JetBlue Withdraws From Sabre; Other Carriers Could FollowJetBlue Withdraws From Sabre; Other Carriers Could Follow
Just 2% of the low-cost carrier's ticket sales came through the computer network, while Web sales are taking off.
December 16, 2004
JetBlue Airways Corp. said this week it plans to drop out of the Sabre electronic ticketing system by Jan. 1, a move that could cause other airlines to follow suit.
Bookings on Sabre, the software system operated by Sabre Holdings Corp., account for just 2% of JetBlue's sales, says sales and distribution director Noreen Courtney-Wilds. But sales through Sabre have been the airline's most expensive, while it's keeping costs down by funneling business and leisure travelers through its Web sites, she says. Revenue from ticket sales through Jetblue.com and a corporate travel Web site launched in June accounted for 75% of JetBlue's third-quarter sales. Travel-agency executives and airline-industry analysts say that additional carriers could reduce their dependence on the electronic "global distribution systems" such as Sabre and Cendant Corp.'s Galileo. The systems have been the primary way travel agencies and corporate travel departments book flights, hotels, and rental cars. "We're going to see some shake-up the second half of next year," says Norm Rose, president of Travel Tech Consulting and an analyst with research firm PhoCusWright. Loren Brown, CIO of Carlson Wagonlit Travel Inc., the world's second-largest agency, says the airlines "have made it clear that they don't see the value in the price point" of the distribution systems. Sabre and Galileo customarily charge airlines between $4 and $5 per flight segment, which means a round-trip flight with a stopover would result in a fee of about $20. Carlson will continue to rely heavily on the distribution systems because asking agents to use multiple tools would be inefficient, Brown says. But the agency is also trying to provide its customers with as many choices as possible by connecting directly to carriers' Web sites. Airline-industry analysts say JetBlue's move isn't expected to have a substantial financial impact on either JetBlue or Sabre, but it could signal the beginning of withdrawals from the distribution systems by additional airlines. That could affect Sabre's finances in the future. "That's always been one of our concerns with Sabre," Standard & Poor's analyst Betsy Snyder says. "Airlines trying to cut those costs could potentially put a dent in their revenue." Scott Anderson, manager of national accounts at Southwest Airlines Co., says the company has no plans to withdraw from Sabre. But the airline generates just 12% of its revenue through Sabre, and that figure is dropping as online bookings increase. Larger carriers such as American, Continental, Northwest, and United generate more than half their bookings through global distribution systems. A spokesman for Sabre says JetBlue accounted for just one-tenth of 1% of its total bookings, and that other low-cost carriers like Southwest, West Jet, and Independence Air continue to participate. During a conference call with analysts earlier this month, Sabre CEO Sam Gilliland said global distribution systems and travel agencies "will continue to be a significant channel for suppliers for a long time to come." Still, airlines have been vocal about asking Sabre and Galileo--as well as their competitors Worldspan LP and Amadeus Global Travel Distribution SA--to reduce their fees. But earlier this month Sabre said it would proceed with its annual fee increase next year. Both Sabre and Galileo have tried to become more attractive to airlines though, in part by updating their IT. Sabre has been moving its software from mainframe systems to less-costly and more-flexible computers. Galileo earlier this year purchased travel Web site Orbitz and its SupplierLink technology, which enables direct connections between travel agencies and the airlines' reservations systems. Galileo also this month completed an upgrade to its fare system that it says will reduce the number of data-entry errors and resulting refund requests by travel agents. This story was modified Dec. 17.
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