JetBlue Pulls Out Of Sabre, As Web Sales RiseJetBlue Pulls Out Of Sabre, As Web Sales Rise
Low-cost carrier says just 2% of its bookings came through the network
December 17, 2004
JetBlue Airways Corp. said last 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 computer network operated by Sabre Holdings Corp., account for just 2% of JetBlue's sales, says sales and distribution director Noreen Courtney-Wilds. But those sales have been the airline's most expensive. 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 other 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 about $4 or $5 per flight segment, which means a round-trip flight with a stopover would carry 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 also is 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 an immediate financial impact on either JetBlue or Sabre, but additional withdrawals from the distribution systems could affect Sabre's finances in the future. "That's always been one of our concerns with Sabre," says Standard & Poor's analyst Betsy Snyder. "Airlines trying to cut those costs could potentially put a dent in their revenue."
Southwest Airlines Co. has no plans to withdraw from Sabre, says Scott Anderson, manager of national accounts the airline. But Southwest books just 12% of its revenue through the system, and that figure is dropping as online bookings rise. Larger carriers such as American Airlines, Continental Airlines, Northwest Airlines, and United Airlines 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 bookings, and that other low-cost carriers such as Independence Air, Southwest, and WestJet Airlines continue to participate. During its analyst call 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."
The airlines have asked Sabre and Galileo--and 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.
Both Sabre and Galileo have tried to become more attractive to airlines, in part by updating their IT. Both have been moving their software to more-flexible open platforms. And 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.
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