Business

Making the best of both worlds

GDS companies are caught between endorsing IATA recognition and yet tapping a thriving non-IATA community that has not only found its comfort zone outside IATA's framework but also presents GDS companies with further market penetration. Bhisham Mansukhani inquires.

Capitalism is the mother of compromise and a capitalist is invariably confronted with a dilemma wherein he is torn between the norms and the mandate of profit. GDS companies in India have been saddled with one such dilemma. While in principle, their stance is an endorsement of all business to be transacted under IATA's ambit, the obligation of further growth and the irreversible trend of consolidation has compelled them to tap the non-IATA community.

Market in the waiting

While there are no available official estimates of non-IATA agents, they constitute approximately 45 per cent of the overall agent community and are more likely to be found in areas that typically lack access to the IATA agent.

Similarly, with the IATA agent base saturating in terms of penetration, GDS companies are taking more cognisance of the non-IATA community. GDS company Galileo India, which holds a market share of 39 per cent, remains reluctant to acknowledge non-IATA agents as a significant driver of its growth. According to Raja Natesan, its CEO and president, "Tapping the non-IATA community in India may be a great way to increase revenue but may give rise to malpractices. We have a responsibility to the travel fraternity, which is far larger than increasing our market share. We therefore will not encourage getting into the non-IATA market."

Raja Natesan CEO and President Galileo India

Viiveck Verma MD, Abacus India

That said, Natesan, adds, "If any non-IATA agent is acting as a franchisee or an outlet for an established travel agent and this IATA certified travel agent gives us a written request asking us to give connectivity to the non-IATA agent in question and is willing to take a guarantee that the system will not be misused, then we would consider the request." The point Natesan makes is interesting since it is the IATA agent himself who has facilitated access for GDS to a lucrative and largely untapped non-IATA base.

To Viiveck Varma, managing director, Abacus India, tapping this base must seem more imperative, given the modest 17 per cent share of the Indian market that it currently retains. He observes, "There is a large chunk of business generated by non-IATA agents. The moot question is whether we should wait for all of that business to get consolidated under IATA. While that project has been our collective thrust for some time now, whether it has yielded the desired results is still a question. Yet, discouraging the GDS to interface with non-IATA agents is simply not reasonable. More than 50 per cent of agent business in India is essentially domestic and even non-IATA agents can issue domestic airline tickets, pending the ongoing BSP pilot for domestic airline ticketing."

Dealing with non-IATA agents is not without its dangers however. The extent of GDS investment in them depends on the volume of business they generate and could range from a simple software CD to an entire terminal. The misuse of inventory and infrastructure is a real risk and so is the added operational pressure, as a result of an increasing agent base to service.

Yet, taking into account the competition between GDS companies to continue growing, non-IATA agents have become increasingly relevant. What began as an investment by GDS companies in agents that were in the process of becoming IATA-approved has now become a strategy to increase their network, irrespective of whether they eventually get accredited or not. Seconding Natesan's point, Verma stresses that even so, Abacus sees non-IATA agents as an extension of IATA agents and deals with them only if an IATA agent takes responsibility for the inventory. The comment, though, is significant as the GDS cites a distinct relationship between non-IATA and IATA agents which allows the former to exist outside the accredited fray.

Consolidating away

The aforementioned phenomenon of consolidation which is gradually sweeping the trade is not entirely misplaced in this discussion. The rise of the consolidators has been the veritable lifeline for the non-IATA agents who have fitted into their networks, enjoying access to large ticket stocks and higher margins so much so that IATA agents, in spite of their additional financial incumbency, are also part of these networks. Such a scenario seems tailor-made for GDS companies looking to capture the non-IATA market. In fact, it is hardly surprising then that Abacus' fare distribution mechanism created for the consolidator community, enhanced the non-IATA agent's business, although Verma says that is just as well for the GDS. The software which enables the wholesaler to distribute his fare to his set of agents is a recognition of the permanence of this setup and is probably the precursor to more sophisticated software for this platform.

"I just have not been able to understand why there are voices of dissent within the IATA community with regard to non-IATA agents being given access in spite of the fact that it is members of their community who are responsible for allowing them access," Verma says. Anonymous industry murmur suggests that the argument exists not between these two kinds of agents but merely two sets of IATA agents - one that has created profitable sub-agent networks and those that haven't and are consequently losing potential revenue.

While this issue has been raised more than once in industry forums, the predictable consensus was that the entire industry must not recognise this community. However, that unanimity was limited to theory as both airlines, IATA agents and GDS companies continue doing business with them.

While all GDS companies unequivocally maintain that they would like all transactions to be consolidated under IATA, they are not waiting for that to happen. By providing end-to-end solutions that include not just real time access to inventory but also accounting software and cost management tools, they are creating a comfort zone for non-IATA agents that in fact may tempt them to opt out of the accredited club.

Defending Abacus' position, Verma says, "We are working closely with IATA and the airlines to move towards e-ticketing that can only be used by IATA agents. It is part of our philosophy to move with the trends, not to scuttle them." The bottom line however remains decidedly capitalist. The fact remains that for a CRS, reach is the primary strength when it approaches an airline for business development, and in that sense the non-IATA market is par critical.