Carrier Sales Phase II, a second generation of ARC coding that allows exchanges and refunds to be made by the agency, not the airline," Young said. He set a realistic date for that implementation for October, though "we would like it sooner," he said.
Delta agreed that Carrier Sales Phase II is what will allow such third parties as GetThere to facilitate GDS bypass on an itinerary that includes air, car and hotel; GetThere confirmed it is working with the Airlines Reporting Corp.
"Carrier Sales Phase II is up and running, but implementation has been slow thus far," said ARC's Barry Lemley, director of accreditation and database management. "There needs to be more understanding about direct connects. Some want to bypass the GDS and some want to bypass the corporate card with electronic funds transfer."
The key service issue is that although a booking can be made directly in an airline reservation system by a third-party booking tool, it does not allow a travel agency or a traveler to make changes to the airline reservation en route. Further, the way the passenger name record is structured, a "passive" airline segment is stored in the GDS along with any traditionally booked pieces to provide the agent or booking system a full itinerary.
"The idea is to use the GDS to shop and then the online booking system to book direct, but the GDSs freak out about this," said Steve Reynolds, chief technology officer at Dallas-based TRX Inc. "Maybe their pricing will change where they charge for shopping, so you have to play hide the booking. The GDSs have value, and to replicate that is difficult."
"The heart of the direct connect question is, 'Where does the PNR live?' " said Delta director of e-business, business to consumer Steve Scheper. "Do we accept passive segments as an appropriate way to support the PNR in that scenario? The answer is no, because the GDSs charge for that. That is not an option as we emphasize a super PNR concept to accomplish the bypass."
Aiming to solve this direct disconnect, TRX is partnering with WorldTravel BTI to kick-start development on a prototype software now known as Trinity that will bridge the gap between supplier-direct and traditional bookings.
Meanwhile, Dublin-based Datalex, which sells Internet booking services to suppliers and soon will offer them a corporate booking tool, also is working on facilitating GDS bypass by creating a "virtual PNR" that resides in an external database and is synchronized with other systems.
Both Datalex and TRX work with the Orbitz Web site in development by the major airlines. Management at Orbitz has not committed to making it a corporate product, but many observers believe Orbitz to be an obvious mechanism for airlines and corporations to conduct transactions without a GDS. Insiders working with Orbitz told BTN that a corporate product is, in fact, in the company's long-term plans.
In the meantime, concerns about financial arrangements, the user interface and other question marks have Alaska, Delta and Southwest airlines seeking GDS bypass for business travelers through their own Web sites. Continental and Northwest Airlines separately are about ready to unveil their own Web-based business bookings. These carriers especially are concerned about ever-escalating GDS costs (BTN, Jan. 15), partly because, aside from Northwest, none of their internal reservation systems are hosted by a GDS, as is the case with American, United and US Airways.
Continental is about to join Delta in setting up a Web site specifically for companies with which it does not have a discount program. Continental is on the verge of announcing that it will use Worldspan's Trip Manager booking engine "and a hybrid of Continental and TRX for fulfillment" on the site, to be called RewardOne Online.
"We're primary preferred, but customers will be able to assign other preferred carriers as well, and also load hotel and car deals," Young said. The new site coincides with Continental's efforts to bring its whole Web site in-house, saving license fees paid to Expedia, GDS fees paid to Worldspan and fulfillment fees paid to TRX. "We've insourced TRX's work to our reservation center, and are developing an electronic support desk for those loyal customers that use our site," he said.
Meanwhile, Southwest enhanced its SWABIZ direct corporate booking product to include a corporation's negotiated rates for both hotel and car rental. The site now offers enough functionality to complete full itineraries. By entering their corporation's code, a traveler connects directly from SWABIZ into internal systems at Alamo, Budget and Hertz to access contracted rates. That enhancement came online in December and other car rental partners soon could be added.
The GDS comes into play for hotel bookings, which became available in March. Southwest partnered with Galileo to enable SWABIZ users to book preferred rates with any hotels loading those rates into the system, though it does not pass on any transaction or processing costs. For travel managers, SWABIZ now offers improved tracking capabilities, including full origin and destination reporting. Tracking of car rental and hotel transactions is not yet available, but Brad Newcomb, Southwest director of marketing automation, said it would be a natural progression.
"The features and functionalities we have added have been direct requests from travel managers from larger companies," Newcomb said. "They want to track what is purchased through the Internet and offer something as user-friendly as possible for their travelers." Another enhancement in the works is to allow travelers to indicate an internal billing or cost center code to further facilitate tracking a corporation's spend.
Delta has progressed furthest in developing a portfolio of alternate distribution channels. Delta.com for corporations, which enables large buyers to access negotiated rates or Web specials directly from the Web site and capture the data, now is being used by 16 accounts with a few dozen more in the pipeline. "It is a direct connect into our own Web site and the Deltamatic reservation system, and is not involved with other third parties," said Lee Macenczak, Delta senior vice president of sales and distribution. He added that Delta "has pulled back a little bit" on GDS bypass facilitated by third parties. "We have some issues to work through from a technological basis before we can move forward with that product."
However, Delta is working with E-Travel on new direct models and also uses that company's booking engine to back the Mind Your Own Business Travel site designed for more modest travel programs. While that site is not a GDS bypass--Delta pays segment fees to Worldspan, which it conveniently owns a piece of--it is set up as a traditional travel agency, allowing companies to book other airlines while earning commissions for Delta. Unlike the large corporate booking product, which is serviced internally by a specially trained group within the reservation department, MYOBTravel uses TRX for customer support. A third Delta module is its Online Agency Service Center. Last week, the carrier announced that agencies now can directly book special Web fares from the site, representing yet another step in Delta's efforts to wean its customers away from traditional GDS bookings. Net fares also are available to agencies through that channel.
Along those lines, Continental plans to make available to large travel management companies a booking link to its internal Shares reservation system, provided by Electronic Data Systems. "Adding Shares to the GDS for a travel agency will give us the scale to create a true alternative to the GDS," Young said. "Of course, that would cut into the agency's GDS incentives, but we'll work with the agency to understand their GDS incentive program and to make them whole--it might be a fraction of our savings. We'll also share the savings with corporate clients."
"We envision a world where a corporation could have a travel agency of record along with an online self-booking tool, as well as direct relationships with suppliers," said Delta's Scheper. "There is a question as to whether or not the industry could administer all three and right now we are in a period of discovery, but we feel sophisticated travel managers could manage all three."
American Airlines is the largest dissenter in the airline group, stating its preference for third-party facilitation over truly direct connections.
"The vast majority of customers we have talked to are not requesting direct booking capability from us. If they have a relationship with a carrier and that relationship were to change over time, they don't want to switch out a booking tool and put in another," said John Samuel, AA vice president of e-business. "Instead, we are working with third parties to create booking capability via their engines."
In fact, American recently became the first airline to sign a definitive agreement--not a letter of intent--with GetThere to begin developing direct access for the GetThere Marketplace to American's reservation system, hosted by GetThere parent Sabre. AA also has signed a letter of intent with E-Travel.