Will new tech disrupt traditional GDSs?

Both sides of the argument could be heard at the recent CAPA Airline CEO Summit in Dublin, with Travelport expressing the views of the GDSs.

Will new and disruptive technology take over from the traditional global distribution systems (GDS) and payment solutions? Not completely, says Travelport, the leading travel technology and provider at the recent CAPA Airline CEO Summit in Dublin.

Travel tech start-ups with great innovations and new entrants like Google and Amazon are challenging the distribution between airlines and its agents, customers and suppliers.

Ryanair CMO Kenny Jacobs and Car Trawler CTO Bobby Healy say that the future for airlines will be to get customers to think retail when planning their travel and bookings, as the customer wants to have all the options in one place, yes just like in a big food retail store, where you get what you want.

Andreas Weider, director at Social Data Lab, says the evolution will go from collecting data to connecting data and the need to embrace transparency and respect and empower the customers.

KLM President and CEO Pieter Elbers says that social media is just a ripple in a much larger digital sea, and KLM must be where the customers are and wow people everywhere.

Finnair CCO Juha Jarvinen comments that the Finnish carrier has provided 6,000 of its staff with an iPhone 8 to empower them to make decisions and improve internal communication.

There is no doubt that the airlines are heading towards more technology and being centric on customised solutions that are designed to fit the individual airline and its core market and customer needs. The technology providers state that airlines must start inside their own organisation by setting a clear strategy, processing it and distributing the needs to relevant parties and system providers that can supply their needs with the required quality. Airlines are not sexy enough to attract the brightest technology heads!

Already in 2020, airlines’ own booking distribution will bypass the GDSs, Ryanair CCO Peter Bellew believes, and the new IATA application NDC (New Distribution Capability) will not change this. Distribution via GDS is expensive, and Bellew says that no one else should eat our “lunch”, meaning the distribution should stay within the airline’s own system, at least for the low-cost airlines.

Not game over

There is no doubt that new technology will within the next three to five years disrupt the communication and distribution between the airlines and its customers, but it is not game over for the current systems, says Travelport. Its global head of products and marketing for air commerce, Ian Heywood, was very clear in his views at the CAPA Summit in Dublin.

Let’s start with the fact that the current GDS and payment solutions work very well, providing the airlines and its customers with systems that are robust and stable and have performed excellently over an extended period with more than 40 years of constant development. The new and innovative technology is often based on open platforms through API (application programming interface). This new technology has not been tested over a longer period of time and we do not yet know about its robustness versus the systems and technology used by the airlines for decades.

Although Travelport is on the ball as the airline industry evolves, it is utilising its platform to redefine the distribution and merchandising of airlines’ core and ancillary products. This is currently available via the Travelport Merchandising Suite, which enables airlines to distribute their fares and ancillaries in a flexible and targeted way. It is a system that suits low-cost carriers well, as it enables these airlines to publish their fares to Travelport via API connections rather than via the basic fare programming system used by most airlines, ATPCO (Airline Tariff Publishing Company).

Still, Heywood continues, over 60% of the fare revenues by the airlines are transacted through the GDSs (Amadeus, Sabre, Worldspan and others), meaning that only 40% are made directly through the airlines’ own booking system.

Ancillary angle

Looking at ancillary, the picture is quite different, as 87% of this revenue is generated directly from airline.com sites. In 2017, the world’s airlines earned $82.2 trillion from ancillary sales, but airlines could increase these revenues even more. Make it easier for travel agents to sell ancillary products to its customers when booking their travels, which is exactly what Travelport Merchandising Suite can be used for.

This is something our local Travelport staff in the Nordic countries and Baltic states will be more than happy to give detailed information about to the local airlines in this area and showcase the company’s successful projects with easyJet and Delta.

Travelport is the “middleman” between the airlines and its customers (agents, corporates and end consumers) and handles more than 1 trillion transactions per year, generating $54.9 trillion in ticket revenues for its customers worldwide, says Derek Sharp, senior vice president and managing director for air commerce, during the CAPA event.

There will be disruptions coming, but Travelport will maintain its industry-leading and proven technology to support airlines and agents for their future needs. And one thing is for sure – the travel agent will prevail, no doubt about it, regardless of the speed in travel tech, Derek concludes.

Safe systems

The rivalry between established and proven distribution systems and solutions and new technology will be fierce, but during several sessions at the CAPA CEO Summit, where many leading airline CEOs were present in panels, it was clear that new technology is coming and will disrupt.

While many airlines are global players and need to be able to communicate and interact with its counterparts and clients anywhere and always, this requires robust, safe and stable systems. Airlines will not be compromised with new technology that has a lower cost but not up to the required standard for robustness, safety and stability as required by the airlines.

It is more likely that new airlines that emerge will have a different mindset to this and apply innovative technology that suits their needs best and with attractive pricing. The next three to five years will be interesting times for the airline industry worldwide.

This article was first publised 25. May 2018 on www.standbynordic.com