The Rise of Airline Web Sites

By Derren Joseph
July 05, 2011

Derren JosephWithin the last year, much has been happening in the airline industry. Of specific interest is the decision by one of the world’s largest airlines to take legal action against two of the three largest content distributors. Content distributors, better known as Global Distribution Systems (or GDS) take fares from the airlines to the travel agents (both online and offline players) so that they can be offered for sale to customers like you and I. Specifically, American Airlines (AA) has decided to file a civil antitrust suit against two of the three big GDS’ to stop what AA describes as “exclusionary, anti-consumer and anti-competitive business practices” of the named GDS’s. What does this have to do with us in the Caribbean one may reasonably ask? On the surface, I see three key changes coming if AA has its way and withdraws some of its fares from these GDS’.

Firstly, if AA does what some say it wants to do, and withdraws at least some of its fares from the GDS’, before long other airlines may follow. History shows that AA often leads the industry when it comes to changing the rules of the game. This time however, some argue that AA has little choice. Despite enjoying an 11 per cent increase in revenue in 2010, they still reported a US$471 million loss. To put this in context, Delta made US$1.4 billion and most, if not all of the big publicly traded airlines made a profit in 2010. AA may have little choice but to become more aggressive in driving down cost; and reducing the cost of distributing their fares, is fair game.

Secondly, the way we purchase flights will continue to change. Whether we as consumers book at an online travel agency, or through our friendly brick and mortar travel agent, it may take a bit longer as it would become more difficult for travel agents to see and compare airline fares side by side on a single screen.

Thirdly, the way we promote destinations such as ours will have to change. If airlines have their way, the ability of tour operators and travel agents to influence consumer choice will decline. Airlines would exert increasing control over the buying process for leisure travellers in particular. This would mean that tourist boards, hoteliers and destination management companies will have to strengthen their relationship with airlines.

The above three points are the obvious ones but they just scratch the surface. The real impact will be seen in the way we use the Internet. In the United States, Amazon revolutionised e-commerce. Ryanair did the same in the United Kingdom. In Trinidad and Tobago, Caribbean Airlines will probably take that award as would LIAT in the Eastern Caribbean. What I mean is that for those residents in these respective geographical areas, these identified companies were probably the first ones trusted by the ‘early adopters’. These were the first companies with which the average person would have felt comfortable, taking out their credit cards, and making an online purchase. These were the ones that opened the virtual door.

Today, I am confident in guessing that the Caribbean Airlines Web site is already the biggest Web site in terms of online transactions in Trinidad and Tobago, as would LIAT be in the Eastern Caribbean market. If AA achieves what it seems set to, combined with increasing credit/debit card penetration, the impact would be the continued increase in traffic on airline Web sites in general by consumers. Smart airlines are already leveraging their Web sites to increase revenue by turning them into portals for leisure activity—including ancillaries like tour guide services, event tickets, or hotels.

On the other hand, the increasing popularity of the airline Web sites comes especially at the expense of regular brick and mortar travel agents. This is perhaps the most difficult moment in the history of travel agents as airline commissions fall to zero, and agencies continue to lose those customers who chose to purchase their seats and ancillary products directly from airlines. Travel agencies employ thousands of people locally and many are closing their doors. But there are some travel agencies fighting back using this same Web-based technology to stay ahead of the game—these are the ones to watch. My name is Derren Joseph and I love my country. As always, I end by saying that despite our challenges, we are so blessed to live in this beautiful land. Let us continue to have the audacity of hope in the future of our beloved country.

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