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Expert study refutes airline claim that direct distribution is less expensive

The report concludes that selling through travel agents using neutral booking platforms (often called global distribution systems or “GDSs”) is just as costeffective for airlines as selling “direct”.

BRUSSELS – New evidence shows that increasing so-called “direct” bookings does not reduce costs for airlines, suggesting the true motive of some airlines is to curtail consumer access to independent, neutral booking channels.

In a study published yesterday, Infrata, specialist economists in the airline industry, highlight the deficiencies in previous distribution cost calculations presented by airlines. The report is supported by the European Federation of Travel Agents’ and Tour Operators’ Associations (ECTAA) and the European Technology & Travel Services Association (ETTSA).

The report concludes that selling through travel agents using neutral booking platforms (often called global distribution systems or “GDSs”) is just as costeffective for airlines as selling “direct”.

Ian Lowden, author of the study, says: “When taking into account advertising, marketing, customer support and payment fees, as well as the significant costs of online customer acquisition such as search engine fees, the costs of “direct” bookings and those made through online and offline travel agencies is equivalent. Airlines seeking to justify a move to less transparent “direct” distribution schemes often omit from consideration these important – and unavoidable – costs.”

The findings raise significant questions about what must drive an airline to encourage more direct distribution of fares, if not cost savings. “Some airlines claim that sales made via travel agents using neutral booking platforms cost them several times more than direct sales. Yet the evidence shows that there is no reduction in costs when airlines push for more direct sales – and costs actually increase for some categories of airlines,” says Christoph Klenner, Secretary General of ETTSA.

Infrata also found that the higher the proportion of “direct” distribution, the higher the cost to airlines of customer acquisition, marketing, advertising, technology development and customer service.

Michel de Blust, Secretary General of ECTAA, adds: “We can only conclude that airlines must have other motives to push direct sales. One clear motive seems to be avoiding the transparency, convenience and choice that travel agents and neutral travel platforms offer consumers. In airlines’ “direct” sales channels, such transparency and choice do not exist, allowing them to make consumers captive and vulnerable to increased prices.”

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Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.

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