Airlines admit that in the light of recent changes in the industry, managing the diversity of distribution channels has become a tough balancing act.

Published: 19 Feb 2009

Airlines admit that in the light of recent changes in the industry, managing the diversity of distribution channels has become a tough balancing act.

Cost structures are tightening and it has become quite difficult for airlines to simply distribute commissions and rewards for services delivered by partners.

Assessing the situation from Travelport GDS' perspective, its commercial director for Asia, George Harb says in the face of global recession that is showing no signs of recovery anytime soon, there is a limit as to how much more cost cutting measures an airline can undertake.

"Reducing commissions and rewards aside, airlines these days are focusing on generating higher revenue per passenger booked and getting ancillary revenues through bundling, upselling and merchandising," Harb told EyeforTravel.com's Ritesh Gupta.

"Moving forward, airlines may even consider rewarding travel agents which can help them to up-sell and cross-sell these services upon booking; thus, generating higher revenue to both airlines and travel agents. I believe that Travelport is poised to enable such a shift through the launch of our new Universal Desktop solution, which will equip agents with the ability to provide such ancillary services to their customers," added Harb, who is scheduled to speak during EyeforTravel's Travel Distribution Summit Asia 2009 to be held in Singapore (1-2 April).

Everything has become visible for everyone; restricting a fare to a select group has become challenging, and therefore differentiation is now being made through fees, commissions and incentives.

While fares are identical, low cost distribution channels link with lower fees, higher cost distribution channels imperatively link with lower commissions and incentives.

Commenting on the role of GDS going forward in this context, Harb said, "As it becomes increasingly important for companies to focus on maximising revenue through each distribution channel, the role of GDSs moving forward will be to help suppliers and agents make the most of every revenue opportunity. For Travelport, this will mean providing agents with the means to book ancillary services as well as offering suppliers merchandising opportunities. The new Universal Desktop solution is one such solution which aims to achieve these objectives."

The traditional gap between online-direct and other channels is becoming smaller as new business models, such as meta-search engines, are proving to be increasingly successful.

On the best way to approach such expenditure, Harb said, there will always be customer segments which cannot be effectively served via online channels.

"Every distribution channel brings a different set of value propositions to the table. When considering the best way to approach such expenditure, cost is only one side of the equation. Yield is probably more important especially when there is limited opportunity to lower costs further to remain viable," pointed out Harb.

"While meta-search engines may be useful in generating volume, especially price-sensitive traffic in times of recession, they tend to generate low yield transactions where margins are tight or even non-existent," according to Harb.

"Furthermore, there will always be the more lucrative, higher-yielding business segment which continues to choose TMCs to manage their travel needs," said Harb, who is scheduled to present during `Distribution using unorthodox and innovative methods' session, to be held as part of Distribution & Sales conference of EyeforTravel's Travel Distribution Summit Asia 2009, to be held in Singapore (1-2 April).

For more information, click here: http://events.eyefortravel.com/tdsasia/conference/agenda.asp

Or Contact:

Reece Gladstone at reece@eyefortravel.com