Archive for the 'Worldspan' Category

Easyjet Opens Old-new Sales Channels

When I saw it in the news that easyJet will sell its seats via GDSs, my first reaction was “oops”. What is a GDS and why is it surprising for the airline industry?

What is a GDS?

The abbreviation stands for Global Distribution System and there are a few of them available in the world. You might have read about Amadeus, Gabriel, Galileo, Worldspan, Apollo or Sabre in our blog.  Airlines use these systems to distribute their products: seat availability and prices. This is the traditional sales channel for airlines. Travel agents also have access to GDSs and they use them to reserve places through them. The reason why low cost carriers do not use this channel is that there are costs attached to each end every transaction and it might happen, that a booking is cancelled, but the airline had costs with it.

Why is it suprising that easyJet starts using GDSs?

Now easyJet opens towards this sales channel, which will definately increase its sales costs. It says it will add a point-of-sale fee to fares booked through the GDSs, ensuring that its Web site “remains our primary distribution channel and fares will always be cheapest when booking direct online. €7.50 will be paid for a one-way ticket, €12 for a return ticket and €5 per segment for a ticket that includes more than 2 segments. Taking the fact GDSs normally charge USD 2-3 per segment for a transaction, they must have thought about cancelled bookings by creating the new fees.

 Why is it still very logical?

The intention behind easyJet’s step was to open towards business travellers. The characteristics of business travellers are that

– they usually travel in and out within a day or maximum 2-3 days – by this characteristic low costs are better for a traveller as traditional airlines usually charge much more for these short returns than low costs

– they like loyalty programs, especially if the company allows them to collect miles during business trip that they can use for leisure purposes – this is something low costs do not have yet, although I believe there are some low costs seriously considering it.

– they do not arrange their trips for themselves, they have travel agents to arrange it for them – now this is the weakness of low costs, because the real big agencies like Amex will do their best to make their reservations via GDSs, so they loose business by not being present in them. And this is the point where Easyjet decided on taking action.

Easyjet

Low cost trends

easyJet is a follower with this strategy. They just copied the model of 2 US low cost carriers: Jet Blue Airways and Southwest Airlines. So what is happening in the airline industry?

The classic low cost model is that they save money on sales channel costs and spend it on direct advertising, thus generating direct traffic for themselves. It is a clear trend that the gap between low costs and traditional network carriers is narrowing.  Network carriers are forced to keep up in the tough competition with low costs, so their reaction against the low cost attack was reducing sales cost by directing more passengers towards their direct online sales channel (their website), stopping costly services like hot meal on board, basically giving less service for a lower cost. Besides that they give even higher services and better for their business and first class passengers to gain more revenue from that segment.

On the other hand low costs have to compete with each other, too. So we can see they start giving sandwiches and refresheners on board (for example Sky Europe) and start selling tickets via GDSs. Next steps can be loyalty programs, code share flights or at least strategic cooperations and different cabin classes, but the latter one is less realistic. The tendency is clear: at the end there will be very similar airlines, some of them offering long haul and very high niveau first class services, but for us, “the rest” it will be irrelevant whether we will fly a low cost or a traditional airline.

Related articles:

Easyjet acquires GB Airways
Self designed uniforms at easyJet

By Szafi 
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Worldspan Joins Galileo and Apollo at Travelport

Worldspan by Travelport Logo

According to the news today, Travelport, the parent company of Galileo and Apollo GDS platforms has completed its $1.4 billion (!) acquisition of Worldspan yesterday after the deal was given regulatory clearance by the European Commission, which concluded that the reduction of GDSs operating in the European Economic Area from four to three would be “unlikely to result in coordinated behavior” between the remaining GDSs. “The Commission has therefore concluded that the proposed transaction would not significantly impede effective competition within the EEA or a significant part of it,” it said. Galileo and Worldspan are the second- and fourth-largest GDSs respectively operating in the EU.

This move makes Travelport a dominant player in the field, by controlling three major GDS platforms. While Travelport has talked of potential synergies between Galileo and Worldspan, it also has indicated that it won’t merge the platforms. Galileo said that even if it thought forced migration was a good idea, “attempts to do this in the past by some of our competitor GDSs have shown that such a strategy would be likely to fail.” According to ATW News, that is likely a reference to Amadeus, which experienced some rocky moments 10 years ago when it acquired System One and forced to migrate its users to the Amadeus system. We will have to sit back and wait for a few months/years to see if this will really be the case. It would be also a possible solution for bigger cost-cutting that the three Travelport controlled GDSs do actually merge in the background, but will keep three UI’s and brand-names to keep the travel agencies and suppliers happy and not to force a migration. Galileo and Apollo are strong with travel agencies, while Worldspan has the extra value of having airline customers and products, and very good online tools. Worldspan also cooperates with SITA on electronic ticketing and ET hub solution for airlines for example. In the world of always improving airline websites and booking engines, a GDS needs to keep up a good online presence (which allows travel agencies to become online travel agencies), which Worldspan has been very good in. In Hungary there has been a major travel agency that only made the move from Galileo to Worldspan to enable itself to enter the online travel market.

Galileo will be enhanced by Worldspan’s online distribution technology platform, while Worldspan will benefit from Galileo’s expanded supplier base and expansive content,” Travelport GDS President and CEO Gordon Wilson said. “The complementary strengths of both companies will bring improved offerings for our agency and supplier customers, and we are particularly excited about the technology innovations and breadth of services we will be able to bring our suppliers and subscribers in the future.

Galileo and Worldspan produced more than 379 million combined air bookings in 2006 while operating in 145 countries and processing as many as 15,000 transactions per sec., according to Travelport. The combined company will serve 750 travel suppliers and 63,000 travel agencies.

by balint01


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