Buoyed by early success with its new distribution strategy, American Airlines is gearing up to remove more fares from legacy GDSs as it expands its NDC capabilities.
That could be bad news for TMCs and leisure travel agencies that have not yet made the commitment to develop NDC capabilities.
“As American keeps removing content out of Edifact, they’ll be in a really tough spot because they won’t be able to compete on offerings,” said Peter Vlitas, president of partner relations for Internova Travel Group, said of those agencies.
In a July 20 earnings call, American chief commercial officer Vasu Raja said the carrier’s push to drive more bookings into direct and NDC channels, and away from traditional GDSs, “has performed probably above what our expectations are.”
The airline, he said, is currently taking in 70% to 75% of revenue from direct and NDC bookings and will accelerate the changes it implemented over the spring. Those changes included pulling approximately 40% of its content from legacy Edifact GDS technology.
“By the end of the year, 100% of what we sell, customers will be able to service online through our app/or our dotcom,” Raja said. “We’ll roll out those features also over time for new distribution technology. But as this happens, we’ll make increasingly less and less of our fare content available through traditional technology.”
American’s earnings report dulled the hopes of any travel advisors who wished the company’s aggressive push away from legacy GDSs had cost it substantially in terms of corporate share and revenue.
During the second quarter, American, Delta and United all improved upon their original revenue guidance per available seat mile, a key industry metric, by 2 to 2.5 percentage points, Cory Garner, a former NDC strategist at American Airlines who now runs the consulting firm Garner, said in a LinkedIn post.
“That means the implementation of American’s strategy in early April created no unexpected harm to American or windfall for its competitors,” Garner wrote. He added that any losses American might have sustained from TMCs and travel agencies booking away from the carrier were offset by the high fares agencies pay for some American bookings when they do use legacy GDSs.
According to Elliott McNamee, director of product marketing for AmTrav (No. 36 on Travel Weekly’s 2023 Power List), since April 3 American has had different prices for NDC-enabled GDS tickets than for Edifact-supported tickets on 36% of domestic fares and 33% of international ones. Price differences have averaged 20% for domestic and 15% for international.
What’s next for travel agencies and AA?
The second quarter, however, might not be the final verdict on the success of American’s strategy.
More telling, said Bloomberg Intelligence aviation industry analyst George Ferguson, will be results from the fourth quarter, a more intensive one for business travel.
ASTA, which has alleged to the DOT that American’s withholding of fares in legacy GDSs is anticompetitive, also said dynamics could change in the fall.
“AA is particularly fortunate to have near-monopoly power in several key markets where it faces little competition,” CEO Zane Kerby said in a statement. “While summertime leisure travelers have picked up the slack and confidence is currently high, the summer will soon end, where we’ll find travelers demanding an open market where they can compare price and service.”
When American does move forward with further content removal from legacy GDSs, agencies that have not yet brought their own NDC capabilities up to speed will be most affected.
Help could be on the way for many companies in the corporate travel space as market leader Concur develops NDC capabilities in its travel booking tool. The company expects to have NDC capabilities ready for Sabre-connected agencies in the fourth quarter and Amadeus-connected agencies in the first quarter of next year.
Vlitas said that Internova is developing a tool that will be available for host agencies affiliated with Internova subsidiary Travel Leaders. Currently in beta testing, the solution will enable Travel Leaders agencies that don’t yet have NDC capabilities to view and book such content from any airline that uses the technology and to have a support team behind them.
Vlitas said that for agencies already NDC-ready, further removal of GDS content by American will be a nonevent.
Still, he added that Internova’s revenue from American and its joint venture partner British Airways is down due to NDC servicing shortcomings, including for family bookings. Every month, said Vlitas, the three GDSs make updates to improve their American NDC implementation.
“But we’re not there yet,” he said.
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