Amadeus drags Air India to court

Will Travelport’s monopoly bring more problems for Air India?

Aviation

March 7, 2019

/ By / Kolkata



air_india

Air India has said that shifting to a single GDS provider would reduce distribution costs by around 60 pc

Air India’s decision to shift exclusively to a single global distribution system (GDS) platform has faced criticism from travel agents who have protested against the decision and said that this move is going to be a setback to its recovery.

Last year when UK based firm Travelport had won the contract to become the sole provider of Air India’s (AI) Global Distribution System (GDS), Air India faced serious flak from the travel agents in India who requested the airline to reconsider the exclusive nature of the deal and to continue to allow content from existing GDS providers. Soon after, a Public Interest Litigation (PIL) was filed by a Nashik based activist, Ratan Luth in Bombay High Court, who challenged AI’s move to migrate its complete reservation system data to Travelport that would have severe ramifications for the Indian aviation industry.

Following this, a plea has been filed by the Indian wing of Amadeus, the global ticketing system firm, against the airline in Delhi High Court saying that Air India cannot end its 30 year old association with Amadeus. Justice Vibhu Bakhru issued a notice to AI and sought its stand, indicating that the court will also examine the way the decision was reached. “The respondents shall produce the relevant records with regard to the award of contract on the next date of hearing,” added Justice Bakhru.

“An interim direction is issued to Air India Limited to continue to allow using GDS of Travelport, Sabre, Amadeus, as was being used prior to 4.12.2018 and till further orders, Air India inventory will be made available to Amadeus also, as was being done prior to 4.12.2018,” judgement of the HC read. Air India had discontinued services of all other global distribution system (GDS) portals from December 5, 2018.

The High Court of Punjab and Haryana also overruled the national carrier’s decision and asked it to continue using the services of Amadeus and others to book domestic and international flights.

Profit or no profit

Currently there are three major GDS worldwide, Travelport, Sabre and Amadeus, with Amadeus leading the market with over 400 airlines distributed through its platform. Amadeus and Sabre jointly command 83 pc of the global share of the ticketing bookings followed by Travelport that has 17 pc of the market share.

Questioning the need for AI to give its entire reservation system to Travelport, the PIL pointed out that other full service carriers rely on all three GDS providers for ticket sales globally.

While justifying its stand Air India has said that the decision would reduce distribution costs by around 60 pc since the GDS providers collects a segment of fee for every booking and shares a portion with the travel agents. By restricting the GDS to only one provider, though costs may reduce, the catchment of passengers would be reduced to only members of Travelport, which barely commands a market share of 20 pc global and 30 pc domestic.

Air India says it expects to save INR 30 billion over the next six years by migrating to a single ticket sale and distribution platform. However according to Luth, since more than 50 pc of all ticketing bookings take place on Amadeus used by a vast majority of travel agents, generating revenues in excess of INR 60 billion, Air India would risk losing out on this by limiting its distribution to one small GDS.

Also out of the 28 Star Alliance airlines, of which Air India is a member, 20 are hosted on Amadeus using their connectivity to sell AI inventory, but none of them are hosted on Travelport, said the PIL. The petitioner further adds that the Star Alliance partners also stand to lose another minimum INR 1 billion annually by restricting the GDS to only one provider.

The AI would also be excluded from other big global online players like Expedia, Odigeo, Egencia, who do not work with Travelport.

Amadeus’s loss will be Indigo’s gain?

Luth has pointed out that the CEO of Travelport is a director of IndiGo and being the exclusive distribution platform of AI, it would have access to sensitive business data related to AI`s passengers and booking sources.

In India, Travelport is managed by Interglobe Technology Quotient (ITQ), which is part of the Interglobe Group which owns IndiGo Airlines, and the CEO of ITQ is on the board of IndiGo, which is a strong rival of AI with an estimated market share of 43 pc.

“By awarding the AI contract to Travelport, IndiGo would be in a position to take advantage of reduction in AI’s distribution networks and facilitate a virtual monopoly for itself, causing further distress in the already strained aviation sector,” said Luth.

Air Deccan founder G.R. Gopinath in his tweet has termed AI’s bid “to migrate its complete inventory date to Travelport, a reservation system managed by rival IndiGo’s group company, to ‘the sheep choosing the wolf’s den for residence’.”

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