Airline’s Distribution Channels

In the early days of the Reservations systems development and for many years thereafter, the main driving force behind development of the distribution channels were airlines. During this period, several transformations of the distribution channels occurred, but they all had in mind to ensure that airline�s are able to maintain visibility of the airline�s product among the Travel Agents, "at any cost".

This is understandable knowing that traditionally, over 60% of all bookings were made by the Travel Agents.

However, the costs of the distribution channels, Reservations systems and IT related payrolls, gradually rose to become the third largest costs item, of the total airlines expenditure, maintaining very little relation to the airline�s revenue results.

During first decade of 2000�s, the major airlines started to distance themselves from the GDS ownerships, ending the period with most airlines completely relinquishing direct control of their Reservations systems on behalf of the GDS companies.

Today, the transformation of the airline�s distribution channels is still not completed; it is in its transitional phase. The old Reservations systems built with the technology of 60�s are consolidated in fewer larger GDS and Reservations Hosting vendors, but the Industry is still burdened with inefficiency of the standards pushed by IATA, primarily developed to protect the largest airlines, and to keep the old model floating, until the major Industry players are ready to catch up with the new developments.

The Reservations systems and GDS distribution channels, governed by the standards developed under auspices of IATA, and primarily using SITA networking and airport infrastructure, used by the traditional major carriers are often referred to as the "Legacy World".

During past several years, Industry has seen some successful new market entrants such as Southwest Airlines, Easyjet, and Ryanair. These airlines were not being preoccupied with cloning of the distribution channels and trends established by the major carriers, and they were not being afraid of building and pursuing a new business model, where the word of "Industry standard" Reservations system or Distribution Channel, didn�t have significant bearing on their decision to define a new distribution model.

The successes of these carriers quickly revealed that substantial cost saving can be achieved, with improved market reach, by utilizing Internet as the major distribution channel.