Tuesday, September 11, 2007

From TR Sept 04, 07 ... Does it matter what kind of navigation system is used if the limiting factor is runway slots? I understand that you can get from Point A to Point B more efficiently, but where are you going to land when you get there?

Eastman's "Off the Wall Comment(s)"

In time, cement and parking gates may be a problem – particularly, if hub-services reinstate themselves as a preferred travel model.

But ATC would alleviate much of the slot-like problems just in managing flow better; coordinating types of equipment, schedules, ground flows, in-flight variances, weather, alternates, etc – i.e. addressing the structure as a whole rather than the current model which is, basically, deal with what’s in your face at the moment sector-by-sector. The present system mandates participation by aircraft that have no need to be there … and can exclude aircraft that do need to be there. The present system tends to channel traffic sequentially through choke-points rather than parallel-flow through dynamic gateways. But fixing ATC without fixing the rest of the system will not solve the problem; it will only shift the focus (blame) in another direction. ATC just happens to be the farthest behind at the moment … and the most easily identifiable target (i.e. – the government).

From TR Sept 06, 07 ... What you say is all technically feasible, but as these things are NOT being done, my question remains valid. The things you propose should be solved before anybody spends a dime on this new equipment.

Eastman's "Off the Wall Comment(s)"

You have the same problem on the ground … with slots (and slot management). The technology exists for ATC to manage airplanes on the ground just as it exists to manage airplanes in the air. If ATC would manage airplanes on the ground more efficiently, it would open up existing space (i.e. slots) even during the “crunch periods” of hubs. The core problem in both cases, at the moment, lies with ATC.

ATC is testing “traffic lights” at runways in San Diego in an effort to better manage planes on the ground – but they’re more to prevent runway incursion than they are to manage flow. Still, the process could be expanded with some coordinating technology (it already exists … would just need to be re-applied).

That is not to say that there airlines themselves couldn’t do more about dealing with these problems as well; internal flow-control, better ground operations, coordinated en route with slot availability management, etc.

But without coordination with ATC and with other airlines, the issue becomes muted by the competitive and marketing needs that carriers believe they must provide in hub sequencing and peak-time departures.

Oh yeah … the issue of “slots management” needs to be broken down into three manageable dimensions – the operational aspects, the marketing aspects, and the political aspects. Today’s slots management is a morass of all three issues … and without a transformation in the management of aircraft on the ground, the subjection issues of marketing and emotional issues of the politics involved will supersede what might be done operationally.

Thus, the answer to your question is a question itself; how do you minimize the marketing and political dimensions enough to allow process-logic to address the operational solution?

Monday, March 26, 2007

WestJet Airlines

From: Ottawa Citizen : 17 May 2006
WestJet Airlines Ltd.'s new reservation system that will link it with U.S. carriers and travel agencies may cost Canada's second-largest airline $40 million, CEO Clive Beddoe said Tuesday. Our partners' investment will be probably double that, and a lot of that is being spent in India with relatively low labor rates," Beddoe said …. WestJet has spent three years to upgrade its existing system with one that could link the Calgary-based carrier with booking systems of other airlines to expand into their networks

From: Market Wire : 22 December 2006

WestJet today announced it has extended its agreement with Navitaire for its OpenSkies reservation system through to December 31, 2008. "This agreement with Navitaire will provide us with an upgraded and supported product in OpenSkies," said Sean Durfy, WestJet's President. "… The aiRES reservation system, owned by IBS and marketed by Travelport, will not be released in spring 2007 as was indicated earlier this year.

From: The Beat ~ a travel business newsletter : 10 January 2007

Canadian carrier WestJet may be forced to write off about $26 million ($30 million CAD) if it fails by May 31 to amend its agreement with Travelport covering the airline's use of the aiRES reservations system developed by IBS Software Services and marketed by Travelport.

Eastman's "Off-the-Wall Comment(s)"© …

How quickly the tide turns.

In the April OTWC … comment dated May 31 … I discussed in some depth the issue confronting airline hosting systems – the past platforms and where the new platforms are headed. That comment was lifted from a thread that originated as part of a discussion of the May 17 WestJet claims to its financial analysts.

In other comments expressed in that thread, I noted …

Ø The project s not only late and over-budget – it is unlikely that WestJet will ever (very important word there – "ever") recover the investment it has made in such a product. Technology is moving too fast and costs are imploding too quickly – for such an all-encompassing investment to be recoverable.

