Qantas Pursues Breakaway Distribution Strategy Despite Grumbling From Some Travel Agencies – Skift

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 its effort to encourage more direct bookings.

Flash forward to now. Qantas Group will take many months to rebuild the capacity it cut during the height of the pandemic. Investment bank J.P. Morgan recently forecast that Qantas’ domestic capacity, which is currently at about 20 percent of last year’s level, will gradually rise to about 65 percent of year-over-year levels in second-half 2021.

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 have 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.

Yet 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 our 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. 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.

Two sources at Australian companies doing business with Qantas said mid-size and smaller agencies effectively see a drop in net income. They 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, though it wasn’t clear what the reduction was and Qantas has publicly said that the overall process enhances agency selling so they’ll make more money and profit overall.

Agency partners can continue to access the full range of Qantas fares via the global distribution system without signing for the new deal. But they’ll pay surcharges on those tickets. Qantas fares, schedules, and availability are all available to GDSs and filed through ATPCO, an airline-owned fare clearinghouse and tech provider formerly known as the Airline Tariff Publishing Company.

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.

But Qantas stopped adding new partners due to the pandemic-related crisis. The employees said the company recently released additional functionality and that it has “a busy timeline ahead, with 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. They have accused Qantas of adding a fee as a short-sighted way to boost its revenue.

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. As of 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.

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. images of cabins and meals and the ability to book extras such as Extra Legroom seating. It will also provide at the point of sale.

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 NDC content.

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 testing a pass-through model with one of the global distribution systems.

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.

Adding to the confusion is a middle path that’s different. 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.

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