For years, a handful of large airline groups outside of the U.S. have slapped surcharges on airfare sold via legacy technology. Hawaiian is the first U.S.-based airline to add distribution surcharges.
Hawaiian Airlines is quietly changing its distribution strategy.
Beginning April 1, travel agencies in the U.S. that use the “legacy technologies” of the global distribution systems Amadeus, Sabre, and Travelport will be cut off from the airline’s fares for travel within the Hawaiian Islands.
Plus, agencies using those channels to access content will have to pay a surcharge.
“For years, we waited, thinking we couldn’t be the first with a surcharge strategy in the U.S.,” said Tina Larson, managing director, distribution, sales strategy alliances. “We thought, ‘We’re small Hawaiian Airlines.’ We thought we needed to wait until American or United did it.”
It’s rare for a mid-size, primarily leisure carrier to adopt such a strategy.
Yet Hawaiian Airlines went ahead on its own to copy overseas carriers in pushing travel agencies to switch from using old technical methods, known by the shorthand “Edifact,” to a newer process referred to loosely as the “New Distribution Capability, or NDC.”
Several airlines believe they’ll sell more using the more modern form of data exchange. The travel distribution players Amadeus, Sabre, and Travelport say they are offering this more modern retailing, too, but commercial terms remain a point of dispute.
Garner told Hawaiian it should have a different strategy from large carriers that are more dependent on corporate travel and have large networks. He suggested that Hawaiian is functionally similar to a national flag carrier in that it is a destination-based carrier with a significant market share on key routes.
For years, Hawaiian Airlines has offered web-only fares outside the global distribution systems and only through its website. Agencies have long wanted access to them. So as a lure to agencies, Hawaiian is offering those “web fares” to agencies that access its content via HA Connect, its partner portal, or via approved aggregators, such as Trip.com’s Travelfusion and a handful of other vendors.
Adopting the new process will take time.
Starting January 24, agencies will be able to connect to its application programming interface, or API. (See Skift’s explanation of APIs, here). Larson’s staff will offer free training and a lot of webinars and other educational tools to agencies interested in connecting.
Less tech-savvy agencies can instead use its extranet, called a partner portal (built by Accelya), without the need for large technology infrastructure.
Hawaiian said it would reveal the distribution surcharge fee around early March. Qantas’s fee is roughly in line with other airline surcharges worldwide. Air France-KLM charges $15 (€13) for a one-way ticket. International Airlines Group, which owns British Airways and Iberia, is on a similar fee level. Since October 1, Lufthansa Group has charged a $21 fee in the U.S. (€19 in Europe).
“In our case, we want to make sure our goal with the surcharge is cost recovery in what the third parties charge us,” Larson said. “We don’t want to exceed that. This surcharge is not a revenue generator. So we’re working with our revenue management teams to make sure we’re calculating this right.”
Hawaiian Airlines wasn’t locked into especially tight terms with Amadeus, Sabre, or Travelport, Larson said. So it doesn’t believe it is falling foul of its contracts with its new strategy.
“It’s encouraging to see the GDSes [global distribution systems] entering into agreements with other carriers about NDC [new distribution capability] agreements,” Larson said. “We have ongoing discussions with the GDSes about that. But right now, given the flexibility we have, we can move forward with this strategy in the way we’ve announced.”
That’s the proverbial “stick.” On the “carrots” side of the equation, the carrier appeals to agencies by offering a few perks.
“We will ‘dynamically price’ our extra comfort seat product right away,” Larson said. “We’ll also have loyalty entitlements.”
Larson said the airline’s revenue management team is creating more ancillary products, meaning bundles of flights with extras priced in an ever-changing manner that responds to shifts in supply and demand.
Ahead of its switch in distribution strategy, Hawaiian Airlines bought Accelya’s full suite of services for managing the new distribution capability.
Hawaiian Airlines is making a move that’s not without risk. It is essentially making some of its flights more expensive, via the surcharge, and more of a hassle to book, via its processes outside the traditional reservation systems used by agencies. That friction could prompt some agencies to shift consumers into booking tickets on rival carriers, such as Southwest Airlines.
Larson didn’t sound worried, though.
“We have been having really productive conversations with our largest agencies, the ones that comprise the bulk of our bookings,” Larson said. “It gives us a lot of confidence in our strategy because when we approached these same partners a few years ago, they gave us a definitive ‘no.'”
“Agencies have come to acknowledge that customer expectations have changed and that customers want the same experience they get in retail and other online shopping environments — Amazon is always the example here,” Larson said. “We want to put the most relevant products in front of the customer and be able to bundle products and accurately market our products.”
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Tags: Accelya, airline distribution, distribution, farelogix, global distribution systems, hawaii, hawaiian, hawaiian airlines, ndc, new distribution capability, surcharges, travel agents, travel distribution, travel technology
Photo credit: An Hawaiian Airlines Airbus A330 on the Reef Runway at Diamond head in 2015. Photo by Alex Viernes. Source: Hawaiian Airlines.