ITA Software's Lollipop

ITA Software, the king of online air search and pricing, undoubtedly took a big hit when Air Canada cancelled the bulk of the reservations system that ITA had been working on for four years.

Remember that at the height of the pitched debate in 2006 involving ITA, G2 SwitchWorks, Farelogix, Sabre, Amadeus, Galileo and Worldspan about alternative distribution systems and full content in GDSs, ITA abandoned the distribution game, in favor of developing a host system for Air Canada.

Now, to a large extent, that Air Canada project is off the table.

One of ITA's QPX customers told me that the loss of the Air Canada project must feel like "a kick in the shorts" to ITA, and a second customer chimed in: "Anyone who says that the Air Canada thing isn't a HUGE, big-fat deal to ITA is not being truthful."

Meanwhile, one of ITA's investors remarked that ITA has "a healthy balance sheet" and the loss of the Air Canada business "is not tremendously material."

Indeed, ITA's metasearch, online agency and wholesaler customers shouldn't have any fears about the viability of the ITA business.

Look at ITA's client roster, including Continental, United, American, US Airways, Alaska Airlines, Tap Air Portugal, Al Italia, Lot Polish Airlines, ANA, Hawaiian Airlines, Fly.com, Kayak, Bing Travel, Orbitz, FareCompare, TripAdvisor, Accovia, Air Canada Vacations, Cleartrip, Defense Travel Sytems, Farelogix, Hotwire, Travel Impressions, Reardon Commerce and New Travel.

That's a lot of flight queries and quarters rolling in by the second.

The ITA investor with whom I spoke said although there is "disappointment" about losing the Air Canada business, the four-year process enabled ITA to develop a "big lollipop," namely a "brand-spanking new" airline reservations system solution which it can take to interested airlines.

The investor characterized the new reservations system, which is said to be in the testing phase, as an "elegant, open-systems solution for the airline industry."

I sort of doubt, though, that many airlines are in the market for new lollipops at the moment.

I don't see many going on a candy-buying spree in the short term.

After all, having an airline wean itself off a legacy system and transitioning to a new res system is a massive project of the highest complexity.

However, recessions do come to an end at some point, so all hope is not lost.

But, consider that Amadeus and United announced in 2005 that the airline would transition from Apollo to Amadeus hosting by late 2008.

That deadline passed quietly and there's been no sign of any migration in the offing.

I wouldn't be surprised if United pulled an Air Canada, but we'll see.

This airline hosting stuff is a tough business.

And, here is the perspective of someone who knows about some of the challenges.

"I think building reservations systems from scratch are extremely difficult tasks for any company to take on," said the source, who doesn't work for ITA. "If anyone can do it, it is ITA. Virgin America bought what was, at the time, Travelport’s new reservations system, aiRES. It is still a very promising system, but it has taken YEARS to get it where it is, and it is still WELL short of promises made when it was bought."

The source sees a silver lining -- which seems a bit Pollyannish -- for ITA in Air Canada's withdrawal.

"It is interesting that ITA will continue to build out the system for other potential customers. Building a reservations system for a unique carrier like Air Canada (with its unique pricing) is actually not a good starting point, since so much of what they would have built for AC would have been customized and not easily transitioned to a more traditional carrier. So in some ways it may free ITA to build its 'core' system that is attractive to more airlines."

An interesting side note about Air Canada is that it is making some distribution news in re-engaging with travel agents through its travel agency portal and API, which it calls AC2U.

Remember that one of the distribution issues with Air Canada in the last few yeas was that the GDSs couldn't display the airline's branded fares in the way the airline sought.

Using the API, Air Canada has hooked up with:

• Agencia by Travelport;

• VTOLite+ and Hawkeye by Farelogix;

• ConvergentPro by Convergentware;

• Cliqbook by Concur Technologies;

• KDS Portal and KDS Corporate by KDS; and

• ResX by TRX

And, although Air Canada has reached out to Canadian agencies with commissions and hooked up to the above distributors and corporate-self booking tools via AC2U, there aren't any new developments with Sabre, which had a big falling out with the airline.

Airline spokesman John Reber said: "There are no specific developments with Sabre at this time. However, we continue to dialogue with them regarding potential solutions."

Maybe some lollipops would work.

