Why the online travel agencies need low cost carriers and vice versa
I strongly believe that the online travel agencies and low cost carriers need each other to succeed in today’s highly competitive world. Here are my thoughts on why they need to come closer together.
Today, if an airline is not in an online travel agency’s (OTA’s) system or if the OTA cannot issue a ticket for the airline, it won’t work with that airline … Nine times out of ten the airline in question is a low-cost carrier (LCC).
In Scandinavia, the cooperation between OTAs and LCCs is working pretty well. Most OTAs sell the LCCs - like Norwegian - alongside ‘traditional’ carriers like SAS. However, if the OTAs expand to other European markets, they will find that two out of the top three airlines are most likely LCCs. If these LCCs are not in their system, they have a big problem as will only be able to target 50% of the market.
Book LCCs and full-cost airlines on one interface?
We are currently working on fully integrating Pyton – our system to manage LCC bookings – into the Amadeus Travel Platform. The idea is that OTAs will be able to book full-cost airlines and LCCs on one interface.
But booking LCCs is often a complicated process for OTAs. First, the travel agency needs to collect payment from the customer and then make the booking. If they can’t make the booking they have to reverse the transaction. With a full-cost airline, it is easier for the travel agency to be a middleman as they can make the booking, collect payment and then issue the ticket the same day or the next day.
Cooperation is the key
Ryanair and Easyjet have been very successful at selling their tickets through one website. However, many LCCs now realise that they can sell more tickets if they open up for travel agency bookings. Norwegian is a good example as they sell a lot of tickets themselves but also appreciate sales from travel agents. Interestingly, while we see the LCCs trying to come a bit closer to the OTAs, the full-cost carriers are now trying to take more bookings on their own sites.
But, it’s going to take quite some time before we see good collaboration between the LCCs and OTAs. Both parties need to understand and appreciate how they can help each other. If an airline doesn’t want to be sold through a travel agency or doesn’t make it easy to be sold by a travel agency, that’s an issue.
Merchandising – a make or break factor
I believe that the OTAs have to try to take the first step to come closer to low cost airlines. And, the LCCs need to be open to this collaboration. It’s a tricky one – the LCCs should be happy with everyone who is distributing their service. On the other hand; the OTAs have to first prove that they can sell the LCCs.
The key value that the OTA must prove they can provide is merchandising through upsell, no airline appreciate a net value order. Advanced purchased checked bags and seat reservations are prerequisites for a smooth Low Cost operation at the airport and satisfied returning customers.
At Amadeus we can see examples where OTAs are better than the airline itself to sell additional ancillary services on the same flights. If you can do that you are relevant for any airline!
About the author
Anders Bernström is our Senior Solutions Expert for Online Travel. He joined Amadeus in 1990 and has been based at our Oslo office for 27 years. Known fondly within Amadeus as ‘Mr. Master Pricer’ – Master Pricer is Amadeus low fare search product - Anders is the kind of guy who always reads user manuals as he likes to understand how things work!