PIL Against Air India For Arbitrary Decision On Booking And Distribution Systems

Picture Courtesy: airindia.in/

Ratan Luth a Nasik based frequent flyer has filed a PIL in the Bombay High Court to protest the arbitrary step that the national carrier Air India is insistent on taking with regards to its booking and distribution systems. The matter comes up for hearing tomorrow. The petitioner contends that the financially distressed carrier is playing with its business of sales and marketing by creating a monopoly as it is looking to align with only one Global Distribution Partner (GDS).

The PIL comes in the wake of demonstrations and protests by travel agents outside Air India offices in Gujarat and Madhya Pradesh and nationwide coverage in the press, expressing displeasure and absolute unacceptance of this decision. Reputed associations like Travel Agents Association of India, Travel Agents Federation of India and the Air Passengers Associations of India have expressed their solidarity against this decision and have written to the CMD of Air India as also other higher authorities to stop this from taking place. Ratan Luth also previously wrote a letter to Air India CMD informing him of the problems.

There are three major Global Distribution Systems in India and globally – Amadeus, Sabre and Travelport. GDS Partner Companies have different market shares based on their individual reach, technology, various value services and benefits. Amadeus is the market leader, with more than 400 airlines distributed via their platform and its Market cap is around 34 Billion USD. Sabre has a market cap of around 6 Billion USD.

Both Sabre and Amadeus control around 83% of global market share of all ticketing bookings. Travelport is, therefore, the smallest of the three, with less than 17% of the market share of all global transactions and a market cap of less than 2 Billion USD. In comparison, Amadeus is almost 17 times the size of Travelport. Then why this exclusivity by Air India?

The reason given by Air India management is that the deal will help them reduce distribution cost by almost 60%. Unlike LCC, full-service Airlines like Air India, Jet Airways have to rely on GDS providers like Amadeus, Travelport and Sabre for sale of tickets in India and abroad. The GDS provider collects a segment of fee for every booking and shares a portion with the travel agent. By restricting GDS to only one provider, it might reduce costs but, will reduce the catchment area of passengers to only members of that GDS. Travelport has only 20% of global and 30% of the domestic market.

Overall more than 50% bookings happen on the Amadeus system used by a vast majority of travel agents, which generate revenue in excess of INR 6000 crores which Air India will risk losing out on by limiting its distribution to Travelport. Out of 28 Start Alliance member airlines, approximately 20 are hosted on Amadeus Passenger Services System (PSS) using their connectivity to sell Air India inventory. None of these star alliance partners are hosted on travel port. Therefore by awarding the GDS contract to Travelport, Air India’s partner airlines stand to lose at least INR 100 crores annually.

It is believed, that this decision by Air India to shift exclusively to a single Global Distribution Service platform, was opposed by its previous Chairman and Managing Director and Commercial Director. The opposition came on the ground that the shifting to a single platform may curtail the airline’s market reach leading to loss of booking.

In fact, the Travel Agents Association of India (TAAI) – a lobby group of travel agents have also objected to Air India’s decision to select a single GDS service provider as it will hurt their revenue. Agents earn incentives from service providers and the airline’s decision will hit them hard. It will also disconnect about 18 codeshare partners and over 100 interline partners. It will also lead to loss of business from Star Alliance Partners, a membership that Air India got with difficulty. Further, it will exclude Air India from large global online players like Expedia, Odigeo, Egencia and others as they do not work with Travelport. It is also understood that GDS companies have proposed alternative strategies with reduced costs to avoid this exclusivity by Air India.

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About the Author

Deepak Sahijwala