Skift Take

Qantas has been coy about its bold distribution strategy launched last year, rarely talking about it since the pandemic struck. Here's an update from the company, plus what you need to know that's missing in its official statements.

What a difference a year and a pandemic make. It’s hard to recall it was only August 2019 when Qantas Airways began charging travel agencies globally for booking tickets outside of its new “Qantas Channel” as part of a long-term plan to tame its distribution costs.

Flash forward to now. A Qantas spokesperson said it now expects to be back up to 68 percent of pre-Covid domestic capacity across Qantas and Jetstar in December (compared to just 20 percent earlier in the year).

The international situation is worse. Despite the re-opening of the route to New Zealand and the talk of possible “travel bubbles” to include Japan, Singapore, and South Korea, a rebound will be slow. International capacity will remain at 20 percent year-over-year levels a year from now, JP Morgan assumes. It will only recover to about half of 2019 levels in 2022.

So how is the Qantas distribution strategy faring against that backdrop?

“Despite the impact of Covid-19 on travel bookings, the Qantas Channel continues to be a key part of our broader distribution strategy,” said Igor Kwiatkowski, executive manager global sales and distribution. “The take-up has been very successful, with thousands of agencies around the globe having signed up since we launched last year. More than 95 percent of all indirect bookings with Qantas are now made by agencies that are in the Qantas Channel.”

Given weak demand, Qantas is taking a strong position by maintaining a “channel fee” of about $12.90 ($17.50 Australian) for all segments booked by agents not participating in the Qantas Channel.

Qantas isn’t the only large airline group to think a pushy distribution strategy is the best way to ride out the pandemic. Qantas’s fee is roughly in line with other airline surcharges worldwide. Air France-KLM Just increased its fee to $15 (€13) for a one-way ticket. International Airlines Group, which owns British Airways and Iberia, is on a similar fee level to Air France-KLM after increasing its fee last year. Since October 1, Lufthansa Group slaps on a $21 fee in the U.S. (€19 in Europe), up from $17.50 (€16 in Europe).

Qantas said its program would become more than a surcharge.

“Greater reward and recognition of our frequent flyers and the ability to deliver targeted offers for our agency partners are just some of the benefits that are in the pipeline,” Kwiatkowski said. “Ultimately, our vision is to offer our agency partners a bigger toolkit than what they can offer customers today.”

The Qantas effort is part of a broader trend in airlines adding fees and rolling out new ways of distributing their tickets to travel management companies and other agencies. Lufthansa Group led the charge five years ago, and as of October, every third ticket that it distributes by an intermediary is sold as a so-called “new distribution capability,” or NDC, ticket.

“We’re also continuing to work with our partners on the development of our NDC program,” Kwiatkowski said. “We’ll be launching a number of new features over the course of the year, all designed to better support the industry in selling and servicing their customer bookings with Qantas.”

Details matter. But Qantas declined to provide additional information. Qantas hasn’t said how many of its tickets are being sold through its new, preferred ways. So some critics question the program’s success so far. Agencies may sign up, but how much do they use the new ways?

So Skift spoke in recent months with a mix of sources within the company and at significant travel agencies and tech vendors that have contracts with the airline to piece together what’s happening. The sources spoke on the condition of anonymity. A Qantas spokesperson declined to comment on the following.

To avoid surcharges on tickets, agencies have to take the first step of joining the “Qantas Channel,” which means signing a commercial agreement with the airline.
As part of the Qantas Channel registration process, each agency must accept new commercial terms with their relevant global distribution system, such as Amadeus, Sabre, Travelport, and TravelSky — companies that help airlines distribute tickets worldwide. The commercial terms are between each agency and its distribution system.

Companies haven’t publicized deal terms. But two sources at Australian companies doing business with Qantas said mid-size and smaller agencies effectively see a drop in net income in the true bottom line. Agencies lose incentives that could range from 50 cents to $4 per segment (with a simple round-trip ticket consisting of two segments) to lower amounts when accepting these new contracts.

Many agencies only stay in the black thanks to incentives from Amadeus, Sabre, Travelport, and TravelSky, which also continue to give standard software applications and training to agencies for free. It wasn’t clear what the reduction was under the new deal terms. Qantas has publicly said that the overall process enhances agency selling, so agencies will make more money and profit overall by being better able to upsell passengers, for instance.

