New technology is shaking up the travel industry by helping airlines connect directly with customers, cater to special demands, cut costs and, potentially, lower ticket prices.
But, as with any shakeup, there are losers.
While the 5-year-old direct-connect model could save airlines billions, it threatens the livelihood of such legacy reservation providers as Sabre Travel Systems and Travelport-owned Galileo and Worldspan.
For years, these companies have served as middlemen between the airlines and their corporate accounts, travel agents and online ticket agents. They handle about 85% of all tickets sold, but their service costs on average $12 per transaction. That’s about $7 billion over the course of a year — a cost airlines would rather not continue to bear.
Increasingly, airlines are convinced they can do better on their own. It only costs them $2 or $3 to sell a ticket through their own websites — an 80% savings for each transaction, according to industry analysts.
It’s been a painful transformation for the 60-year-old electronic-reservation industry, developed by the airlines long before the Internet, and still referred to by travel agents as GDS, shorthand for “global distribution system.”