Ø A WestJet strategy of interline and code share would suggest a “going back to the future” approach – which would appear to me as very risky. It would force the airline further into the commodity seat business, inhibit the airline’s ability to sustain its current competitive advantage of quality service at competitive costs, and marginalize yield opportunities with the need to comply with code share partner’s older business process scenarios.

Ø Because one spends more for technology does not mean that the same solution is not available at much lower costs! At 1/10th the price; or even 1/3rd the price – a small and fast growing WestJet competitor can viably compete. More important, technology costs are going to go down month by month! Not year by year – but month by month. Technology is moving that fast.

Ø Even today, various forms of this technology are available from TEG, Radixx, Kinetics, Datalex, and any number of other new technology vendors. It isn’t that the small and/or fast growing airline cannot have this type of technology. It’s that their managements don’t know how or where to look! … I suspect that is what blindsided WestJet. But because WestJet didn’t understand does not mean that WestJet’s competitors will not see it.

The purpose of reconstructing these points made 6-plus months ago is not to say “I told you so” (although there is some satisfaction in that as well) – but rather, it is to introduce a very critical aspect of the thinking process that is virtually institutionalized within senior management(s) of the travel industry … airlines, tour operators, travel agencies, wholesalers, etc.

One has to ask why WestJet initially made the initial decision to move from its already proven innovative OpenSkies hosting environment. OpenSkies was developed by David Neeleman when he was running Morris Air; brought by David to WestJet during his consulting tenure after leaving Southwest; and subsequently used by David when he launched JetBlue. OpenSkies, now owned and marketed by Navitaire, remains the core of the JetBlue hosting environment today.

What sort of management “logic” went into the decision to become a “launch” customer of the aiRes product being marketed by then, Galileo and now, Travelport? As a keen observer of the distribution sector of the travel industry … but a WestJet outsider looking in, just the same … I would posit three major factors led to this decision!

§ GroupThink -- the tendency to make decisions like the people with whom we work most closely.[1]
§ ExpertThink -- the tendency to go along with the tried and true methods of experts.[2]
§ BLT -- or “Be Like Them”; the need to be like somebody else[3]

Most large corporations and certainly all of the large corporate entities in the travel industry – be they airlines, tour operators, or travel agencies – are subject to GroupThink. GroupThink is embedded in the culture of the industry – and solidly locked in place by the long established technology processes that enabled the business to grow and mature over the past 50 years. GroupThink in a start-up evolves when the business hires “industry experienced” staffers to manage and run a rapidly expanding business.

ExpertThink is often spawned by GroupThink. ExpertThink in a business comes about when there is a lack of consensus about how to solve some problem – and the business looks outside of itself to find “experts” in the field that can help. For the most part, those experts are “experts” because they have a long history of implementing or managing the process or problem area as it has existed in the past; of using the “tried and true methods” or “branded products” from the past.

BLT is a two-fold perspective … reflecting the GroupThink mentality of needing to emulate what other “successful” companies in the field are doing; but within the individual(s), the need to be like others. The “Be Like Others” can take on an extended meaning when senior management egos get involved; leading senior leadership to emulate the examples of their peers while lacking either the knowledge or experience to implement a similar solution.

It appears to me that in WestJet’s success and rapid expansion, they recruited experienced staff away from others in the industry. Rather that sustain the GroupThink core that surrounded their start-up efforts, the industry GroupThink quickly prevailed as the airline found itself having to respond to new and quickly evolving challenges.

Industry GroupThink was … and is as I write this … technologically dependent on the historic providers of airline hosting and distribution services – the GDSs. Start-up OpenSkies and its new owner Navitaire became “too small” … “too unresponsive” … “too new an idea” … for the new industry GroupThink values. GroupThink managers wanted something they had experience with and a brand name they could depend on.

This undoubtedly led to a need to “review” the current providers.

As an aside, how many of you reading this far … have been here?

The “review” led to selection of “ExpertThink” consultants … who, in turn, recommended “ExpertThink” solution providers. Galileo was at that time … still a leading “ExpertThink” resource. But Galileo was, in fact, also feeling the pressure to evolve its hosting platform from the prevailing legacy environment serving United Airlines – to something that could compete with the new Amadeus product evolving in Star Alliance. So Galileo-come-Travelport used their ExpertThink podium to “sell” their envisioned aiRes solution being built by IBC using low cost technology resources in India.

