The TravelMole Interview: Chris Kroeger, Sabre

GDS booking fees are not unreasonably high, contrary to what some airlines might suggest, according to Sabre EMEA vice president Chris Kroeger (left).

It follows claims by airlines including British Airways and bmi that GDS costs are spiralling out of control. Rival GDS Worldspan has also announced that it is currently reviewing its pricing structure – with its chief executive Paul Blackney warning of disastrous consequences for the sector unless there is radical change.

But Mr Kroeger told TravelMole that he believed that some parties are muddying the water on the issue of GDS fees – for example by claiming that the charge represents an unacceptably high percentage of a low fare ticket. Mr Kroeger points out that if you consider the average ticket price, Sabre fees account for just 2-2.5% of the fare, the same percentage as in 1992.

He told TravelMole: “Our view is that you can’t look at one fare in isolation. If you look at a low price ticket of course the fee is going to represent a higher percentage. But then you could look at a £5,000 ticket and the percentage would be less. But the fact is the average percentage is the same as it was 10 years ago – so the argument that booking fees are spiralling out of control is wrong.”

Mr Kroeger also pointed out that the company performs a number of services to the airlines – such as loading schedules and storing and updating fares – free of charge. Sabre only charges the carrier when a reservation is made and not when the booking is researched.

And according to Mr Kroeger it is wrong for airlines to point to the higher profit margins of the GDS firms compared to the aviation sector and claim this proves that they are charging too much. He told TravelMole: “We are in a different business with different expectations from a shareholder perspective. The appropriate comparison is with other technology companies.”

He added that while he understood that the airlines needed to reduce their costs, Sabre was also going through the same process. “The industry is facing pressures we probably haven’t seen since the Gulf War, but the GDS firms are not immune to those pressures. If you look at Sabre we are half the size that we were 18 months ago. Part of that is due to the deal with EDS but it’s also because of redundancies.”

However Mr Kroeger agreed that there was some scope for a review of pricing which didn’t involve “throwing the baby out with the bath water.”

In the US Sabre has just launched Sabre Corporate Connect which provides a lower priced distribution model for airlines and corporates using the GetThere booking tool. According to Sabre it will save airlines 50% on the booking fee, partly because from January 1 corporates and travel agents who opt for the direct connect solution will not receive incentive payments.

Mr Kroeger added that it was likely to be introduced outside the US sometime in the near future, and was already relevant to airlines with large US corporate clients. He told TravelMole: “Its initial focus from a point of sale approach is the US because that’s where the most discussions on direct connections between corporates and suppliers have taken place. It is one of the new models that we are starting to evolve. It meets a market need and ensures we still play a role.”

See our previous stories:
17 Jun 2002: The TravelMole Interview: Paul Blackney, Worldspan
05 Jun 2002: Worldspan to evaluate new pricing strategies

See previous TravelMole Interviews:
30-Jul-2002: Chris Mottershead, TUI UK
23-Jul-2002: Seamus Conlon, Airtours Holidays
15-Jul-02: David Soskin, cheapflights.co.uk
09-Jul-02: Bruce Bishins, Genesis TDS
01-Jul-02: Howard Frost, Travelink
25-Jun-02: Rob Wortham, RWA
17-Jun-02: Paul Blackney, Worldspan
11-Jun-02: Mark Jones, Online Travel Corporation
27-May-02: Oliver Hillel, UNEP
20-May-02: Keith Webber, Telewest
13-May-02: Mark O’Brien, Rosenbluth International
07-May-02: Alicia Gardner, Sabre
29-Apr-02: Carolyn Ezzell, Delta Air Lines
23-Apr-02: John Davis, Pegasus Solutions
15-Apr-02: Gregory Hunt, ABTA Arbitration Scheme
09-Apr-02: Stuart Winter, Atinera
03-Apr-02: Roberto Da Re, Dolphin Dynamics
26-Mar-02: Arnaud Debuchy, Amadeus
19-Mar-02: Helen Baker, Lastminute.com
12-Mar-02: Pat Minogue, Galileo
07-Mar-02: Jon Hart, MyTravel
28-Feb-02: Lawrence Hunt, Rapid Travel Solutions