Distribution costs no longer a preoccupation with airlines

Amid the rocketing fuel prices, here’s one silver lining for the airline distribution industry and travel agents – it’s taken the airlines’ eye off distribution costs.

Four to five years ago, distribution costs were the favourite whipping boy of airlines but today it’s slid down the scale to become the fourth or fifth concern of carriers after fuel, labour, technology, credit card fraud and fees.

Gordon Locke, senior vice president, airline strategy, Sabre Airline Solutions/Sabre Travel Network, said it was easy to pick on distribution costs a few years ago because “in the past, all the data and analysis were not fully available – it was a very visible cost curve”.

But now airlines are realising that it’s not a question of beating one channel up, but it’s about having multi-channel distribution.

“Travel agents are not going to go away,” said Locke, who was in Singapore for a brief visit. “In some areas they are growing. Airlines can’t go 100% direct. With indirect channels, you pay as you go. With direct, you pay whether you get a booking or not.”

Some airlines have also realised there are hidden costs to the online channel. For example, John Lonergan, general manager-direct channels of Qantas, said that online had become more about servicing than selling for his airline.

He said there were hidden costs in the online channel and the biggest single cost of sale on Qantas.com.au was call centre charges. “It is better for us not to sell online but to service online.”

Locke said: “Every channel has to be about service and sales. Customers have to be hand-held and treated well by the computer as well.”

With the online channel, Locke said, the focus was now not on cost, but how to capture more customer data.

The shape and form of companies such as Sabre has also had to change with the times. The term “GDS” (Global Distribution System) no longer applies in the strictest sense of the word. “Sabre invented the term,” laughed Locke, “so I guess we have to live with the consequences.”

“We call ourselves Global Distribution Services these days, it’s about multi-channel balance.”

He said that Sabre was investing heavily in the future. “We want to be the company that leads the largest industry in the world in thought leadership and solutions.”

Given Locke’s obsession about how airlines need to deliver a consistent brand experience across all channels, it seemed a logical question to ask when Sabre would bring its brand to Asia, instead of still working through Abacus International, in which it has a 35% stake.

“Abacus is working very well for us. It is part of our business model and it is important for us to provide regional, relevant services. There is no need to put the Sabre stamp on everything.”

• And then, there will be three – catch more of Gordon Locke’s predictions in The Transit Café (www.thetransitcafe.com) this week.

By Yeoh Siew Hoon/Transit Café