And how many of your reading this … have been or are here?

So now enters BLT … at the senior management level. Here’s a start-up carrier that has matured to be a competitive factor in the Canadian market; an airline giving its major competitor Air Canada fits! One of its founding consultants … for all practical purposes, a key implementer of the core business foundation of the airline … David Neeleman; has left to launch the even more successful JetBlue. Yet OpenSkies, a perceived problem by the new GroupThink echelon needing an upgrade or replacement justified by the ExpertThink team, is a remaining “link” to the now ex-consultant. What better way to demonstrate that you can be like him … and create a better technology solution by being innovative like him?

GroupThink wants the change … ExpertThink offers an alternative … and senior management, having either the technology knowledge nor relevant product distribution experience – opts to move down the GroupThink/ExpertThink/BLT path.

Conservatively, the out-of-pocket cost to the airline $30 million dollars in “contract extraction” costs plus the $40 to $60 million already spent to get to this point. And that does not consider (a) lost opportunity, (b) cost to upgrade OpenSkies, (c) redundant or duplicate development costs, (d) wasted staff resources, (e) exposed market risks, (f) deflated moral or lost-confidence by staff, or any of a host of other hidden costs.

Please understand … the picture I paint above is a scenario. It is created as an example – to depict in a close-to-real environment with which most of you can relate.

To WestJet’s credit, management regained control – and appear to be moving down a path more applicable to the air travel product that they offer. Whether its Navitaire or some other new technology solution, the issues of industry GroupThink and industry ExpertThink are at least – now being offset by psychological distance in dealing with the distribution problem; a renewed passion in being WestJet it once was; and paying closer attention to the demands of its travelers in lieu of reconstructing a monument to vendor-controlled channel distribution.

So let me ask you – are you allowing the historic travel industry GroupThink to drive your decisions? When you look for information, do you turn to the traditional industry ExpertThink resources? To what extent do you … or your managers … seek to “one-up” their competitive peers with some incremental growth doing what they are doing?

Now don’t take away from this discussion the premise to explore new digital technologies from other industry distribution channels. The problem with that mindset is that people in other industries do NOT have the knowledge or related experience to be able to accurately assess how to meld the new technologies with the existing business processes of the travel community.

Further, GroupThink is critical to successful growth and evolution of any travel business. But GroupThink needs to be channeled and measured by the goals of the company – NOT by what others in the industry are doing! ExpertThink needs to focus on the goals of the company – NOT on what others in the industry are doing. And managers/management need to free themselves from BLT drivers and focus on independently derived solutions that allow the company to adapt existing core competencies to serve the new demand-driven buyer knowledge tenants that the ubiquitous access to instant information allows.

As I close this set of comment(s) … I remain frustrated and in awe of the vast number of travel industry leaders – individuals, managements, and corporations – that remain inculcated in the processes and thinking of the past; almost immune to what is taking place around them.

The industry is beset by bankruptcy or almost-bankruptcy. For those that have passed through bankruptcy, the recovery plans have come under assault by labor seeking a piece of the “new wealth” … and for that and other embedded business processes, the majority of those quickly find themselves headed back underwater.

Others, carried by reputation and/or brand, continue un-endingly into the financial morass that comes from continue use of people to effect transaction processes that are foisted upon them by the distribution tools of the past.

Many of these companies gloat over their new “classy” front-end GUI web solution – while failing to recognize that the back-office human transaction processing and traditional channel marketing efforts are marginalizing any potential for profit! In fact, for most, effective web marketing tools simply compound the problem – forcing the business to expand their back-office human staffing to deal with the legacy transaction needs of inventory management and financial settlement.

I started this piece with the comment, “The future doesn’t “just happen” … the future is created each day by you and me … by each of us as individuals reacting or responding to the actions or needs of others.” Those “you and me’s” include the people that buy our products … use our services … and come back because the product delivered met or exceeded their expectations.

As noted above, buyers can no longer be “sold” expectations through the vendor-controlled channel distribution solutions of the past. Buyers have access to information … and their own special needs … which, together, become the expectation. The ability to respond to buyer needs with component parts of the buyer’s expectation via the virtual digital world has achieved critical mass – yet few other than Expedia (and more recently Travelocity/Sabre and the new hosting world of Amadeus) have come to recognize what surrounds them. The misguided illusion of the industry’s historic travel distribution GroupThink is less threatening I guess.