Agency partners can continue to access the full range of Qantas fares via the global distribution system without signing for the new deal, the company said.

But agencies that don’t sign up to the Qantas Channel don’t have access to the lower fares from Australia published in ATPCO, an airline-owned fare clearinghouse and tech provider formerly known as the Airline Tariff Publishing Company. They also don’t get access to any new NDC offers distributed via Qantas’s distribution platform.

Today agencies participating in the Qantas channel have access to all fare classes for tickets booked in Australia, excluding E class.

Qantas has a second step. Since 2018 it has been building out a Qantas Distribution Platform. Agencies will be able to use this platform to access “new rich content.”

One publicized example has been making Qantas’ frequent flyer information and tier status available to an agent in the workflow of selling a ticket, something not typically available when agents use traditional reservation systems. Another promise is that the Qantas distribution platform will provide agencies with the ability to present customers upon booking with special negotiated corporate fare conditions, access to seat maps, and baggage allowance based on a traveler’s frequent flyer status.

Dispelling Rumors

Rumors that Qantas has, or will soon shut down or pause, its platform aren’t right, sources said.

One current and one recently departed Qantas employee said anonymously that the platform has remained live and in development this year. The airline’s so-called test environment remained open for existing partners to continue to develop in. Its production environment also remained open to partners who had plugged in and begun using the system before the crisis, such as Australian travel management company Corporate Travel Management (CTM), one of Australia’s largest business travel management agencies, and Serko, a travel-and-expense management software provider based in New Zealand.

Qantas hasn’t announced any new agency partners since the crisis began.

Qantas has added new tech partners but not announced them since the pandemic began. It has also continued to talk to new tech partners, several which will go live in the coming months.

The current employee said the company recently released additional functionality and that it has new features and content in development. Agencies participating in the Qantas channel will have access to more fare classes than agents who don’t.

Some mid-sized and smaller agencies have grumbled that the surcharges penalize them and complicate their lives during a dramatic revenue crisis for the sector. Some have accused Qantas of adding a fee as a short-sighted way to boost its revenue.

Qantas has noted it put in place the Qantas Channel well before Covid-19 and that the new distribution capability is an industry-wide initiative that involves investment by all players, including considerable investment by Qantas.

The carrier’s distribution strategy is not purely a cost-savings exercise, said one current and one former Qantas employee. The sources noted that the airline continues to invest in building a distribution platform with tech vendors’ help. That tech spending cost likely overtakes any boost in margin from the surcharges.

Today, Qantas is providing a more comprehensive range of fares and content than what’s been available via traditional indirect booking systems, they said, which means there’s an added value for agencies who participate.

Some agencies have also complained that Qantas’ tech platform has gaps, particularly when it comes to servicing tickets in the event of a flight disruption. A couple said that it’s much easier to rebook a ticket that changes close to, or after, flight departure via the traditional systems such as Amadeus, Sabre, Travelport.

Qantas has worked with its partners to build what is described as its own “end-to-end, NDC-enabled capability” with airline technology vendor Farelogix — which Accelya, an airline services tech company, bought several months ago.

Some industry critics said Qantas is overselling what it has actually built so far. Qantas is using traditional “interlinks” to distribute fares, schedules, and availability said one technologist who has worked for airlines on their distribution systems for more than a decade. It’s not doing anything technologically savvy for that content.

Yet Qantas has insisted in its public statements that its distribution platform is “NDC-enabled,” meaning that it takes advantage of newer messaging standards and data exchange methodologies with the help of Farelogix.

Mid-sized and small agencies could face a tech investment cost to connect directly with Qantas, sources said. Qantas has built a system with the help of tech vendor Farelogix. An agency would need to hire a tech provider to incorporate Farelogix’s environment into the agency’s tech environment. And an agency’s selling platform, interface, mid-office and back-office applications are almost always provided by one of the global distribution systems. Agencies say connecting the old systems with a new one isn’t easy or cheap.

Courting the Distribution Giants

The Qantas goal is for agents to choose to consume “NDC-enabled” content via its global distribution system partners, an approved tech vendor or “fare aggregator,” or by integrating and connecting directly. Direct integrations have been heavily promoted by Lufthansa Group and American Airlines, both of which also use Farelogix as one of their vendors.

