INTERNATIONAL INDUSTRY SOLUTIONS GROUP FORMING TO ADDRESS AIRLINE PRODUCT UNBUNDLING

Updated: 12-11-2009

The Institute of Travel & Meetings (ITM) and Business Travel Coalition (BTC) today announced plans to form an international Industry Solutions Group (ISG) to develop and build consensus around standards and policies for airline product unbundling. Initially, an Industry Position Paper will be presented and debated among Solutions Group members during the Business Travel & Meetings Show in London in February 2010. Members will include corporate travel managers, airlines, global distribution system representatives, airline alliance representatives, travel association executives and other industry stakeholders.

"While the unbundling phenomenon essentially began with no-frills carriers in Europe and across the Atlantic, it has not yet been embraced by the network airlines in Europe anywhere near to the extent as in the U.S. However, European airlines are studying the development with an increased sense of competitive urgency given U.S. carriers' successes," stated ITM Industry Affairs Chairman Chris Reynolds. "As such, before the boomerang comes back to European shores, with all the attendant disruption unbundling is currently causing in the States, the idea is to be proactive and get out in front of this surging industry phenomenon."

This time last year analysts were projecting that unbundling checked baggage fees would be worth $400 million at the industry level in the U.S. on an annualized basis. It's now north of $2 billion and climbing. Add in change-fees and other new ancillary fees and it's over $4 billion in the U.S.; $10 billion globally. Some 150 potential airline or 3rd party services have been identified with estimates that within a few years the total of all these fees collected globally could reach $50 billion on an annualized basis (on a base of $500 billion in global annual airline revenues).

According to ITM and BTC, unbundling has caused significant new complexities and costs as well as obstacles for effectively managing corporate travel programs. The industry got way ahead of itself with unbundling and ancillary fees in terms of not anticipating how far and fast it would spread, and in terms of not having the technology, administrative, accounting and auditing processes and systems in place to manage it. Never has there been an opportunity for such serious bedlam in managed travel. Corporate managed travel is on a certain path toward mass confusion and disruption as momentum builds behind this new industry trend.

"Our immediate focus is to produce a peer-reviewed Industry Position Paper by year's end. We have some 60 experts from industry and academia from around the world who have volunteered to be peer reviewers," said BTC Chairman Kevin Mitchell. "Is airline product unbundling just a short-term financial lifeline for this most beleaguered of industries, or could it possibly represent a new and economically sustainable business model breaking out at the most opportune moment in time for airlines? There is great interest in this subject and there are many questions to be answered. I look forward to working with colleagues from around the world on this important initiative."

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