Are legacy carriers are shackled to the GDS?
Published: 18 Mar 2008
TDS Asia 2008 Special: Interview with Simon Nowroz, Travelport
Low cost carriers are growing rapidly in Asia. But full service airlines, too, are responding on their part by revamping operations and offering lower fares to compete with the LCCs. In addition, some of the established airlines have introduced their own LCCs.
Assessing the battle between the two and sharing a GDS perspective, Simon Nowroz, Managing Director for Asia, Travelport says the company makes sure it caters for its customer segment needs by providing full content carrier fares. At the same time, the number of low cost carriers participating in its GDS is growing. Travelport also provides low cost carrier solutions i.e. Galileo Flight Integrator in Asia and Galileo Low Cost Air in the Pacific, which capture web fares outside the GDS and compares them with GDS fares on a single display giving customer segments the choice and variety they deserve.
"In Asia we have seen new low-cost terminals and airports in cities like Singapore and Kuala Lumpur built to cater for the ever growing number of low cost carriers. At the same time, legacy carriers are not standing still and cannot be underestimated. In Asia, legacy carrier loads factors are increasing, and these same carriers are adding new routes and capacity, as well as buying new aircraft (Emirates, CX) to cater to the surging demand, not to mention the impressive Singapore A380. By catering to two different markets, the LCCs and legacy carriers have a bright future ahead," Nowroz told EyeforTravel.com's Ritesh Gupta.
Nowroz shared his viewpoint about the role of GDS, distribution in Asian market and much more. Excerpts:
Ritesh Gupta: GDSs have expanded with new tools to include new content, such as LCC, merchant hotels, etc. How do you envision the role of GDS going forward?
Simon Nowroz: Airlines are changing how they sell. The travel distribution market needs to keep pace with this. The challenge for GDS companies is how to enable airlines to sell in the way they wish to sell to agents. An example of how we have done this is with Air Canada where we announced a multi-year agreement for a revolutionary graphical agency desktop solution that provides Galileo-connected Canadian travel agents with access to the full range and attributes of Air Canada's innovative à-la-carte fare products and Flight Passes.
Airlines recognise that third party distribution through GDSs and travel agents are still vital links in the travel chain and they need to continue working with these distributors to offer choice to their travellers. The Low Cost Carriers will continue to embrace the GDS worldwide. Many are now reporting back on the success they have enjoyed distributing through the GDS channel.
For us, we have positioned ourselves to offer best of breed to our agency partners and suppliers by acquiring the GDS Worldspan to form Travelport GDS which consists of both the Worldspan and Galileo GDS's. We can now provide our customers with combined resources (expanded content and global reach) and extended supplier relationships.
BCD Travel Whitepaper commented that only 15 % of all managed travel transactions are booked outside of the GDS today. We believe that GDSs are necessary for global reach and because of the depth, breadth and richness of content we offer from LCCs to legacy carriers, from the global hotel chains to the independent properties, from car hire companies to rail and ferry companies to travel insurance companies. We also help TMCs and OTMs with the provision of content.
With a global footprint such as Travelport GDS, economies of scale are gained. We are responsible for 1.1billion transactions per day and over 410 million bookings per annum.
Ritesh Gupta: Considering Asia's diversity and geographically huge structure, managing scale-to-scale differences in maturity across the region, while changing the distribution channel mix is among the major issues for the travel distribution business in the region. How do you assess the situation from your perspective?
Simon Nowroz: Travelport has always been sensitive to the diversity of the different markets in which we operate. In some domestic markets there is a high demand for LCCs and in others they desire information on destination tourism. We have provided the content for all these different markets from LCCs to legacy carriers, from low cost hotels to established chains. This has been made possible through our successful relationships with a wealth of suppliers globally.
We also have differences in distribution channels ie online bookings, direct supplier bookings, travel agents shop fronts and travel management companies. The prevalence and influence of channel types differ in each region, so Travelport GDS has evolved to assist our customers where for example in India and Taiwan where the online market is booming, we are offering Galileo Web Services to enable agencies to market online with our content offerings.
