Global distribution systems (GDS) continue to weather airline criticism over transaction fees, but they claim to be responding with new price models and more attractive products, while simultaneously repositioning their own businesses
David Jones, executive vice-president commercial at Amadeus, borrows from Mark Twain to illustrate his view of the future of GDSs: “Rumours of our death were greatly exaggerated.” While it is almost certainly true that the sale of air tickets via a GDS is, and will continue to be, huge, the big-four players are being forced to change their business models radically – and fast. To stay relevant, the GDSs are creating new pricing models to satisfy the demands of full-service carriers for lower distribution costs, new products to tempt low-cost carriers into the fold, while diversifying into new areas like IT services and adding other online travel-related content, such as hotels and car hire.
“Our focus is on content and to expand the proposition to go beyond being a cost to a potential revenue stream for a carrier,” says Bryan Conway, group vice-president at Cendant Travel Distribution Services. This could come from its Orbitz or ebookers travel websites, or other Cendant content like online hotel website Octopus. “We went from a captive market situation where we were the only game in town to a position where we have to justify our commercial value to carriers,” Conway says. “From our point of view, a GDS is a content integrator,” he says. Cendant has been buying up plenty of new content over the past two years, and brings this to the table when talking to carriers about distribution via its Galileo GDS.
At Amadeus, the strategy differs. While the GDS is substantially the largest part of its business, the fastest growing area is in providing IT services to airlines and other travel operators, says Jones. This repositioning is reflected in its name, which has changed from Amadeus Global Travel Distribution to the Amadeus IT Group. Similarly Sabre Group’s approach includes its healthy Solutions IT portfolio, including customised suites that wrap distribution into core airline and airport services through its SabreSonic product.
At Sabre’s core though is the paired powerhouse of the Sabre GDS and Travelocity, one of the three largest online services. Hugh Jones, Sabre’s chief operating officer, says “broad and deep content, multichannel strategy is our strength”.
Worldspan’s Ninan Chacko, chief commercial officer, presents the classic case for the GDS: “We have the widest inventory and can deliver it at the lowest cost.” He also touts the privately held firm’s deal-clincher: “The fundamental value proposition of the GDS keeps coming up in the discussions we’ve had, and increasingly we see an appreciation for the fact that running a dot-com business is not a simple or inexpensive proposition. Running a world class, 24/7, 365-day-a-year website takes a certain kind of resource, a certain type of talent. In the airline industry today it’s pretty tough to attract and keep that talent. We already have it.”
Aware of these same factors, Jones of Amadeus stresses that it will not de-emphasise the GDS. This may be a mature part of its business, but it is still one that has healthy prospects and will be “steady going forward”.
Amadeus is the only one of the big four GDSs that still has airline shareholders. At present, Air France, Iberia and Lufthansa collectively own 45.7% after selling part of their holdings last year. This status quo is likely to remain for now. “It is important to keep an eye on it, to keep some influence,” says Lufthansa, which would be reluctant to unilaterally sell its stake if its competitors retained theirs. A possible change could arise if Europe’s GDS market is deregulated, which is under discussion ■
MARK PILLING / LONDON AND DAVID FIELD / WASHINGTON
Source: Airline Business
