Friday, May 05, 2006

Air Canada and Alternative Distribution

Early this week Air Canada announced that no-frills Tango fares would be available exclusively through, not through any of the GDS. This announcement is very significant in terms of the evolving world of travel distribution as well as the ongoing debate of GDS vs GNE. From a supplier's perspective distribution must provide low cost (something very clear to everyone in the industry) but also added value. In prior blog entries I discussed the need for airlines to implement channel management strategies which provide different pricing to different channels. I also have voiced my opinion over the last 2 years, the GDS vs GNE debate is not only about price, but also about the underlying technology. Air Canada is offering discounts of $8 one way or $16 roundtrip on Tango fares if travelers "opt out" of checking bags or changing their itineraries. The bottom line is that the GDS cannot handles this type of creative pricing based on customer preferences. Thus we've now witnessed a concrete example of how the legacy GDS environment is incapable of flexible pricing that matches creative channel distribution. I anticipate a lot more innovative pricing to emerge over the next two years exposing some of the inflexibility of the primarily mainframe-based GDS and demonstrating the true value of the GNEs. I am hopeful that the GDS will continue to offload functions from their mainframe to lower costs and provide a more flexible server technology, but until the core passenger name record (PNR) is de-coupled from the transaction system, true customer specific pricing will not be possible.