Business & Finance
04:15 PM
Tony Kontzer
Tony Kontzer

US Airways Plays IT Bargaining Chip

America West had become quite adept at selling tickets online. So why has US Airways, the airline created through the 2005 merger of America West and the old US Airways, inked a long-term deal to provide its entire airfare inventory through the Sabre Travel Network?

Most airlines have contracts with third-party booking engine operators such as Amadeus, Galileo, Sabre, and Worldspan on which travel agents and corporate travel departments rely. But while those service companies offer airlines slightly discounted fees in exchange for long-term commitments, they still charge about $12 for each ticket sold.

Many of those contracts expire this year. Airlines, meanwhile, have been trying to increase sales through their own Web sites. Last year America West booked 28% of its revenue through its site. (The old US Airways, in contrast, was more dependent on the travel-agent distribution channel and generated minimal sales through its own Web site.) America West also launched its own corporate booking portal in 2004 with the stated intention of bypassing the Galileos and Sabres by letting travel agents book fares that reflected their corporate travel policies.

So it came as a surprise earlier this month when US Airways signed a new five-year deal with Sabre and said it will cease further development of the corporate booking site. But the contract provides the airline with a fee structure that better fits its low-cost business model. (Details of the fee structure weren't disclosed.)

Did America West's corporate booking site provide the new US Airways with more bargaining leverage? It wasn't meant to be a bargaining tool, says Scott Kirby, the airline's executive VP. While he acknowledges that the corporate site could never match the volume of the agency booking systems--business customers aren't willing to shop across airline sites looking for the best fares--Kirby says having the portal gave the airline a certain amount of confidence in its negotiations with Sabre and other booking-system service providers.

"We had to convince the [booking systems] that, if necessary, we were prepared to go on our own," he says. "Even if it's a lesser alternative, it's an alternative."

Return to the story:
Merger On The Fly

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