JetBlue recognizes value of GDS

Implications: After a summer of "beating" by the airlines in contract negotiations, the GDS' are finally getting some much deserved recognition as a channel.

Last week JetBlue's CEO David Neeleman hailed the GDS channel for the opportunity to attract new customers to the airline and more importantly, to extract higher ticket prices. 

JetBlue is seeing two-thirds of the traffic coming from the GDS channel as new customers and more importantly, is seeing higher yield per ticket.


Analysis: JetBlue had previously not distributed its product through the GDS systems (Galileo, Sabre and Worldspan).  It recently decided to re-enter those systems this summer.

GDS bookings are yielding $35 more per ticket, net of GDS fees, and are booking on "off-peak" days in the middle of the week, filling out JetBlue's flights at much needed times. 

JetBlue's CEO David Neeleman believes that the incremental business should help JetBlue's margins and boost revenue by as much as $100 million in 2007.

At the same time that JetBlue is getting closer to the airlines, Air Canada announced intentions to move even further away from the GDS.   Air Canada's changes are centered on a new menu of options available for the consumer (lounge access, advanced seat assignments, in-flight meals, etc.) that the GDS cannot support for the travel agent.

The airlines have made the mistake of looking at only the cost side of the equation in the past and have not taken into consideration the upside of both the variable cost nature of the GDS channel and the higher average revenues.  Those that miss out on the upside will be left with a commoditized product and continually cost cutting - a mediocre growth plan at best.