Subscribe
Login
Coronavirus

New Wholesale Model Could Shake Up Airline Distribution Thanks to American Airlines Test With Sabre

Sean O'Neill photo
Sean O'Neill

Skift Take

We read the 100-page rulings on the proposed merger of Sabre and Farelogix so you don't have to. Airlines want to take over a lot of the tech work from Sabre and its rivals and pay travel agencies directly for bookings. American Airlines says the new model has already saved it millions. But the rulings found few tech vendors up to the task.

When British and American legal authorities published rulings on a merger case this month, they also provided a comprehensive, impartial look at how airlines want to change the way they sell tickets. The rulings focused on whether technology companies Sabre and Farelogix should merge. But along the way, they summed up dozens of interviews with experts and leaders at airlines, agencies, and tech vendors worldwide. The rulings suggest that the sector — where airlines spend about $9 billion a year — is heading in a new direction. The rulings found that large airlines have chosen to cooperate with tech middlemen, despite years of fighting. Yet some airlines will push a new "wholesale model" to pay travel agencies. The wholesale model would overthrow today's system, where airlines pay tech intermediaries, who, in turn, kick back some of the commissions as incentive payments to agents. The rulings reached opposite verdicts. In the U.S., a federal judge sided with Sabre against the Department of Justice, which had filed an antitrust suit to block Sabre's acquisition of Farelogix. In the UK, the regulatory watchdog the Competition and Markets Authority said it would block the merger. The Department of Justice said Tuesday it may seek an injunction to temporarily put hold the merger on hold. Yet looking beyond Farelogix's fate, the two rulings agreed on a lot of trends in airline distribution generally.

Get the Latest on Coronavirus and the Travel Industry on Skift's Liveblog

The 385-page British decision and the 95-page U.S. court verdict summarized views from dozens of experts. The experts said cooperation is the new watchword for corporate bookings. Most airlines and travel agencies will now spend most of their energies cooperating with Amadeus, Sabre, and Travelport, the so-called global distribution systems (GDSes), through something called "GDS pass-through." The GDS pass-through works roughly like this. Airlines take on the work of packaging the different aspects of travel, such as the route, type of seat, flight schedule, availability, and price information from various computer databases. They push that information to agencies. In other words, airlines take more control over how their "offers," meaning plane tickets and other products, appear on the reservation systems that travel agents use. Until now, Amadeus, Sabre, and

Online travel coverage is exclusive for Skift Pro subscribers.

Subscribe for full access to all Skift coverage for as low as $55 a month.
See the latest online travel headlines.

Apple Pay, Google Pay, Paypal, VISA, Mastercard, Discover, American Express

Already a subscriber? Login