Scandinavian Airlines’ newly proposed distribution model is drawing consternation from agency groups and facing questions from corporate travel buyers.

Announced last week and effective March 2023, SAS proposes to pay agencies in Denmark, Norway and Sweden a tiered upfront commission for sales, but claw back distribution costs incurred on each agency’s behalf. The airline’s New Distribution Capability-hooked commercial program is not optional in the airline’s home markets.

For agencies relying on global distribution systems, proposed commissions (up to €2.50 per fare component) are unlikely to cover passed-on costs (up to €12 per ticketed segment). Further, SAS’ decision to retrieve such expenses by dinging agencies with debit memos, while novel, will deal administrative burdens to travel management companies, and, in many cases, new pass-through costs for their corporate clients.

While a proponent of model change, Ann Cederhall, an airline distribution consultant based in Sweden, called this commercial approach “a bit odd” and “overly complex.” The fact that SAS is paying agency commissions “per fare component” but billing distribution costs “per segment” is indicative of that view, she noted.

“Admin costs are going to increase significantly,” she said of the impact on TMCs. “They are going to have to rethink their corporate contracts. Auditing costs are going to go up. They will need invoicing processes that can support both worlds.”

Berg-Hansen is a sizable Nordic TMC, and CEO Per Arne Villadsen last week noted the company will “probably” continue to distribute SAS “independent” of its new distribution program, “but content and pricing will be subject for change.”

As he sees it, the cost burden is poised to shift to the client, and “any GDS fee will be charged the traveler.”

Berg-Hansen “will not enter any NDC agreement without a robust and long-term agreement which includes technical and commercial provisions,” he added.

Several TMCs and buyers said meetings with SAS are on the books for this month. There is plenty to discuss and only five months before launch.

As the airline’s “complex product” collides with its “limited NDC experience,” Villadsen said he didn’t expect SAS to stick the landing on a “full-scale NDC solution” in the timespan.

Further, the airline’s go-to-market plans will be a test for Datalex. The IT provider sits behind SAS’ NDC-based application programming interface and has yet to be tested by airline production at this scale, according to analysis from airline IT and distribution research and advisory firm T2RL.

Although SAS will not levy a point-of-sale GDS booking surcharge, as many European airlines have, the net effect appears to be the same: The buyer will shoulder the cost.

Søren Schødt, managing director of Copenhagen-based TravelpoolEurope, which manages business travel on behalf of 35 companies, the majority based in the Nordics, would actually prefer a point-of-sale surcharge like Lufthansa Group’s trendsetting fee, since “it avoids putting administration on to the agency.”

Also bothersome to the buyer side is SAS’ plans to withhold from GDSs low-tier Go Light fares worldwide, which will be exclusive to NDC-based and airline-direct channels.

This decision, Schødt said, “fragments the distribution chain.” A buyer whose bookings are reliant on GDSs would have to use a separate channel for the lowest-priced content.

“I like the idea that SAS wants to make distribution costs transparent,” he said, “so change the economics, but don’t change the technology.”

Swedish Business Travel Association general manager Lotten Fowler highlighted a similar concern. “To a buyer the most important thing is to have access to all rates and to be able to compare,” she said. “If this is made difficult or impossible, there will be a reaction.”

SBTA and other corporate travel buyers this month will hold meetings with SAS, Fowler noted. As GDSs and TMCs also grapple with the implications, there “are still issues to resolve,” she added.

Meanwhile, SAS’ decision to apply the commercial model only in Denmark, Norway and Sweden could result in agencies securing tickets from alternative International Air Transport Association agency billing locations, Cederhall said.

“I’m concerned it’s going to increase cross-border ticketing, which is never good for the end consumer,” she added. Downstream issues arise when bookers try to change, cancel or refund cross-border tickets, she noted.

Didrik von Seth, managing director of Swedish travel agency group SRF, still was reviewing SAS’ model change. While SRF has meetings with SAS in the coming weeks, his initial feedback was that the model would result in “increased distribution cost and less transparency for end customer.”

“At this stage we question why SAS, under Chapter 11, wants to pursue a risky path which will lead to lost market share within the agency community,” von Seth noted. SAS this summer filed for Chapter 11 protection in the United States, and some suspected financial hardship prompted what they viewed as hasty changes to its distribution model.

SAS on its website acknowledged its spin on the so-called “wholesale” commercial model “is exposing agents to reduced revenue and higher costs,” but added: “Agents have multiple options to choose from and can therefore mitigate the risks.”

Connectivity options include using an approved aggregator, a direct connect or an airline-direct portal. These are common among airlines taking an NDC turn.

If an agency uses a direct connect, the booking commission is theirs to keep. If an agency uses an aggregator like Travelfusion that charges the buy-side for bookings, the incentive would have to cover aggregator costs before an agency can approach being made whole.

SAS won’t charge agencies to use its agent portal, but many TMCs have shunned single-carrier systems since they don’t jibe with workflows or enable competitor offerings.

Denmark-based senior partner of AMM Consulting Ole Hammer Mortensen, a former senior TMC executive, said TMCs set up to access content via API sources will see “neutral” costs. “If they change to an API, they will receive extra income, but they will have the cost of getting APIs up and running.”

“The very big TMCs which have really good deals with the GDSs and airlines won’t be happy,” Mortensen said. “Their infrastructure, even after the past two or three years, is still the same. The system works for them, and they want to keep it as long as possible.”

Even so, SAS’ model may thrust the Scandinavian corporate travel market into the world of API-based distribution, of offers and orders and, perhaps, away from traditional GDS economics and channels.

“The Nordics is a market that hasn’t really been touched by NDC,” said Cederhall. “Lufthansa has tried to implement direct connect in this market, but that’s not been very successful. This isn’t a market that has moved towards aggregators and can incorporate direct-connect content.”

While critical of some commercial elements, Cederhall said: “Kudos to SAS for the effort of doing something to lower distribution cost.”

After all, she contends that “the world would be a better place if agents actually paid for distribution and technology. If they were not to receive incentives and didn’t get technology for free, we would get a completely different landscape. We would see innovation. Instead, we just see them using the technology provided by GDSs.”

~ With additional reporting by Amon Cohen