Airline Product Unbundling Principles & Standards

PRINCIPLE #1
Airline product unbundling initiatives should assure full consumer awareness and choice.

Standard: Airlines should ensure that all airfares, along with unbundled products and their associated costs, as well as any new types of bundled offerings with included components, be made available through industry distribution providers in which the airline participates in a manner that enables transparent, easy-to-understand and comparative displays along with offerings from other airlines, so as not to prevent consumers from having  complete and accurate information at an early stage of the shopping and booking process. 

PRINCIPLE #2
Airline unbundling initiatives should reinforce and not undercut the value of TMCs’ or corporations’ contracts with those airlines

Standard: Airlines should not alter mutually agreed contractual principles in terms of discounts, commissions or other negotiated benefits based on the TMC’s or corporation’s use of any particular distribution channel so long as that industry distribution provider is one in which an airline participates to sell its products and services.  

PRINCIPLE #3
Airline should make available their unbundling initiatives in a manner that does not discriminate against a TMC or corporation based on a TMC’s or corporation’s choice of reservations or fulfillment processes that best meet its needs.

Standard: Airlines should not withhold content or otherwise discriminate against TMCs or corporations with respect to access to airfares or discounts, including unbundled products and services or new types of bundles offerings, based upon the TMC’s or corporation’s choice to obtain such access through any industry  distribution provider in which the airline participates.

PRINCIPLE #4
Airline unbundling initiatives should be made available in a manner that increases or at least maintains the efficiencies of the prevailing travel procurement processes utilized by TMCs or corporations

Standard: Airlines should commit at the CEO level to work cooperatively, diligently and in good faith with distribution system providers, travel management companies and corporate travel managers to develop solutions to address existing and potential new challenges related to efficient procurement (from shopping to booking to consumption to reporting) of airline ancillary items and product bundles - including cooperation in development of and adherence to industry-wide technical solutions.

PRINCIPLE #5
Airline unbundling initiatives should avoid economic models that create a classic “free-rider(1)” problem wherein an airline has no incentive to use merchandizing and distribution services efficiently or economically because corporations shoulder the cost.  

Standard: Airlines that choose to introduce new merchandizing initiatives in order to increase revenue should be responsible for the costs of making those offerings available to corporations that buy those services, and to the TMCs upon whose services those corporations rely - and upon whom airlines rely to sell and service their products. 

 

(1) MORE ABOUT FREE RIDER
If airlines get GDS services for free, then economists will tell you that you have created a classic free-rider problem in which the user of the services has no incentive to do so efficiently or economically because someone else bears the freight.  The concept is simple.  Anyone who consumes a service that is paid for by someone else has the inherent incentive to over-indulge.  Airlines themselves recognize this in their business model, which is why they assess a hefty service fee every time consumers using all but the highest priced tickets make a change.

Examples of how an airline might “over-indulge” in GDS services if the tab is paid for by corporations could be helpful.  Two examples:

a. Today, airlines have a disincentive to make very frequent schedule changes because each time they do, they generate a cancel and a rebook in the GDS, both of which result in an added charge to the airline as both transactions drive added DP costs in the GDS – as well as added costs for the travel agency who must notify the client.  If GDS participation is free to the airline, why would airlines not engage in more schedule change churn to respond to “maximize” fleet utilization?

b. More globally, an airline that knows the corporation pays the GDS bill will have no disincentive to demand from the GDS added functionality the carrier may want – like more ability to merchandise and sell unbundled products to corporations, like pre-reserved or special seating for a fee, often in an ad hoc non-standardized way, because for the airline, “price is no object.”