Ever since deregulation, airlines have been unhappy with how their products are sold. Before deregulation, there was enough money swooshing through the system to keep everyone satisfied. Travel agents earned significant commissions on the sale of airline seats, agency automation systems benefited from a thirst for technology, and airlines were content with the modest slice of direct bookings attained through call centers. Deregulation arrived in the US in 1978, and gradually spread elsewhere through the world, and thus began the grand disruption of the entire business of selling travel.
Market share would no longer be influenced on the basis of extravagant onboard service such as American’s 747 flying lounge for economy class customers displayed on this page. Discounted fares focused consumer attention on the lowest fare. In addition, the new world of distribution and pricing sought to steer business using a dizzying array of travel agency commission structures and air fares. These were the new financial tools used by airlines to preserve revenue in a travel market which had become highly competitive. The entry of low-cost carriers – which were happy to sell directly to consumers – would cause even more complications.
The arrival of the internet was viewed as a method to slash growing distribution costs. Airlines happily positioned online travel agents (OTAs) as leverage against the now-strained relationships with traditional travel agents and global distribution systems. As testimony to this new strategy, American, Continental, Delta, Northwest, and United Airlines cooperated as investors to launch the Orbitz.com booking site.
In the US, your typical main street travel agency storefront virtually disappeared. And yet these traditional agencies contributed a very solid 20 percent of airline bookings in 2016 per a global survey of industry executives.
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