JetBlue reconsiders participation in GDSs
By Michele McDonald
Travel Technology Update, June 2006
JetBlue Airways is “looking seriously” at GDS participation, according to David Neeleman, chairman and chief executive officer.
At the Merrill Lynch Global Transportation Conference, Neeleman said the airline was missing out on business by not being in corporate travel departments’ booking systems.
He acknowledged that when JetBlue participated in Sabre, the average fares booked through the GDS were higher than those booked directly with the airline. “The GDSs are very competitive and very, very aggressive, so it makes a lot of sense for them to come to us,” he said. Neeleman said the airline was not interested in working with online travel agencies.
“That’s our market,” he said. “If 80% of our business is coming to us on the Web, why would we go into Expedia, Travelocity or Orbitz?”
JetBlue participated in Sabre at the Basic Booking Request level – the lowest available – but withdrew from the GDS at the end of 2004.
Southwest, which also participates in Sabre at the Basic Booking Request level, also recently indicated it would entertain additional participation if the right deal presented itself.
But while the price of participation is an issue, Southwest also is concerned about control over how its inventory is displayed, a factor that also has kept it out of online travel agencies. GDSs “always approach us on the cost issue but forget the control side,” Kevin Krone, vice president of interactive marketing.
Meanwhile, 70% of Southwest’s bookings are made via southwest.com, chief executive officer Gary Kelly told attendees at the Merrill Lynch conference.
In other highlights of the conference: ￏ Jeff Misner, executive vice president and chief financial officer of Continental Airlines, said sales on continental.com have grown from 28.% of the carrier’s bookings in first quarter 2005 to 57.6% in first quarter 2006. “But it’s not the only channel we’re focusing on,” he said. “Our emphasis is not to drive everybody to a cheap channel, but to an appropriate channel.”
For example, he said “we’re fine with travel agencies” because they produce higher-yield tickets. As for GDS fees, he said, “we’re making good progress in bringing that cost down.”
Overall, Continental’s distribution costs as a percentage of passenger revenue have decreased from 7.5% in 2002, the year in which base travel agency commissions were eliminated, to 5.7% in 2005.
Sam Gilliland, chairman and chief executive officer of Sabre Holdings Corp., said Sabre Travel Network’s new contracts with airlines ensure that “if we indicate we are providing full content, that’s exactly what it is.” “In our DCA-3 contracts, we had in essence what we would call full-content agreements, but I think there were cases where you could say the definition wasn’t as strong as we liked,” Gilliland said.
In conjunction with the new airline contracts, Sabre is offering travel agency subscribers the option of access to full content in exchange for reduced incentive payments.
Because Sabre is developing “new economic relationships with our travel agency customers, we had to be careful as we’ve structured our new [airline] agreements” to ensure that full content means exactly that, Gilliland said.