GDS talks backfire on BA as ‘rack rates’ kick in

British Airways has declined an offer to re-sign its four GDS distribution contracts, which expired on 28 February, and admits costs imposed this week are “not sustainable”.

The UK’s flag carrier has also turned down an olive branch offer by at least one GDS to temporarily extend its existing contracts for 30 days, according to sources close to the negotiations.

This means that BA is now subject to much higher GDS fees after the passing of the negotiation deadline this week.

“”When the contracts went away, so did BA’s discounts and so BA is now subject to the GDS rack rate,” said one source.

Under its old contract, BA was entitled to deep discounts, paying around £2 per segment and lower rates on certain routes and ticket types. The average, non-discounted GDS rate, which BA is now subject to, is roughly twice that amount.

A spokesperson for BA confirmed this morning that the carrier had failed to reach “any agreements on subsequent contracts”.

BA also conceded that, as a result of failing to reach to an agreement, it is now incurring “significant increases” in costs for all fares sold via the trade.

“These costs are not sustainable for us in the long-term and therefore we continue to consider a number of options should we not reach agreements with the GDSs in the near future,” a BA spokesperson told Travolution.

As of today, BA said all content will continue to be distributed via all the GDSs. So long as that remains the case the news is not all bad for travel agents.

Under the old BA-GDS contracts, agents that had wanted full access to BA’s inventory had to “opt-in” to a scheme under which they paid 50p per segment. Those that did not opt-in were subject to a £2 surcharge.

With those contracts now expired, travel agents, technically, are no longer subject to any surcharges.

Galileo said today that is has removed the opt-in fees for this month and a source close to another GDS said it also has no intention of passing on any new fees to travel agents.

“Agents will not be out of pocket because of this,” a senior figure at one of the GDSs said this morning.

“At this point we’re looking for a temporary solution,” said a source close to one of the GDSs, indicating that the chances of reaching a new multi-year deal are, at least for now, not promising.

All parties involved say negotiations are ongoing, but declined to comment further.

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