For decades,
travel agencies were the sales engine airlines never built. The selling
part—the art of finding customers, converting them and building loyalty—was
never really theirs. That’s where travel agencies, and later online travel agencies (OTAs), stepped in
and quickly became the marketing and sales arm of aviation. But today, the very
same arm is being ruthlessly chopped off.
The big great squeeze
Airlines were
never built to sell. They were never a massive sales organization. Their role
has always involved managing the operational aspects—in other words, to move
people safely and efficiently across the world. But running complex flight
operations is one thing; mastering digital marketing, dynamic pricing and
personalized customer journeys is absolutely another.
Today, OTAs are
finding themselves squeezed and choked by the very companies they helped to
grow. In the current (very competitive) market situation, when the oxygen
masks fall as the pressure drops, airlines are turning off traditional commissions—the oxygen of agency
economics—that once fueled the OTA world.
Instead of collaboration, we are now
seeing the demand for the ultimate
control: airlines restricting content, removing logos and overall branding
rights, taking away promotional content and funneling every possible booking
toward their own “.coms.” Truth be told, this brewing mess is not good for
anyone involved. The skies do not look bright even for the airlines
themselves.
The price of playing Monopoly
It really comes
down to economics: Over the last 10 years or so, airlines have faced continuous
economic and political turbulence. At some point, they opened their P&L
sheets and started questioning every single line in there.
One big move
everyone remembers was the push from global distribution systems to New Distribution Capability. On paper, it looked promising: Cut out the middlemen, save money and take control of distribution. But the
current reality? Far from the initial promise, as the shift has become
expensive for everyone involved. And history repeats itself.
However, the
pursuit of greater profitability carries three side effects: inflated costs,
strengthened influence of major OTAs and customers shouldering increased
prices with less trust.
1. Inflated costs
Airlines focused
on flying planes—that is, in logistics and flight operations, while travel
agencies specialized in market reach and conversion. For the last decade,
airlines have spent their efforts consolidating power, tightening their grip on
distribution, aiming at venturing beyond their traditional strengths and moving
away from running flights to running marketing departments. It’s just that
becoming a huge sales and marketing organization, particularly a global one, is another ballgame.
What slowly
started as a push for profitability is now turning into a game of Monopoly—one where airlines aim to hold all the cards. But this domination has its
price: The cost of maintaining direct technologies, servicing customers and
navigating fragmented integrations is mounting.
2: Strengthening influence of major OTAs
As smaller and
mid-size agencies are vanishing or choosing to merge, the ecosystem will
consolidate around fewer, far more powerful industry players. If airlines choke
every intermediary, they don’t just eliminate competition. In fact, this way
they empower the few mega-OTAs they fear most. And when the giants step onto
the field, they come armed. They will bring vast customer armies, deep war
chests and legal teams ready for battle.
3: Customers bear increased prices
Once
intermediaries are pushed out and transparency weakens, prices rise unnoticed
and the customer ends up becoming the ultimate victim of the power play, being
penalized with the increased prices. Click by click, prices go up, baggage
regulations differ and increased marketing costs get reflected in the fare
prices. While airlines gain unchecked control, travelers lose choice. Fewer
choices, less transparency and higher prices. What a mess.
The changing air game
The airlines’ quest for total control will most likely increase short-term
profits. But it also runs the risk of causing long-term stagnation. After all,
diversity in distribution keeps this market healthy.
A joint effort is what keeps
the industry thriving. We must talk more. If OTAs collaborate on shared issues
and airlines keep senior leaders connected to the realities on the ground with
intermediaries, we can build a stronger, more transparent ecosystem. Or else,
the airlines might soon realize they’ve traded flexibility for dependence,
innovation for bureaucracy and partnership for confrontation.
Monopoly, after
all, always ends the same way: one player left standing and no one left to
play with.
About the author…