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Sari Vahakoski Director Markets – Amadeus

Amadeus has announced its new pricing structure for airlines for 2005. We’ve caught up with Sari Vähäkoski, Director, Markets, CESE & MEA to hear how Amadeus has evolved its value-based pricing first presented last year.

TDN: What is value-based pricing?

SV: Value-based pricing recognises airlines’ diverse commercial strategies and the different benefits that the GDS channel brings to airlines today. It aligns distribution fees with the services and solutions Amadeus delivers to airlines in reach and complexity of bookings processed.

In 2004, Amadeus was the pioneer in introducing this new pricing policy for distribution of services.

TDN: How have airlines reacted since the introduction of this new pricing model in 2004?

SV: The philosophy behind this model has been widely accepted by our airlines and the industry at large. Even our competitors are supporting this approach.

As the 480 carriers distributed via Amadeus renewed their Participating Carrier agreements this year, Amadeus also conducted extensive research among airline customers. 98% of the airlines identified geographic reach as a key benefit brought by the GDS channel alone and 69% perceived high yield sales as the second most important quality of the GDS channel. These conclusions lend further strength to the direction Amadeus has taken in terms of value-based pricing.

TDN: What is the main difference between the pricing presented in 2004 and that of 2005?

SV: In 2005, Amadeus continues to evolve the model introduced in 2004. We are further aligning pricing with the benefits Amadeus brings to airlines’ distribution.

The two key elements for 2005 are:

  • Development of the segmented booking fee structure to further differentiate the fee charged for different types of bookings, depending on the value each brings to an airline. From two booking fee categories presented in 2004, we now have four categories: standard, standard plus, premium and premium plus.
  • Amadeus has also introduced additional opportunities for the distribution of airlines’ low fare inventory.

TDN: How does the new pricing impact the airlines?

SV: As pricing is further aligned to the benefit we bring to each airline, the impact will differ from airline to airline, depending on their business profile (i.e. if they rely more on international operations or more domestic ones).

Indeed, we will see in 2005 that an Amadeus booking fee can range from €4.90 to as low as €2.67 – in line with the value delivered to the airline by a booking.

TDN: How does the new pricing impact different regions?

SV: The impact of Amadeus’ 2005 pricing will vary from airline to airline, independent of the geographic region in which the airline is based.

TDN: Why has Amadeus chosen this route for airline pricing?

SV: Amadeus has opted for this range of unprecedented and strategic pricing reform as it is recognises that the radical changes in the airline industry require a similar fundamental evolution in distribution pricing.

With the emergence of complementary sales channels, the value of Amadeus’ distribution network for airlines varies from one booking to another. Amadeus has therefore recognised that airline pricing should move beyond the single-fee based structure which was the norm in the past.

Amadeus’ pricing policy aims to adapt distribution pricing to be in line with the value that the GDS and travel agents bring to the airline. This philosophy proves that Amadeus is thinking “outside of the box” when it comes to the needs of its customers.