United Airlines will remove basic economy fares (domestic and short-haul international) from legacy GDS channels, beginning Sept. 5.
Those fares will only be bookable via United.com, the United app and NDC-enabled channels -- including NDC offerings in the GDSs.
The move, said United sales executives Doreen Burse and Glenn Hollister, doesn't portend a larger removal of United content from the legacy GDSs.
"We have no plans at this point to do anything beyond basic economy," said Hollister, United's vice president of sales strategy and effectiveness.
Burse said that because legacy GDS technology doesn't support a full slate of ancillary products, removing basic economy is a natural step to take. United's basic economy customers must pay for all seat assignments prior to check-in, and because they aren't allowed carry-on bags, collecting checked-bag fees is a key portion of the product's revenue proposition.
"If you think about basic economy, it's really meant to be sold together with ancillaries," said Burse, United's senior vice president of worldwide sales.
The move will significantly impact a few large OTAs, Hollister said. It will have little impact on TMCs, reasoned Hollister, since less than 0.1% of their GDS sales are basic economy bookings. Traditional leisure agencies also mostly stay away from basic economy.
The announcement nevertheless could cause concern among travel advisors, especially since it comes less than four months after American Airlines pulled approximately 40% of its content from legacy GDSs, ended some commission contracts and sharply scaled back agency-facing sales staff. It's part of AA's strategy to reduce distribution costs and push more bookings into direct channels.
Burse said United will not reduce agency-facing staff and that the airline continues to see agency relationships as "incredibly important."
"We're being really transparent and upfront that we want to do business together," she said. "And we're going to continue to find ways to do that. We'll be transparent. We'll be proactive and we'll be clear in what we're doing moving forward."
United currently offers NDC content in the Sabre and Amadeus GDSs and is in the late stages of a Travelport NDC implementation, though no specific completion date has been set.
To date, the airline has not pulled legacy content from GDSs, but among its Sabre and Amadeus NDC-enabled bookings, approximately 40% are continuously priced fares that aren't available to travel agencies that don't support NDC, the sales executives said. That's because Edifact's alphabet-based booking codes cannot accommodate continuous pricing, which offers unlimited price points.
The upcoming removal of basic economy fares from legacy GDSs will be the first in a series of distribution-related changes United will implement in the coming months, Burse wrote in a letter to travel agencies.
Those changes have not yet been finalized, Hollister said. But he and Burse explained that they'll be geared toward implementing United's three-pronged distribution strategy.
Prong one is to make as much content available as possible in each distribution channel, subject to that channel's technological and economic capabilities.
Prong two is to align costs with value in distribution channels while reducing economic differences between the channels.
Prong three is continued investment in modern merchandising technology, including expanding the capabilities of United's NDC and direct channels.
Hollister wasn't specific about the steps United might take to align costs with value in distribution channels. Legacy GDS sales tend to be more costly for airlines than sales in other channels, in large part due to segment fees paid by the airline to the GDSs, a portion of which are typically passed through to travel advisors. Several airlines globally have introduced GDS booking surcharges to address that issue.
Hollister said United also incurs substantial costs to maintain its Edifact infrastructure to support legacy GDS bookings.
He explained that United weighs the value of travel agency sales by their yields and by the access they provide to customer segments that are otherwise difficult to reach, such as groups.