Air Transport World

Distribution: It's a bazaar out there.(computerized reservation systems and the airlines)

And the offerings increasingly appear to be bypassing travel agents.

As with living things, so too with companies: Adapt or die. Computer reservation systems, the costly travel agent-based tools that have dominated distribution for two decades, are adapting.

Several years ago, CRSs made a seemingly cosmetic change--they started calling themselves global distribution systems or GDSs. The premise: They no longer would be regional systems but would broaden their geographic and business focus. The result: They no longer are regional. But airlines or their holding companies still have majority ownership of three of the four major GDSs, still control decisions and still obtain 75-80% of their bookings from travel agents.

In other words, the pace of change has been rather slow. Sure, they added new products for travel agents and corporate customers. They expanded outside their geographic origins. Some even merged. And with government prodding they reduced the architectural and display bias toward their owners.

But despite years-long complaints, they did little to reduce costs and fees. Owning airlines could balance their own high booking fees with fee income from nonowners. Low-fare airlines stayed away, of course, choosing the telephone and advertising instead, but that business would be a drop in the bucket anyway. So who cared, except Sabre, which years ago struck a low-cost deal with Southwest. To protect itself, though, SWA kept building reservation centers.

Times change. The Internet onslaught once had people consigning CRSs to distribution heaven. Too soon. The systems are evolving--signing up partners, moving onto and investing in Internet technology, trying to ensure they are part of distribution's future.

This creates a problem. Airlines are pushing hard to sell more seats on the Internet, bypassing travel agents. But carriers have only so much development money to spend on their own websites, GDSs and other distribution channels. Moreover, all of the GDSs or their airline owners are struggling to decide whether or when to sell stock while the market is favorable.

Despite the urge to sell, airlines do not want to lose control of GDSs while Internet and other alternative distribution tools are in their infancy. SITA commissioned a survey that suggests 10% of airline sales are via the Internet. American forecasts $500 million in Web sales this year, compared with 1998 passenger revenues of $14.7 billion.

Terry Jones, Sabre's head of interactive operations, estimates sales by online agency Travelocity may total $600-$700 million in 1999, up from $285 million last year. Lorraine Sileo with PhoCusWright is more optimistic. Microsoft's Expedia online agency is booking $16 million. She suggests it and Travelocity might reach $1 billion each this year, and that US airlines' own websites will produce $2.1 billion in sales. Forrester Research estimates $30 billion a year in tickets and other travel product sales by 2003.

Meanwhile, individual airlines are letting it be known they expect their own online sales to be high. Fiona Swerdlow, Jupiter Communications, estimates that by 2002, 62% of online sales will be from airline websites. Reaching such estimates means airline-direct sales will prevail over other possible online linkups that may or may not include travel agents, agentless GDSs or Brand X vendors to travelers. …

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