Ritesh Gupta: Not every airline can operate in a direct to market model. But still do you think legacy carriers have shackled themselves to the more traditional distribution channels and even as hard as they try to extradite themselves to bring their distribution costs down they cannot do without the 'brick and mortar' travel agencies?
Simon Nowroz: An increasing number of airlines are choosing to sign up to participate in the GDS. Airlines need a mixture of sales channels to reach both leisure and business travelers and we have seen bookings on airline.com sites begin to plateau.
I do not view legacy carriers are shackled to the GDS. The GDSs add tremendous value and are recognised by carriers as a vital link in the travel distribution chain. We are continuingly evolving our business to remain relevant with the provision of solutions which increase efficiencies, grow revenue and help make our agents life easier in an environment with increasing competition and reduced commissions.
Travel vendors, in particular airlines, have always had in place a direct sales model with their city ticket offices and call centres. These remain a part of the overall distribution mix along with GDSs and travel agents. As the travel distribution has changed with new technology and consumers looking to book online, industry suppliers and providers have adapted their marketing strategy to develop their own websites to serve this part of the market. Airline websites now offer user friendly, self service options while at the same time, becoming more market savvy and deploying sophisticated marketing tactics to sell seats directly.
Ritesh Gupta: Do you think we need to understand that travelers are not a LCC customer or a traditional customer, but rather the modern traveler who mixes and matches based upon the requirements for that journey and their perception of the value of the product on offer. In this context, how do you think airlines need to approach their distribution going forward?
Simon Nowroz: With the growth of the Internet, our traveler is becoming more discerning and demands choice. It is therefore very important that airlines, supplier and travel agents understand the psychographics and the demographics of their customer in order to implement CRM strategies to meet their specific needs. Travelport offers mid/back office systems like Cross Check Travel which have CRM capability to enable agencies to organise and group data about customers and segment them accordingly.
Travelport also offers airlines and suppliers various means to communicate with their customers; through merchandising, partner marketing opportunities as well as through ancillary sales programs.
Ritesh Gupta: Since travel is an emotional buy, relationships are important ~ how to get the Hybrid mix right?
Simon Nowroz: Geographical differences need to be taken into account here. In UK, the online channel is expected to comprise 48% of the overall market in 2008, but growth rates are projected to settle into the 20% range. In contrast, Chinese will research hospitality information online but still use travel agents for bookings. Japan is the region's largest travel market but one of the slower movers. Corporates remain heavily focused on traditional service and relationships with Japanese speaking consultants. In view of these differences, airlines and agencies need to develop targeted CRM and Marketing strategies that help them address these geographic differences.
Ritesh Gupta: Do you think agree that the trend in Asia is following that of Europe and the US to drive more transactions reliably as well as more relevant to the customer. Also, online customer self service functionality is being driven via different communication/technology tools – computers, SMS, PDAs, Kiosks, etc?
Simon Nowroz: Yes there is a relatively high usage of mobile devices and interactive booking tools for travel booking purposes in Asia in early adopter countries like Taiwan, HK and Japan. However in other parts of Asia, there needs to be improvement in infrastructure for this to occur.
Ritesh Gupta: What's on your agenda this year?
Simon Nowroz: Some of our key priorities are realizing and maximising the benefits of our integration with Worldspan which will enable us to roll out our best of breed products from the combined portfolio of Worldspan and Galileo. Rapid Re-price is an example. We will also be focusing on continuing to build supplier and customer relationships, expanding the depth of our content and growing our customer base in growing markets such as China and India.
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tromba said on 18 Mar 08:
Why is any business that is even remotely to the airline industry still asking questions about how to integrate legacy systems? More than a decade ago, it was recognized that the the infrastructure must change from one supporting primarily legacy technology protocols and platforms to one focused on IP-based technologies.
Maybe there is a big piece of the puzzle that I don't see.