[1] “The Innovation Killer” by Cynthia Barton Rabe: Published by AMACOM, a division of American Management Association, International; Copyright 2006 by Cynthia Barton Rabe. www.zerogravitythinker.com
[2] IBID
[3] “Understanding Yourself and Others : An Introduction to Interaction Styles” by Linda V. Berens: Published by Telos Publications; Copyright 2001, 2006 by Linda V Berens, PhD http://www.16types.com/ and http://www.16typesuniversity.com/

From: Rolfe Shellenberger – e-mail of 15 January, 2007 from an ongoing discussion about innovation

What you are really saying, Richard, is that innovation is crucial because all of the past tends to mold with age. Copycats may be rewarded with financial gain from relative inertia, and that has been a prevalent airline pattern ever since deregulation appeared, but "same old, same old" is hardly a winning strategy when so much opportunity exists for changing paradigms. My own perspective is that all events are interrelated. That means technology or any other human endeavor is altering its gestalt all the time; resistance to that force is what generates failure. If you don't pay attention or ignore those "flow" changes, your enterprise is doomed. In marketing anything, you have to create for your selected targets, an artificial vision; what they can expect to see that is different from what they see now. Very few advances have occurred when inertia dominates, as it does today among legacy airlines. Too many marketers are product-oriented rather than sensation-oriented. A case in point is the new airline, ExpressJet, which will operate nonstop between cities that are not hubs of any airline. Just describing that uniqueness may be an attention-getter, but perhaps even more powerful an appeal is that no middle seats are imposed on travelers; in fact 2/3 of seats are window seats and 2/3 are aisle seats. Aha! 4/3 is impossible! No. That is a true statement because on one side of the aisle are rows of 1-seat and 2 seats on the other side of the aisle. Few people buy on factual information; they buy on what is most important to them, e.g., comfort, speed, freedom from hassle, safety, and supplier sensitivity to those issues.

Eastman's "Off-the-Wall Comment(s)"© …

Much of what David Neeleman emulated was taken from Southwest ... by David's own admission. The difference between those that succeed and those that don't has a lot to do with the ability to adapt. History ... business, social, or natural ... is paved with proof that the "big" don't necessarily survive any more than the small necessarily die. Those that survive are those that adapt.

In the airline industry, those that have survived (big and small), have been those with leadership that could and did adapt. Innovation is all about adapting to new needs -- not copying.

Even more relevant – leadership is about not doing what others expect based on what's been done in the past! Most of the financial airline distress of the past few years can be attributed to managements doing what their predecessors or competitors were doing!

<< ... you have to create for your selected targets an artificial vision, what they can expect to see that is different from what they see now. >>

But buried in the middle of Rolfe’s comment is the fundamental crux of the issue. Consider the implementation of the words "... you have to create ... an artificial vision ....

The premise of the vendor creating a vision that induces buyers to select their product is a marketing premise that is not out of date. It originated in the Industrial Age when vendors controlled the channels through which their products were distributed; and airlines were among them. But …

… in this era of digital knowledge ... the buyer already has "the vision" -- whether artificial or not. In this era of ubiquitous access to information, the buyer has already researched and knows what he/she is seeking to purchase -- particularly by the time the buyer is in a state of readiness to purchase (as opposed to the information gathering state).

Getting a sale in this environment is NOT tied to the vendor creating a vision at this point! Rather, getting the sale is dependent on the vendor providing product in virtual time that MEETS the already conceived vision of the buyer.

In this era of digital information, the “selling” process needs to evolve during the buyer’s information gathering mode; whether that information-gather state takes place during the 10 minutes prior to creating the booking; or takes place over two to three months of pre-planning (and pre-planning is just as important to corporate travel buyers/packagers as it is to the leisure traveler).

Marketing ... or that part of selling that precedes the actual consummation of the sale ... must walk the fine balance of filling in the buyer's vision based on what the buyer already understands ... or will understand ... as a function of his self-acquisition of the related knowledge. This is a far different focus from the legacy mind-set of "creating a vision for your target prospects." In the latter, the vendor creates the vision ... in the former, the vision is created by the buyer from multiple sources and the vendor must fulfill that buyer's vision. They are almost diametrically opposed human processes.

