E-Commerce Times Talkback

Re: Airlines Bite the Web That Feeds Them
Posted by: Keith Regan 2001-10-29 18:25:49

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Continental Airlines sent shudders through the online travel world by saying it would no
longer pay commissions for fares sold on certain Web sites. This is not the first time
such a declaration has been made by an airline, and the big fear is that it won't be the
last. Perhaps even during these rocky times, the major airline companies still write the
rules for their industry. But by shunning Web travel sites, the airlines are biting one of
the hands responsible for feeding them.

Re: Airlines Bite the Web That Feeds Them
Posted by: Kath McCahill 2001-10-30 14:18:56 In reply to: Keith Regan

Continental has to be THE WORST AIRLINE ever to grace the sky. Overbooked, poor in-flight customer service, inept, you name it and Continental sucks. I would fly any other airline.
So Continental pulling any punches is going to have little effect on my pocketbook.

Re: Airlines Bite the Web That Feeds Them
Posted by: Jay Sorensen 2001-10-30 12:39:01 In reply to: Keith Regan

I will paraphrase a line from the movie the Rainmaker, "Continental must be stupid, stupid, stupid." Why on earth would you abandon the lowest cost form of ticket distribution, and one which clearly represents the future? Only two reasons I can think of. First, Continental plans to cut all commissions and do negotiated deals with specific sites . . . not a bad plan but one that certainly has caused heartburn for online travel shareholders. Or secondly, because Continental is so desperate to cut costs that they are selling the fire hose to pay the mortgage on a burning house. I'm hoping for the former.

Re: Airlines Bite the Web That Feeds Them
Posted by: Tom Lianza 2001-10-30 16:38:06 In reply to: Jay Sorensen

> Why on earth would you abandon the lowest cost form of ticket distribution, and one which clearly represents the future?

Answer: Because it's not, and it's not. Selling tickets on the web through a middleman is not the future - it's the present, and it's not the lowest cost - otherwise they wouldn't have made a fuss about the fees.

If they have a plan in mind this could well be a smart business move. Maybe it's bad for the consumer and bad for the shareholders of online travel sites, but if it's good for the business then it's a good move for Continental to make. If they pull a move like Southwest and end up *really* cutting distribution costs, then more power to them. They're certainly helping themselves out of the fierce price competition that online travel sites create.

Now I guess they're going to have to live on their reputation... (however good or bad that may be).

Re: Airlines Bite the Web That Feeds Them
Posted by: James Dianto 2001-11-05 11:52:19 In reply to: Tom Lianza

Ah, a person who understands the airline distribution channel! You are 100% correct that the online distribution channel, through online agencies, are not as inexpensive as they seem. The usually fall somewhere between phone (airline 800#) and traditional agencies (because of the commission cap imposed on them). The cheapest, least expensive and most efficient channel for the airlines are their own web sites, bar none. Unless, of course, they are paying someone else to provide the technology for them, in which case they're probably paying a transaction fee or some contract-based fee to the supplier of the technology. They can get around that by building it themselves, or purchasing the technology (and its source code) outright, then depreciating it like any other asset while contining to make refinements.

I predict we'll see the airline's site become more of a powerful player for each of the airlines, and most, if not all, of these other little online agencies go the way of the DoDo (hope I spelled that right). Expedia, Travelocity and Orbitz will still be around to duke it out for the reason I mentioned above (selling their technology). And for the record, the online site with the most kick-ass booking engine is Orbitz, which they purchased from ITA Software. It rocks!

Re: Airlines Bite the Web That Feeds Them
Posted by: James Dianto 2001-10-30 12:22:37 In reply to: Keith Regan

I disagree with your assessment of Continental's decision. Traditional travel agencies have considered commissions almost an entitlement, which explains their reaction when the airlines finally realized what they were paying for. Agencies do not sell a specific airline, and you end up doing most of the work yourself. This is akin to Kraft paying the local supermarket a commission every time someone buys a package of Mac & Cheese.

Before I knew better, I assumed that the customer paid a fee for the agency's services. Only when I found out that it was a "free" service that I began to think, Boy, that's dumb of the airlines! And soon enough, they figured it out too and began to cut commissions. Now, with their own sites and Orbitz - which does not earn a commission but a transaction fee - they can cut out the middleman again. They don't need them, since they have their own sites and now a direct competitor (Orbitz). And if you think this doesn't work, look at Southwest. They do not deliver their product through traditional GDSs...just phone and it's web site. And it has over 50% of its sales online and doesn't pay a fee to anyone. That's why they have been making a profit for the past 20+ years.

Let the airlines cut the commissions! If you don't need a middleman, why keep them alive? This will also kill all of the other little online agencies that don't make any sense, like Cheap Tickets, The Trip, Cendant's new Travel Portal, and the like. If a person really wants to use these services, let them pay for it! I'm sure Mr. Jones and Mr. Barton will figure something out, or retire on their stock options!

Re: Airlines Bite the Web That Feeds Them
Posted by: R. Bell 2001-10-30 01:06:04 In reply to: Keith Regan

Nonsense.
Why not cut out on-line travel sites?
Airlines can do web travel as well as anyone.
Independent web travel sites have no loyalty to an airline.
Airlines already cut out real travel agents who provide much more than web sites.
Let the on-line sites get their money from the flying public just like real agents do.