ITM REPRESENTATION MEETS WITH EASYJET
ITM and easyJet have started in-depth dialogue about the airline's move to the GDS.
On the 27th February 2008 representatives from ITM and easyJet met to discuss the recent move by the airline to distribute to the corporate market via the GDS with an additional distribution charge (or Point Of Sale Fee). The representatives from ITM included Caroline Strachan (ITM Chairman), Mark Avery (ITM Immediate Past Chair) and Paul Tilstone (ITM Executive Director).
ITM started the dialogue by applauding the airline for understanding the corporate need for effective distribution but by explaining that a number of corporate members had expressed concern and dismay over the GDS fee likely to be passed on to them (approximately £8 per return flight). ITM also expressed disappointment that the decisions taken had been done so without full consultation with the association.
easyJet explained the long process the airline had gone through to get to the decision, which included initial direct research with individual buyers and a round of research, commissioned through ITM Research, to test the concept and elasticity of fee levels. They also explained that their chosen channel to provide content to corporates was via the GDS and the creation of an API (Application Programming Interface), which is essentially a structured data interface that can be used to connect with third parties, such as aggregator distribution systems, TMCs, SBTs and/or the corporates themselves.
In addition, they explained that the fee was set at the present level due to two main factors. Firstly the agreement reached with the GDS's meant that they have to maintain parity of distribution costs across all their channels outside of direct web distribution regardless of customer type. Secondly, in addition to covering the GDS booking fee cost, they wished to take into account the "opportunity cost" of customers not booking direct via the website. This refers to an element of the fee to compensate potential lost revenues from the booking of ancillary products such as insurance, hotels, car hire etc. which may have occurred had the booking gone direct through the website. They also advised that they were listing the GDS fee separately, rather than incorporating it into the fare, as their model was based on transparent pricing.
easyJet was relatively confident of the success of the model because they believe their fares are consistently cheaper than those of other carriers on the same city pair routes, and some fare comparison data was presented to demonstrate this. easyJet also shared its intentions to close off all unauthorised screen scraping solutions used by travel agencies. easyJet hopes that these system providers will engage in a voluntary migration to use the API by signing a License Agreement with formal terms (including POS Fee), but if they refuse then easyJet have advised that legal action will be used to enforce the screen scraping switch off. They believe that this action will ensure the choice of booking through a third party system (GDS or non-GDS) with POS Fee or booking directly at the website to avoid any additional distribution fees.
ITM responded that it acknowledged it had taken a great deal for the airline to move along this route but wanted to highlight the likely impact of their decisions. Firstly the association pointed out that the data presented did not demonstrate that they were necessarily always the cheapest airline on business routes across business passengers, as it incorporated all easyJet travellers. They suggested some independent research be commissioned to demonstrate to corporates whether it was worth incurring additional costs if the overall savings were greater. Secondly, ITM suggested that it was highly unfair to penalise business travel bookers with an "opportunity cost" when they were unlikely to book ancillary products, with the average fare and therefore margin on business traveller fares also being higher than the average booked through their website. Thirdly, ITM suggested that IF the same levels of distribution fees were to be applied to all third party API links, e.g. with corporates and TMCs, then travel managers would not look to create these direct links with the airline as there was even more cost associated with creating the link and yet the same fees remained.
Finally, the association pointed out that the level of the GDS fee was likely to produce the opposite effect to that intended if travellers and bookers were turned off by a separate and relatively high fee added to the fare and TMC booking fee. It could actually drive travellers towards the website or away from the airline altogether.
The association representatives then moved to express their hope that easyJet would take on board the concerns in the near future to adjust the model and the discussion concluded with ITM advising that it will continue to encourage a.) the price to be truly representative of the chosen method of distribution and primarily that this be reflected in any API direct connections and b.) that easyJet commission an independent researched comparison tool to allow corporates to measure the total cost of an easyJet flight against legacy carriers for business travellers (including POS Fee). This is so that a company can truly measure whether promoting easyJet at these fee levels is beneficial to their corporation.
The airline has since continued the dialogue with ITM to explore alternatives to their model and to take into account the points made by the association and wider business travel management community. However, easyJet has made it clear that it needs to allow a proper period of time to measure the success of its current strategy, before implementing any major changes. In particular, they stated that this will involve closing off any unauthorised screen scraping solutions used by travel agencies.