The initial paragraph reflects on the fact that those who survive are those that adapt best. Adaptation is just that ... adapting to new demands and expectations from buyers. In the airline business ... as in other sectors of the travel business … or in the computer business ... there are new ideas all the time. But new ideas only become innovation when they achieve the critical mass of acceptance by the users/buyers at acceptable costs.

Equally important, a successful single innovation invariably drives secondary innovations built on the first. Over time, as acceptance becomes critical mass, innovation becomes "standard" ... the ideas for growing the innovation become increasingly marginalized within the boundaries of the process itself as person-after-person; company-after-company emulates the new paradigm with incremental improvements. It's sort of like jumping half way to the end of a log; each time the half-way jump becomes smaller until ... at some point in time, to jump 1/2 way topples one over the end of the log.

The legacy airline industry and their channel distribution outlets has been jumping half-way to the end of the log for the better part of 40 years. More recently, new “incremental innovations” have failed because the legacy information systems inhibited balanced communication or completion-of-transaction of the new innovation. The core hosting platforms have been unable to adapt; and the traditional retail outlets and intermediaries have been reluctant to restructure their processes at the risk of being wrong. Essentially, they have failed to adapt.

Instead, the industry and its analysts continue to measure themselves and managements by criteria established in the legacy processes that are now, largely 40 years old. The start-up air carriers and the new online digital packager/outlets have innovated adaptive models independent of those processes … and they continue to expand market share and generally derive profits at the expense of the carriers or traditional distribution channel structures that are NOT adapting.

What the new carriers are accommodating (i.e. adapting to) ... and the legacy carriers are failing to accommodate ... is the newly acquired power of informed knowledge-driven buyers.

In the Production Era, producers (read airlines using classic hosting platforms, brick-and-mortar agencies with people “packaging” customer travel plans, tour packagers bound to legacy business technology platforms, etc) use to control the flow of information and thus, controlled the decision-making process of buyers. That business environment is disappearing … rapidly.

Today’s knowledge-driven buyer’s access to information allows competitive decision-making in the buyer’s head. While the production-era airline/producers must still inform, they can no longer control the information flow through their production channels. Information has become ubiquitous -- both in distribution of product information AND in information pertaining to production of product. Buyers need/expect to be able to interactively pick-and-chose from a myriad of same-time/same-place alternatives.

Airlines and digital packagers that are the most profitable are those that have both allowed the product they offer to be adapted to meet buyer demands ... and have adapted new information business models to accurately educate buyers as to what is and is not available to meet different buyer’s needs or expectations.

Those are marketing and selling criteria far different from the legacy model of “creating a vision” in the buyers mind at the point of sale.

In short, what gets incentivized is based on what is measured by management; so what is measured becomes critical to any company's future. Airlines, travel agencies, tour operators, or wholesalers that measure based on the past models are at risk. Innovation is derived by measuring against the needs and demands of buyers searching solutions … and adapting the business process in real time to serve what each “measurement” identifies. Technology tools and business processes that integrate fractional or component travel parts are what enable adaptation and instant flexibility.
As reflected in the strategic discussion of Amadeus, Sabre, and Expedia above, intermediary vendors and outlet service providers that are not headed down one of these paths at full speed are destined to the dust-heap of travel providers. Critical mass has been attained as reflected in the Expedia, JetBlue, Air Canada, and now impending EU CRS ruling examples noted above. There is no going back!

From: Jack Keady : e-mail of 23 January, 2007

In referencing the document that follows his query : Note – following the headline, only the second paragraph of the advisory document is quoted[1]

Richard - in plain terms, how are the big GDS's planning to screw the consumer? -- jk

Business Travel Collation European Advisory : 23 January, 2007
Sweeping New Airline Distribution Changes Would Imperil Travel Management

Based upon BTC sources and research, some airlines in Europe are planning to unveil proposals to shift distribution costs swiftly and surely to end customers and fragment content in the near term, and completely marginalize trusted players in business travel distribution in the longer term. What's more, these airlines have done minimal outreach to the industry and to business travelers to explain their intended moves. Indications are that new programmes will be announced with little or no discussion and with little or no lead time. Unless the industry demands its seat at the table soon, these unilateral reforms will become a dangerous reality.

