Grabbing opportunities in the wake of new carrier GDS contracts in North America Interview with Rajiv Aggarwal, director - business development, Farelogix |
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Has 2006 emerged as a defining year for those associated with the airlines industry? Rajiv Aggarwal, director - business development, Farelogix certainly feels so. With the expiration of carrier GDS contracts, most North American carriers took the opportunity to introduce wholesale changes in the way they manage their distribution. And Farelogix has been at the forefront of this evolution, says Aggarwal. “The changing industry dynamics identified several major opportunities for Farelogix for expanding our client base and we have taken full advantage. We have signed up several large global TMCs and have converted our legacy clients to our new platform. We also have evaluation agreements in place with a number of large TMCs. Our biggest boosters have been the carriers themselves – in fact, a lot of opportunities have come our way due to the new partnerships we have forged with the carriers where gains can be mutually experienced by all parties – carrier, technology provider, retailer, and the end customers,” he says. Farelogix propagates that it is extremely well placed to leverage its technology and expand the distribution options for carriers globally. According to Aggarwal, “the company’s Total Value proposition, which includes: Our unique ability to aggregate content from multiple sources and present/book seamlessly; Our ability to integrate existing agency applications (for middleware and backend) with new applications – we call this our Essential Bridging Technology; Our ability to integrate our content pipe with any front end application of choice that supports XML connectivity for agencies; and Our industry leading content management abilities provided by our “Distribution Manager”…places us head and shoulders above our competitors. We deliver an unmatched blend of technology and industry smarts – a true revolution for the fast evolving industry.” Farelogix’s claims are also matched by its deeds. In a significant development in July this year, Farelogix signed an agreement to establish a direct connection between Emirates’ reservation system and the Farelogix FLX Platform. “With this agreement in place, Emirates becomes the first international carrier located outside of North America to supplement its current distribution model with a direct connection to an alternative distribution system,” the company had stated. The companies anticipate that the first implementation of the direct connection will be completed towards the end of the third quarter of 2006. |
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In a conversation with Airline Information’s Ritesh Gupta ahead of Airline Information’s eConference 2006, scheduled to take place in Muscat on November 8 and 9, Aggarwal spoke about the deal with Emirates, opportunities in the Middle East market and most importantly his assessment of the environment for low-cost, multi-source distribution. Excerpts: Ritesh Gupta: Kindly share info on your association with Farelogix and how has it evolved over the years? Rajiv Aggarwal: I started with Farelogix in January 2001 as a project manager, where I implemented an industry first call center application with aggregated content from a GDS and multiple consolidators at American Express Canada BTC. I then took over Product Management in 2002. In this role I defined and delivered Sabre Rate Manager – a consolidator booking engine application for Sabre. We identified the opportunity in Alternative Distribution and began discussions with multiple carriers in late 2004. I was named director of business development in 2005, and in this role am responsible for global carrier relationships.
Ritesh Gupta: Talking about the Middle East market, total revenues of airlines based in this region have been growing at double-digit rates for the past few years. What’s your viewpoint about this market? Rajiv Aggarwal: The Middle East is the single most dynamic market region today in the air travel industry. Strategically located to facilitate international east-west traffic, visionary managements, an ultra-modern aircraft fleet, and service oriented attitude towards the traveling public is serving the region well for year over year growth. The change in economic policies, focus on tourism as a major source of capital, and the gradual shift to a more open attitude towards outside visitors is facilitating a sustainable boom in air travel for the region. Carriers like Emirates, Etihad, and Qatar Airways have become leaders in the industry and are revolutionizing the way people travel. Less than 10 years ago, carriers used to try and emulate global behemoths like Singapore, Qantas, and Cathay Pacific; today, the focus has shifted and carriers are looking at emulating these Middle East carriers as their path to success. This new market acceptance by their peers and the traveling public will continue to bode well for this region in the foreseeable future.
Ritesh Gupta: Where is it expected to head, especially in terms of the environment for low-cost, multi-source distribution? Rajiv Aggarwal: The name of the game for an agency is content. The consumer today is educated and demands the best possible price from the retailer. In fact, available research from organizations like PhoCusWright and IATA continues to show that more and more consumers are now first shopping on the Net before calling a travel professional. The agent is now competing with the Net for the travelers’ business. Content distribution today is no longer limited to a GDS – there is content available on the net from the consumer booking engines (Expedia, Travelocity, Orbitz, CheapTickets, etc.), from the consolidators, airline web sites, and wholesalers. In this environment, it is absolutely critical for an agency to have multiple sources of content for comparison so they can satisfy the consumers and book the best option acceptable to their client in an efficient and effective manner.
