Skift Take
Lufthansa Group and IAG (the parent of British Airways) are striving to shake up airline distribution. One of the tech providers that they've hired to do this is Farelogix, whose boss, Jim Davidson, has a provocative vision of the future that's running into commercial resistance.
Editor's Note: This year we expanded our coverage of the technology companies that do the behind-the-scenes work of powering the technology systems of the world's major travel companies.
We’re chatting with a handful of industry leaders for our new Travel Tech CEO Listening Series to discover where they think the industry is heading. Read the other articles the series here.
This spring, International Airlines Group (IAG) -- the parent company British Airways -- lashed out at the business model used by three airline distribution middlemen, Amadeus, Sabre, and Travelport.
Starting in November, IAG plans to slap surcharges on flights sold via those third-parties to travel agents. It will copy similar fees added by Lufthansa Group in 2015.
The moves by the two airline groups (plus a similar one by tiny Ukranian International) may have set in motion a global shake-up in how flights are marketed and sold.
Through the surcharges, the airlines intend to coax travel agencies to bypass the global distribution systems and connect directly with the carriers' reservation data for cheaper fares and more upselling options, like seat upgrades.
This has left a technology gap to fill, and a small Miami-based company named Farelogix is hoping to cash in.
This spring Farelogix signed a multi-year deal to expand the direct connection services it has been providing to Lufthansa Group.
Not everyone's happy about Lufthansa's actions. One of the tech middlemen, Sabre, has told Lufthansa Group that its effort with Farelogix and other tech companies violates its contract. The airline group responded last year by suing Sabre in a Texas court and Sabre countersued. The litigation is ongoing.
The moves by Lufthansa Group and IAG -- if it is not merely a tactic in negotiations -- to shake up distribution cast a light on broader industry trends. Several technology companies are trying to take advantage of the opportunities springing up.
There's growing interest in two types of technology: software that helps airlines be smarter about what they sell, and software that helps them distribute their inventory directly to travel agencies.
The pioneer of the first solution is ITA Software, which has been offering pricing and merchandising tools for about a decade and didn't stop when Google acquired it in 2010. Farelogix, Datalex, and other companies offer related services. Amadeus and Sabre, via their airline IT divisions, also offer related systems.
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