Eastman's "Off-the-Wall Comment(s)"© …

Jack … In my view, BTC is a very invigorating participant in the business travel sector of aviation; but unfortunately, in this particular aspect <<>>, its members appear to be living in a world of the past.

In times past, the airlines owned the distribution systems; as did all major manufacturers during the Industrial Age (i.e., the 1900’s for the most part). In the beginning, the airlines owned the distribution systems because it was the only way to efficiently and effectively distribute their product (i.e. seats between A and B). Over time, the airlines begin to use their distribution tools for competitive advantage … initially, against their direct competitors … and ultimately … against indirect competitors (i.e. airlines that did not have like distribution solutions). CRS rules were created in the mid 80’s and early 90’s to effectively neutralize or negate these competitive advantages.

Subsequently, the ubiquitous natures of the Internet begin to impact the vendor-controlled nature of the distribution system in the early to mid 1990’s. The distribution channels begin to disintegrate as consolidators and tour wholesalers offered their distressed inventory in the “open market” made available by Internet. Ultimately the airlines found that they could not be in both the “airline seat” AND “digital transaction” businesses at the same time – and the airlines begin divesting themselves of the digital transaction side of their businesses.

BTC leadership is comprised of long-time big-budget corporate travel managers … products of the vendor-controlled distribution era. They derived all of their experience and skills finding ways to use their “bulk buying” power base for their personal (and sometimes, corporate) benefit(s).

As demand-driven Internet distribution evolved and continues to evolve … these former travel “power brokers” begin … and continue … to lose their power and control. More importantly, they do not seem to understand what is happening in travel distribution arena; most likely because they have no past experience upon which to draw reference.

To answer your question directly … the GDSs are not planning to screw anybody.

In fact, with the exception of Sabre, the other traditional U.S. GDSs are unlikely to survive another 10 years! They are, individually and collectively, fighting for their very lives! Last month’s OTWC discusses how the merger/acquisition of Worldspan by Galileo/Travelport is a defensive tactic … two “falling-behind” giants seeking to combine assets to lower costs through consolidating back-office work processes. Both are losing market share and customer base. How the heck do companies losing money intentionally “screw” the customers upon which their very existence is dependent?

Sabre SOLD its airline inventory hosting software base to EDS … in order to fund a NEW contemporary Internet-based distribution technology platform. It has been five years developing this product … and that product is now coming online. But if the other U.S. GDSs are fighting for survival, who is Sabre competing with? Not Worldspan. Not Galileo. Not even Amadeus (more on that below). No … Sabre is competing with Expedia! It’s Expedia that has evolved into what is effectively a GDS power-broker in the travel distribution sector.

Amadeus is not a threat to Sabre (or Expedia) because about the same time Sabre started building their interactive distribution platform, Amadeus identified and moved down a very different strategic path. Because of the strong European base (in ownership, retail outlets, government control, and most importantly, culture) … when Amadeus came to recognize the power of Internet, it reverted back to its inventory hosting origins – and built (and continues to build) an Internet compatible inventory hosting platform! Amadeus build its core to serve the vendor airlines (i.e. one world and subsequently, Star Alliance). Amadeus has created a platform that can offer airline product through any Internet portal or venue that the VENDOR wants to participate in.

Thus, Amadeus reverted to inventory hosting/management … while Sabre moved to embrace the manifestations of a knowledge-driven Internet world of distribution integration.

Galileo/Travelport (who also owns Orbitz … a fading star) and Worldspan (who originally controlled Expedia’s access to the airlines but is now involved in embittered legal battles with Expedia and others as it desperately tries to hold onto its Internet switching business) have become also-rans in the travel distribution paradigm.

The past is gone! The vendor-controlled distribution channel King is dead. Long live the NEW King! That new King is demand-driven abilities to respond to buyers coming from an infinite number of digital sources.

Some of the traits of the demand-driven paradigm are that buyers share in the cost of obtaining the information they seek. After all, who pays for your access to the Internet? Who bought the software that lets you access the Internet? In the past, those were all costs and processes and software provided by, originally, the airlines themselves … and subsequently, the vendor-controlled channel intermediary GDSs,

Another trait of demand-driven distribution is that anybody from anywhere with access to the Internet and/or digital intermediaries packaging or serving the travel industry – can demand and expect to get the “package” and/or “price” and/or “service(s)” that they are willing to pay for. Anybody from anyplace at any time. The vendor-controlled model of the past mandated access through agents … agents that were certified by vendor-owned intermediaries; agents compensated by the vendors; agents that steered buyer decisions; agents that only worked at certain hours and on certain days, etc., etc., etc. That’s not “anybody from anyplace at anytime.”

