Sabre Airlines

Sabre airlines

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Information technology is a generic term. In fact there is a system of information technologies. The largest and most important information systems in the tourism sector are the computer reservation systems. The US Department of Transportation defines a CRS as 'a periodically updated central data base that is accessed by subscribers through computer terminals'. They have emerged as the dominant technology.

Computer reservation systems (CRSs) were developed by the airlines. They are primarily tools used by airlines to maintain inventory control of their seat offerings. They have played a significant role in facilitating increasing volumes of travel over the last two decades. A significant shift is now occurring towards global distribution systems (GDS) and increased competition amongst airline groups seeking to broaden and strengthen their product distribution through developing regional global CRSs. A GDS takes the inventory from a CRS (or from many of them) and distributes it via travel agents and other distribution outlets. A GDS has no specific airline inventory control functions other than to 'report back' (French 1998). Since the early 1990s their function has expanded to include many other travel products (e.g. accommodation, rent a car, etc.) and to embrace alternative means of distribution to travel agents, such as Internet. Originally they were developed by groups of airlines in order to automate and facilitate reservations and ticketing both by the airlines themselves and travel agents. Five global or very large regional GDSs emerged, selling their services by signing up travel agencies and usually providing them with the necessary computers and IT back-up. Agents could make bookings via their GDS-many agents might be linked to more than one GDS-but the airlines then paid a fee to the GDS provider for each flight sector booked. Airlines using the GDS directly also had to pay the same fees. By switching to the Internet airlines can bypass the GDS and save the GDS fees. The Internet is also producing new and alternative suppliers of search engine technology. For instance, a US company, EDS, has been hosting Continental's reservations system since 1991. GDS providers will suffer loss of business from the process of disintermediation. This will become more severe if virtual online travel agencies also bypass them and book directly with the airlines. Certainly some airlines have foreseen the declining importance of GDS and have sold their shares. They have felt that GDS was a non-core activity and, since by the late 1990s all GDS carried the same unbiased travel information, ownership of a GDS no longer provided airlines with a competitive edge. Moreover, by selling their GDS shares airlines could realise significant profits which were, in some cases, needed to boost flagging airline profits. In 1998-99 both British Airways and KLM, two of the biggest shareholders, sold their shares in Galileo, one of the largest GDS. Other airlines have also divested themselves of some or all of their shares.

Despite the declining interest of airlines in GDS ownership, the latter do have a role to play. The majority of travel agents will continue to make reservations through the GDS. This is especially true of agents in countries where the Internet is not widely used or where personal contact remains an essential part of doing business. They will also continue to be used by some online travel agencies since they provide ideal and powerful search engines. In fact GDS turnover and profits continued to increase in 1999 despite losing their effective monopoly because they spread into new geographical areas, such as the Far East and grew rapidly their car rental, hotel and other non-airline business.

The GDS have been diversifying to ensure their long-term survival. They provide the IT platforms and search engines for many airline websites. The ability of the GDS engines to provide other services such as hotel, car rentals and other booking services makes them potentially very attractive for airlines. Galileo, Sabre and Worldspan, the three largest GDS between them provide the search engines and tools for over 130 airlines. When early in 2000 a group of ten large European airlines announced they would be joining forces to create a new joint website, all four GDS companies, the above three and Amadeus, put in bids. In addition the

American Airlines has been described as the most "widely regarded of late as the industry's best managed and most innovative carrier." Headed by tenacious Robert Crandall, American pioneered two-tier wage rates for labor in 1984. This made expansion a lower-cost endeavor, an opportunity on which American capitalized by creating new hubs in Nashville and Raleigh/ Durham, San Juan and San Jose, and by expanding geographically into Europe, the Caribbean, and Mexico, as well as buying Eastern's Latin American and TWA's London operations. In just six years, American doubled its payroll, to 67,000 workers (from 42,000 in 1984). Today, about half of its workers earn lower, B-scale wages.

In 1989, American purchased Eastern's Latin American routes for $349 million at the bankruptcy sale (which, ironically, Eastern had bought from bankrupt Braniff for $30 million in 1983). To reach these international destinations, American has 446 aircraft on order or option. American has not paid dividends since 1982, reinvesting all its profits and throwing labor a bone or two in profit sharing. In 1988, American paid each worker an average of $2,000 in profit sharing. Thus, it has enjoyed meteoric growth, in 1990 surpassing United as the nation's largest airline.

American was also an innovator in computer reservations systems. Its SABRE system is dangerously successful, hooked up to more than 50,000 locations. American earns a 20 percent return on SABRE operations, far more than it earns on its airline services. American also inaugurated frequent-flyer programs. In 1959, American took the lead in the airline industry in another area when it and IBM announced the development of a Semi-Automated Business Reservations Environment (SABRE). Until the 1970s, SABRE's unduplicated efficiency was a major weapon against United's size. In the mid- 1960s, the airline industry suffered from an overcapacity problem due to the enormous influx of larger aircraft. American initiated reduced-fare plans to fill its aircrafts' empty seats to solve the capacity problem.

Between June 3 and October 30, 1970, there were 10 separate contacts between officials of American and Western Airlines over a possible merger between the two companies. Before the American/Western merger agreement was signed, American had acquired