Kirloskar Institute of Advanced Management Studies, Harihar

Case Writing – Strategic Information Technology

Case – “The Impact of E-Commerce Technology on the Air Travel

Industry”

Submitted to
Mr. Syed Nazimuddeen

Submitted by-
Giridhar Mohota (21)
Nidhi Maheshwari (50)
Rohit Sharma (70)
Shashi Shekhar Sharma (79)
Shashikant Sharda (80)
 1. SYSTEMS:

GDS

 GDS: Different airlines’ reservation systems, travel agents, hotels, etc communicate with
one another in real time. An agent can access and book flights on other carriers via its
primary system.
 GDS enabled travel and service providers the ability to market to customers in remote
locations.
 From 1980 a new concept of Consolidator was emerged where, companies who
purchased blocks of unsold seats from airlines and were able to sell direct to the customer
at a lower price than the Travel Agent could offer using GDS pricing.
 Due to the GDS Pricing customers became aware of the differential pricing strategies
used by airlines and became more price-sensitive.

SABRE – American Airline system - Launched in the early 1960s

 SABRE (Semi-Automated Business Research Environment) was developed by American

Airlines in conjunction with IBM.
 SABRE – First computerized system for American airline (AA) reservation counter
from USA to Canada to Mexico.
 Other player filed lawsuit against AA for being unfair, because they listed first in the
system.
 Other systems competing SABRE were Apollo from United Airways, PARS from Trans
World Airline, and DATAS from Delta.
 SABRE connected 50000+ hotels, travel agents, contents 450+ airlines & etc which made
SABRE a largest GDS.
 SABRE - as an evolving set of systems, it is continuous evolution in combination with
the opportunistic exploitation of opportunities offered by the industry environment.

2. ANALYSIS:

Changing Environment:

In the 1960s, a travel agent would find a suitable flight in the printed schedules published by
individual airlines and make a reservation and in turn got a flat commission fee for the booking.

PRE – COMPUTERIZATION AIR TRAVEL INDUSTRY

SABRE was the first computerized airline reservation system, serving American Airlines
reservation counters
• In 1976, travel agents were first offered a direct, remote-access service.
• In 1985, SABRE was the first system to allow consumers to access airline, hotel and car rental
reservations.
• In 1996, the SABRE Technology Group launched Travelocity.com.
• New innovations included wireless connectivity and the use of hand-held devices.

Two recent trends:

 Emergence of Global Distribution Systems (GDS), served as the main channel for airline
ticket distribution in the USA. The advent of GDS changed the balance of power and the
main players in the air travel industry and diversified travel agents into selling multiple
products, all of which can be reserved in real time.

 The second development is an increasing familiarity with Internet technology, on the part
of consumers.

AIR TRAVEL INDUSTRY POST GDS

Current situation:

Following e-commerce developments, the travel industry is segmented between:

1. Traditional travel agents serving an increasingly smaller pool of individual customers
who do not wish to spend the time and effort in searching for lower-priced travel.

2. Traditional travel agents serving the corporate market, whose margins are increasingly
eroded by competition on customer rebates and by commission-limiting strategies on the
part of airlines and other travel providers.
 3. Consolidators whose business is increasingly threatened by the dynamic pricing strategies
of online and direct sales channels.

4. Online travel agents who serve the corporate market and price-sensitive individuals.

5. Travel providers selling directly

6. Influences on the air travel industry include increased competition through globalization,
changing customer lifestyles, and the perception of risk that consumers attach to air
travel.

7. Some market trends include increased consumer knowledge about product offerings

8. Technology trends include the ever-increasing sophistication of data mining and

customer relationship management software

9. Individual e-commerce customers are demanding and often unforgiving.

10. The challenge for airlines, in common with other businesses, will be to offer a consistent
customer experience across channels.

3. TOOLS AND METHODS:

 Metamediaries: A company that acts as the single point of contact between online
customers and suppliers. Metamediaries are also referred to as middlemen or third-party
providers.
Relevance in the case:
 Travel provider websites
 Consolidators
 Internet Travel Agencies (Travelocity,expedia.com)
 Company websites.
 Primary business Process: This was the pre – computerization air travel industry.
 Secondary business Process:
 Technology development: Advent of online reservation system.(SABRE,GDS)
 Development of online portals by companies and Travel Agents.
 Shift from Brick and Mortar format to Brick and click
 Increase awareness of Internet systems by the customers.
 Online Portals like – Travelocity, Expedia etc.
 Migrate from selling products to services
 From airline’s point of view: The airline companies shifted their focus from modes of
selling the tickets to developing software or provide services to the customers that will
help in boosting the sales.(SABRE,GDS)
 From Travel Agents point of view: To fight with the competition they started selling
other services like car rentals hotel rooms, etc with the regular air tickets.
 Many companies came up with developing tour packages for the customers (air tickets,
hotel stay, and car rentals) in order to attract customers.
 The companies also concentrated on providing differentiated services in order to attract
and retain customers.