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Ritesh Gupta: How do you assess the agreement between Farelogix and Emirates Airline? How do you think the agreement with Emirates is going to be a trendsetter in this market? Rajiv Aggarwal: With the exception of a handful of carriers, the only group not making any money in the travel supply chain is the airline itself. Yields have decreased, costs have risen, and fares have remained pretty well constant. No airline today could automatically accept the pricing provided by the traditional distribution channels. As a result, effectively managing distribution cost has become critical for the carriers’ continued profitability. At one time, there was little competition and few alternatives for distribution. Today, advances in technology and the Internet have enabled companies like Farelogix to enter the market at a global level, offering new distribution methodologies at a fraction of current costs. Emirates is known around the industry as having a visionary leadership that is not averse to risk taking. EK operates in a global environment and is susceptible to traditionally high distribution costs like any other carrier – be it in North America, Europe, or anywhere else. They are competing with other carriers for each and every passenger sale in every corner of the world. In this environment, any edge you can gain for the company can only help the bottom line. Emirates has gained a significant market advantage by tackling these distribution costs head on. Their deal with Farelogix will enable EK to lower their costs per ticket sold and gain back the lost yields, without affecting the traveler. In fact, we believe that this agreement between Farelogix and EK will lead to more agreements between alternative distribution providers and airlines. There are already quite a number of carriers that emulate this carrier – they will be the first ones to look at the possible advantages that companies like Farelogix can deliver. And, due to the global nature of this business, other major carriers will also have no choice but to follow in EK’s footprints if they want to remain competitive within the industry.
Ritesh Gupta: What are your expectations from the Middle East? What are the striking feature of this market? Rajiv Aggarwal: Our expectations are certainly high for the region. There are a number of young carriers within this region that share global aspirations. And they are learning from the some of the largest and best carriers in the world. The most striking feature of this market is its entrepreneurial spirit – with the largest number of aircraft on order, continued double digit growth, strong managements, and high levels of customer service on the ground and in the air – this region typifies the glory days of air travel. This spirit bodes well for success for the carriers in the region.
Ritesh Gupta: A section of the industry feels there has been a lot of inaccurate information about distribution with GNEs, which has been disseminated by legacy GDS’ and others who either don’t fully understand the value proposition. How are you addressing such concerns? Rajiv Aggarwal: We are new entrants in an old industry and there are bound to be misconceptions and misperceptions about us. We will only begin to break down barriers once we begin delivering what we have been promising the industry. That day is fast approaching.
Ritesh Gupta: Considering its highly scalable plug and play architecture, how quickly do you think Farelogix FLX Platform will be penetrating into the Middle East? Rajiv Aggarwal: Penetrating the local market has nothing to do with our architecture – rather, our entry into this market will be highly dependent on our partnerships and our abilities to break down barriers within the local environment. For this reason, we are being very careful with selecting our partners. We believe that strategic partnerships with a select few dominant players in their home markets and international arena will serve us well in the long run. Emirates is one of our key strategic partners for the region.
Ritesh Gupta: It was earlier announced that Farelogix will be moving forward with BSP (Bank Settlement Plan) certification to ensure that its multi-source distribution and independent faring technology is available to airlines and agencies outside of North America. Farelogix will initially target BSP certification across EMEA markets in Fall 2006. How is this shaping up? What targets has the company set? Rajiv Aggarwal: Farelogix is now working with several BSP around the world for certification purposes. We expect to have certification in at least three countries completed by year-end 2006. We expect to add a further 10 by end of Q2/07 and 20 by year end/07. Farelogix and its participant carriers select target countries jointly.
Ritesh Gupta: A lot of carriers have signed new content deals this year in the US. How are such deals impacting your business? Rajiv Aggarwal: Truly speaking, it is a great for Farelogix. By virtue of their ongoing contract talks, airlines are beginning to understand the advantage that we bring to the table in terms of costs, technology, and flexibility. Our total value proposition is gaining us wide acceptance and helping us get “full content” deals with our participant carriers for published, negotiated, corporate, and web fares.
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