Qantas has been expanding the platform since 2018. It provides images of cabins and meals and the ability to book extras such as “extra legroom” seating at the point of sale, something legacy distribution systems didn’t do.

Qantas hasn’t yet signed up with one of the tech giants to provide this “new rich content” through their pipes. That differs so far from Air France-KLM Group, which in September announced a deal where Amadeus helps generate and distribute the airline’s new distribution capability content.

A Qantas spokesperson said: “It’s worth noting that Qantas is working closely with all of our GDS [global distribution system] partners to distribute NDC content, and we expect all of these partners to be distributing QDP-generated NDC offers early in 2021.”

The content in the Qantas distribution platform is not currently available via traditional indirect booking systems, namely, Amadeus, Sabre, Travelport, or TravelSky. But Qantas hopes that these providers connect and do so on favorable commercial terms.

If the global distribution systems connect to Qantas’s distribution platform, the “rich content” will also be available via it to their agency customers. Today, the tech giants can access all Qantas fares, schedules, and availability but not the “rich content.” One source working at Qantas said the company is prototyping a pass-through model with one of the global distribution systems.

A Qantas spokesperson said, “We’ve been working with GDSes on pass-through options since the beginning of our NDC journey.”

In February 2019, Qantas entered into a distribution contract with Amadeus to allow Amadeus travel sellers to access Qantas’ content. Skift couldn’t determine if this included a plan to build a so-called “pass-through” solution like the one Air France-KLM has negotiated, though it might.

The Qantas platform doesn’t yet connect to Qantas’s Amadeus-build passenger service system, so it’s not really a “direct connect,” claimed a person who recently left employment at Qantas, though the statement couldn’t be verified.

Qantas has motioned that its distribution platform does connect to its passenger service system. Agencies and other travel entities can connect directly to the Qantas distribution platform or via an aggregator such as a global distribution system.

Direct connections to passenger service systems are important to be able to power e-commerce, such as Google’s “book on Google” metasearch results, said an engineer that has helped connect airlines to the search giant.

Low-cost carriers built themselves from scratch using modern data messaging practices, such as offering ways for agencies to book their tickets via an application programming interface, or API. But older network carriers like Qantas haven’t. Modern companies like Google expect APIs as a standard offering.

Qantas is a key Amadeus customer of Amadeus’ passenger service system, Altea, which offers separate functionality for airline operations. Amadeus could benefit if Qantas used the direct connect capability built into Altea as part of a broader evolution to its distribution policy with Amadeus, speculated one industry veteran. Air France, for example, has the ability to use Amadeus web services to send a modern data feed between its Altea reservation system and travel agency systems.

A separate issue is whether so-called additional “rich content” can be provided today without needing any new messaging standards, said an executive at an airline tech vendor.

Adding to the confusion is a middle path that’s emerging. ATPCO offers an “NDC Exchange” service that helps normalize and enhance airline data, letting airlines and agencies can talk to each another even if they’re on different versions of the technical standards that power the “new distribution capability.”

Last month, Sabre said it had reached a deal with Qantas to offer agents access to richer information about the airline’s fares, products, and services through the airline’s connection with ATPCO. Sabre will integrate Qantas’s so-called “universal product attributes” invented by ATPCO’s Routehappy unit to add visual content to bring the products and services to life for agents. Sabre will also adopt ATPCO’s “universal ticket attributes, such as baggage allowance and seat selection information.

Some critics question how innovative Qantas can be in distribution given the hit to its revenue and workforce. For example, Duffel, a startup aiming to speed up efforts to reinvent airline distribution, doesn’t have on its road map a plan to integrate with Qantas’s rich content, a source said.

Yet Skift’s reporting overall suggests that Qantas appears committed to building on its new distribution capability as part of its broader digital evolution of indirect booking channels.

UPDATE: Qantas has just announced it will be extending its carbon offset program to the indirect booking channel.

NOTE: Article was updated on December 7.


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Tags: airline distribution, distribution, ndc, new distribution capability, qantas, qantas airways

Photo credit: Qantas 100th anniversary celebration in Sydney. Gregg Porteous / Qantas

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