Northwest Aligns Distribution with Low-Cost Carriers

25th Aug 2004

Northwest Airlines today
announced steps to lower its domestic distribution costs by aligning them
with those of the low-cost carriers it increasingly is competing with for
today’s domestic travelers. Northwest will offer consumers and travel
agents options that allow them to choose the level of service they desire
when purchasing or issuing tickets for travel within the 50 United States.
Domestic tickets issued through Northwest reservations offices in the U.S.
will now include a “Call Center Ticketing Fee,” and domestic tickets
issued through airports in the U.S. and Canada will include an “Airport
Ticketing Fee.” In addition, in an effort to better compete with low-cost
carriers on distribution costs, Northwest will reduce the amount of global
distribution system (GDS) fees it will absorb on domestic tickets. U.S.
and Canada-based travel agents issuing domestic tickets through GDSs will
incur a new “Shared GDS Fee.”

Once fully implemented, the changes are expected to lower Northwest’s
annual domestic distribution costs by approximately $70 million.

Customers using Northwest’s Web site and travel agents using
Northwest’s WorldAgent Direct Web site or other technology that bypass
GDSs will continue to enjoy the convenience of these services without
incurring a ticketing fee or Shared GDS Fee.

“More than 70% of Northwest’s domestic customers have a low-cost carrier
option available to them, and low-cost carriers continue to grow at a
steady pace,” said Tim Griffin, executive vice president of marketing and
distribution. “Since we compete with low-cost carriers on price, it is
essential that we take steps to be competitive with them on distribution
costs, where they currently have a clear cost of business advantage over

In an effort to reduce its distribution costs, beginning August 27, 2004,
Northwest will charge a $5 Call Center Ticketing Fee for each domestic
ticket purchased through one of the airline’s reservations centers in the
U.S. In addition, tickets for domestic travel purchased at Northwest
airport locations in the U.S. and Canada will include a US$10/CAD$13
Airport Ticketing Fee. The charges will be non-refundable, and include
domestic WorldPerks frequent flyer program award tickets. The $5 Call
Center Ticketing Fee and US$10/CAD$13 Airport Ticketing Fee will be per
ticket, regardless of whether it is one-way or roundtrip, for travel
within the 50 U.S.


Domestic tickets, including for WorldPerks frequent flyer award travel,
obtained through Northwest’s Web site will not include
the Call Center Ticketing Fee or Airport Ticketing Fee.

Since the fees only apply to new ticket issuance, no fee will be charged
to discuss a new or existing reservation with an airport customer service
agent or a telephone reservations sales agent.

Many low-cost carriers issue a majority of their tickets through their own
Web sites, providing them with another significant cost advantage. Also,
some low-cost carriers charge a fee on tickets issued with the help of its
reservations call center or airport staff.

Beginning September 1, 2004, Northwest will share part of the GDS expense
with U.S. and Canada-based travel agencies that use a GDS to issue tickets
by imposing a US$3.75/CAD$4.75 one-way, US$7.50/CAD$9.50 roundtrip
per-ticket Shared GDS Fee, on tickets for travel within the 50 U.S.

Unlike many low-cost carriers, Northwest pays an average of $12.50 for
each ticket booked through a GDS, and has absorbed 100% of that cost. In
2003 alone, Northwest paid approximately $180 million in GDS fees.

GDSs take a significant portion of the fees that they collect from
airlines and give back up to one third of them to travel agents as an
incentive for subscribing to the GDS’ services.

Some low-cost carriers do not sell tickets through GDSs, making their
product available to travel agents only through distribution outlets with
far lower costs, such as their own Web sites.

Since the airline does not incur the same GDS fees on tickets issued
through Northwest’s WorldAgent Direct Web site, developed specifically for
travel agents, tickets issued through
will not incur the Shared GDS Fee.

In addition, travel agents who issue tickets through lower-cost third
parties that use technology to bypass GDSs, such as Orbitz’s “Supplier
Link” affiliate agency program, will also not incur the Shared GDS Fee.


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