Now consider this almost emotionally dire warning from BTC … << … some airlines in Europe are planning to unveil proposals to shift distribution costs swiftly and surely to end customers and fragment content in the near term … >>. Isn’t that just exactly what I just described is already happening throughout the travel distribution model?

European carriers are leading the charge at the moment because Amadeus reverted to become a vendor-hosting platform with the tools that serve all of these demand-driven expectations.

Concurrently, for whatever it counts, Sabre has evolved a platform that will allow it to compete at the buyer end by enabling buyers to cost-effectively access whatever fragmented content they seek, can find relevant to their need, and/or do NOT want to pay for or use! Sabre’s new platform is directly competitive with Expedia’s; and even their revenue models are beginning to look similar.

But the key driver is fragmentation! The ability to access and/or provide whatever element of a travel package the buyer seeks and/or is willing/able to pay for! Fragmented content is what interactive packaging is all about. Fragments, when viewed from another perspective, are nothing other than components. Components are at the core of interactive packaging; assembling in real time the various components that a buyer seeks in his particular travel package. It is toward interactive component packaging that both Sabre and Expedia are headed – just as Amadeus has built the platform to respond to those component or fragmented interactive demands of buyers.

This is NOT a new concept to readers of OTWCs! OTWC has been identifying this trend and elements thereof, for the better part of five years. It became very obvious when the newly independent GDSs entities begin to structure their distinct strategies as they were weaned from airline controls. Amadeus and Sabre’s strategies seem to have worked … while Galileo (now Travelport) and Worldspan, although having intermittent spurts, have fallen behind. But back to the BTC issue.

In my view, BTC seems to be creating a hullabaloo about the inevitable. BTC travel managers are, in fact, threatened by fragmentation because it does change their cost base – and more importantly, dilutes their brokering power with the vendors! These corporate travel managers are losing power as a result.

A year ago, there was a furor over changes to the U.S. GDS regulations. Now, the EU appears to be about to emulate, in their own way, similar changes. The advisory is attempting to “rally the European travel mangers” under the guise of fear.

But it is really fear of the unknown … fear of change … fear of loss of power. These fears are not unlike the fears that Unions advocate when confronted with changes brought about by technology or other cost-saving innovation.

Unfortunately, BTC and the corporate travel managers are fighting the inevitable … like agents trying to stave off e-tickets or Internet booking solutions. BTC and this group of travel managers would be better off spending their monies in building the tools and the business structures that will enable them to take advantage of the fractionalization and re-structuring of the travel distribution process now well under way.

Examples abound, including … Air Canada’s restructuring both its product offerings and its distribution channels when the traditional channels could not accommodate the new Air Canada pricing (another thorn in the side of BTC) … Expedia’s decision to not offer American Airline products through the Worldspan channel because those product offerings were incomplete or incurred costs to Expedia’s buyers that were greater than the buyers could get through other channels and/or expected to pay … JetBlue’s recent decision to integrate selected cruise product offerings on its web site to enable buyers to get air/cruise pricings not available elsewhere; a classic example of fractionalized components being integrated to enhance specific value.
Fractionalized travel product and packaging is the trend of the future … and it is essential that both vendors and intermediaries evolve the tools to deal with and varied demands and expectation of buyers. In the process of this transition, the traditional power structures of buying and selling will be re-constituted. Travel agents, corporate or leisure, are not going to go away – but their role of controlling transactions and channeling business as a function of the vendor- controlled distribution structure is now on a very short leash! People and businesses in those roles need to very quickly reassess their futures! The clock is now ticking!

[1] Many european based OTWC readers will have received this document on 23 January. My copy is available on request; or a copy can be requested from BTC by e-mailing mitchel@businesstravelcoalitian.com. The advisory is not yet posted on the BTC web site, but a .pdf document entitled “Rumblings in Brussels” seems to address the BTC concern and can be retrieved at http://businesstravelcoalition.com/statements/144.html