Air Transport World

Surf's up for distribution.(changes in airline distribution and marketing)

Don't look now but airlines barely have begun to overhaul distribution and marketing. Having initiated some long-overdue steps to reduce costs - through ticketless travel and lower agency commission rates - they face a far-greater problem: Delinking from decades of copycat marketing and capitalizing on the possibilities of cyberspace, on-line services and direct sales.

Everyday brings some new or enhanced avenue from the Internet, net access providers, American Express's ExpressNet, Microsoft Network, America Online, IBM Advantis, user interfaces, AT&T Interchange, Prodigy, CompuServe, Network MCI, ATMs, Ticketmaster. Every day, airlines suggest these won't work - yet.

But revolution is on the way. Bob Salter, head of marketing fir software developer PROS, declares: "For years, the airlines have given away control of their own inventory [to agents via CRSs] at enormous cost. [But] distribution is about to turn upside down. It will be the most explosive event to occur since deregulation." Mark Coleman, TWA senior VP-marketing , told Worldspan agents: "Over the next five years, the level of change will make the previous 20 look like nothing."

Airlines last restructured distribution and marketing in the late 1970s, when in-house systems became too expensive. They created the CRS, making it the first big area of outsourcing. Now, 80-85% of airline sales go through agents.

What was done to save money now costs carriers clearly. Avitas says commissions are the No. 4 operating expense, after labor. fuel and maintenance. And that doesn't include items such as credit card and booking fees, and CRS investment. Says Don Garrett of SH&E: "If agents only take orders, die pre-electronic [CRS] system was less expensive."

Few agents just take orders. They provide time-consuming advice to leisure travelers. That will continue, albeit boosted by new techniques. They also track business travel more cheaply than corporations themselves, airlines claim. So for now, airlines will distribute business travel through agents. But make no mistake, airlines are working hard to reduce their costs of obtaining business travel, which means a lower agent share, fewer overlapping incentives to obtain that share and more cost-reducing automation. …

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