Tony O'Connor On Moves By Qantas That Could Make The Big Bigger

On Thursday, Qantas will go live with a new distribution strategy that surcharges bookings using channels the Sydney-based carrier disfavors. Like other big airlines, in a stated effort to personalize shopping it’s pushing direct channels and those that use XML connectivity based on the NDC standard. Qantas in February said “a majority” of key agency partners agreed to participate in the Qantas Channel, including corporate travel heavyweights Corporate Travel Management, Egencia and Australian market leader Flight Centre. American Express Global Business Travel and BCD Travel have since announced deals. A Qantas executive this month told The Beat that parties representing 90 percent of the carrier’s agency revenue signed on.

Conceptually similar to IAG’s and Air France-KLM’s private channels, the Qantas Channel guarantees access to “certain Qantas content” for those agencies that work out a new deal with an approved tech provider, according to the airline. Approved providers include Amadeus, Sabre and Travelport, meaning any agencies that strike Qantas Channel deals can continue booking Qantas content through one of those global distribution systems without incurring the surcharge. Qantas also approved Serko and Travelfusion as tech providers.

Consultant, auditor and GBTA-Australia & New Zealand director Tony O’Connor raises questions about what all that, as well as the newly approved American Airlines-Qantas joint venture, means for corporate travel.

Seven months after the initial announcement, Qantas is due to flick the switch on its Qantas Distribution Platform (QDP) on August 1. There is widespread uncertainty as to what will happen on that day, as well as about the airline’s plans thereafter. Travel buyers seem to have little information.

Tony O’Connor, Butler Caroye Asia Pacific founder and managing director, and GBTA-Australia & New Zealand director

Most of the talk from TMCs and other suppliers has merely been about their own connectivity efforts, certification levels and preparedness, and the potential benefits of an NDC booking channel. There is near radio silence about how it will work, what it will look like and what changes it will bring to pricing and booking. Even TMCs have expressed uncertainty and frustration to me. The Australian Federation of Travel Agents has also expressed concern.

Sticks are more popular than carrots at this point. Absent an agreement to participate in the Qantas Channel, bookings via established GDS channels will carry a per-segment surcharge of 17.50 Australian dollars ($12.50). And it’s been suggested that there may be inventory holdback on the existing channels.

Here are a few questions to consider.

• If the TMCs do not receive their GDS commissions on QDP bookings, how will they be compensated? Higher client fees? More aggressive hidden fare markups? Background airline rebate deals?
• Will TMCs’ Qantas competitiveness diverge?

None of the larger agency groups in the market have stated misgivings about NDC or the new Qantas Distribution Platform, which suggests they’ve sorted out everything as best they can. For many of the smaller agencies, it was all very rushed. There was not a lot of time to get answers. There’s a real potential for a rich man/poor man scenario playing out. Even midsize TMCs are expressing concerns.

• What happens when Qantas Channel agreements expire?
• Will QDP just start with the cheapest domestic fare types?
• Does my TMC have its own direct link to QDP or does it still connect via its GDS? Both seem to be happening.
• What happens to data consolidation, and to existing airline contract terms?
• How much unbundling will happen, and when?
• Who re-integrates what?
• What’s the difference for the client?

It’s the night before the prom and we still don’t have a dress.

The Qantas-AA Alliance

Just before Qantas’ go-live with NDC, the U.S. Department of Transportation gave the green light to a joint venture between Qantas and American Airlines on U.S.-Australia routes. The Trump administration granted antitrust immunity to the airlines covering international services. The previous U.S. administration rejected the application on the basis that it “would reduce competition and consumer choice.” The deal means that Qantas and American can coordinate prices and schedules.

The airlines said the agreement “could” generate up to 180,000 new trips across the Pacific annually. This sounds good but it’s only a 5.5 percent increase in passenger numbers. The latest annual market share figures for Australia-U.S. routes produced by the Government of Australia are 43.5 percent for Qantas, 7.5 percent for sibling low-cost operator Jetstar and 5.5 percent for American.

So the Qantas Group would see an increase in the market share under its control, from 51 percent to 56.5 percent. (The Virgin Australia/Delta partnership has a combined share of 20 percent.) All eyes should be on American. Will it use its fleet to add capacity across the Pacific, or will combined capacity go south resulting in prices heading north?

Travel agents I spoke with were concerned that the deal would mean reduced capacity, reduced competition and higher fares. Airlines only join forces to increase profit, naturally. One way — the harder way — is to increase market share and/or grow the market. The simpler strategy is to raise fares when you can. One agent wondered whether the attraction for AA is that it could redeploy Pacific capacity onto other, faster-growing and more profitable routes.

Let’s keep a close eye on capacity and fares between Australia and the United States.