Category: Internet technology

Information and Communication Technologies (ICTs).

Internet technology and web based commerce have dramatically transformed the airline industry in the last ten years. As travelers embraced the Internet, this enabled airlines to bypass the traditional distribution pattern through travel agencies and sell direct to end consumers. Web distribution combined with cheaper and more flexible technologies allowed new players on the market, low cost airlines (LCCs), to implement effective low-cost direct distribution strategies and intensify competition in the sector. Airline distribution has for many years been synonymous to Central Reservation Systems (CRSs), later termed Global Distribution Systems (GDSs). GDSs have served as the nexus of electronic commerce in travel for decades, providing virtual real-time connectivity between thousands of suppliers of travel inventory (airlines, hotels, car rental, tour operators, cruise lines, etc.) and hundreds of thousands of retail sellers of travel products. GDSs progressively consolidated their position to only four major systems, namely Sabre, Amadeus, Galileo and Wordspan.  Sabre offered its first passenger reservations systems in 1960. Since then, Sabre made continuous technological advances for electronic commerce for the travel and transportation industry. The company operates through four segments: (1) Sabre Travel Network is used by more than 350,000 travel professionals; (2) allows individuals to make their own travel arrangements; (3) Sabre Airline Solutions provides software, e-business tools, and consulting services to improve the operations of some 400 air carriers and airports; and (4) Sabre Hospitality Solutions does the same for hotels. Amadeus is another major player in the industry, providing travel reservation and ticketing systems. More than 100,000 travel agencies and 35,000 airline sales offices use Amadeus’ global distribution system (the world’s largest), which books flights on about 460 airlines. It also makes reservations at some 85,000 hotel properties and about 25 car rental agencies, as well as rail, cruise, tour, and ferry operators. Airline fares were deregulated in 1983 and airlines have been able to charge whatever price they wanted since then. The procedure has been to provide the global distribution systems (GDSs) with fares that would be sold to the public. Negotiated fares, for consolidators, corporations and tour operators would be distributed privately. In 1996, web fares were made available. Individuals who signed up with an airline were emailed information on deeply discounted fares would be announced weekly. These fares were designed to unload seats on routes that had low load factors. Over time, carriers also began offering reservations capability on the Internet and offered lower fares or other inducements such as bonus frequent flyer miles in order to get passengers to book online. When a passenger books online, there are no travel agent commissions or CRS fees. GDS platforms evolved from the original airline central reservation systems (CRSs), which were first introduced decades ago. Up to the 1970s, travel agencies had to locate the best routes and fares for their customers in airline manuals and then call the carrier for availability and reservation. The Internet also brought about the appearance of online travel agencies on the marketplace such as Travelocity and Expedia. Online travel agencies, consumer success and high ambitions made airlines react by setting up Orbitz, an online Web site with direct connect technology to airlines, bypassing GDSs and their booking fees. This entity became a powerful competitor to online travel agencies, and it enabled carriers to connect directly via its technology and avoid GDS booking fees. The leisure travel segment is the one where airlines have the most leverage, yet these are the products which have the highest relative cost of distribution. Travel agents provide their customers with information and advice, make reservations, provide tickets, and other ancillary services. Their services include making reservations on airlines, hotels, car rentals, cruises, tours and other events. The rapid growth of publicly available global distribution systems (GDS) and central reservation systems (CRS) for air passenger bookings has generated a dramatic shift in India. GDS/CRS data for domestic airfares are widely available through consumer portals such as Expedia , Travelocity and Orbitz. Basic travel queries to these portals reveal the real-time airline and fare information for a variety of competing carriers. Information regarding flight routes, departure times, duration and connections are also presented by the GDS. The purpose of this Article is to present a method for acquiring and utilizing GDS data for transportation analysis. Finally, to provide an example of how this GDS data can be used a gravity-based accessibility model, which utilizes network information and itinerary pricing mined from the GDS engines is presented. The reasonable outcome would be to have the airlines offer their web fares at two levels: their site price and their marked up price, depending on the channel of distribution. This would allow them to avoid the costs of the GDSs and it will give them broader market exposure. Their marked up price could include other charges such as credit card fees. Their pricing structure should be made public so that it is understandable to all. 

In this Article I examined the latest developments and transformations in airline distribution, triggered mainly by the emergence and growth of the Internet and open architecture technologies. I have presented the key changes affecting the GDS industry as identified and described by airline distribution research analysts.