Monday's Travel InsideOut

Twitter, the social media site with the nebulous business model, apparently is getting set to make good on its pledge to start charging for premium services, including business accounts. In a move widely interpreted as a step in that direction, every Twitter page now has a Business link on the bottom, leading to Twitter 101, a business guide to Twitter. The business guide includes case studies, including the following one tracing the evolution of JetBlue’s use of Twitter.

Twitter: @JetBlue: It's Fun, But Does it Scale?: When JetBlue joined Twitter in the spring of 2007, it was one of the first major brands to do so. Today, the company has nearly a million of followers, and its account is often cited as an example of smart corporate twittering. But the company started out on Twitter with modest goals. It wanted to help customers. Read more

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Getaroom.com’s unpublished hotel discounts over the phone sound like a great idea so I dialed for dollars, so to speak, and put its value proposition to the test.

Dennis Schaal Blog: Getaroom.com's Phone Rates and Manner Fall Flat: I briefly and unscientifically tested the getaroom.com call center experience and wasn't impressed with its unpublished rates over the phone and its customer-service style.

Hotwire offered much steeper discounts for properties with the same star ratings and city areas in two instances, while getaroom.com's phone rate bested Hotwire's opaque rate by a few bucks in a third test. Read more

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With their Star Alliance collaboration given the green light, United and Continental plan to get very cozy in their technology relationship.

Travel Weekly: Continental, United to seek shared technology platform: Continental and United plan to forge a common information technology system as part of their new relationship as Star Alliance partners, Continental CEO Larry Kellner said. Read more

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Yahoo and Microsoft reportedly are moving closer to a search deal, an alliance that could positively impact Bing Travel if the partnership makes Bing a stronger competitor against Google.

Advertising Age: Do You Bing? Yahooers May Soon Search With Microsoft: NEW YORK (AdAge.com) -- Yahoo is close to making Microsoft's Bing its search provider. The deal, which would make Microsoft a more credible competitor to Google, is likely to be announced this week, and seems likely to be based on a revenue share, not on a big fat check upfront, as some at Yahoo had hoped. Read more

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Times are tough for the airline industry. But is it prudent to gouge your customers a bit more during the height of a recession by increasing checked bag fees?

Yahoo Finance/Reuters: AMR raises bag check fees for domestic flights: CHICAGO (Reuters) - AMR Corp (NYSE:AMR - News), parent of American Airlines, said on Friday it would raise by $5 the fee it charges to check a first or second bag on domestic flights. Read more

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Global distribution systems have their developer agreements, enabling third parties to build applications to their systems. But Farelogix, in making its Hawkeye point of sale application available for public download, did something completely different -- it released the application’s source code. Here's an update.

Dennis Schaal Blog: Open Source Experiment in Travel Industry a Modest Success: I was reading about open source Mozilla's challenges now that Google has entered the browser market with Google Chrome, and that reminded me that it was time to get an update about the travel industry's own open-source experiment. Read more

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In some quarters, swine flu concerns have subsided, but the problem promises still to be a thorn in the travel industry’s side. Britain recorded “a huge rise” in cases and started screening cruise passengers.

Times Online: Swine flu screening at UK airports amid fear that NHS could be overwhelmed: NHS intensive care services could be overwhelmed by a huge rise in swine flu cases, researchers have warned, as Britain’s port authorities started screening incoming passengers for the first time. Read more

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Travel InsideOut is a Dennis Schaal Blog daily feature. Get a thorough-going look at the day's travel industry top and tangentially interesting stories. Feel free to comment on them below.

Travel InsideOut is Copyright (c) 2009 by Dennis Schaal. All rights reserved.

Open Source Experiment in Travel Industry a Modest Success

I was reading about open source Mozilla's challenges now that Google has entered the browser market with Google Chrome, and that reminded me that it was time to get an update about the travel industry's own open-source experiment.

As you may recall, four months ago travel distributor Farelogix kicked off Project Hawkeye, an open source point-of-sale application and made it available for free downloads.

Farelogix stepped up to the plate and gave away the desktop application's code and documentation in the hope that developers would build applications to it that the travel industry can share.

So far, 450 entities have registered for the Hawkeye source code and downloaded it, says Farelogix CEO Jim Davidson.

It's not entirely a selfless effort on Farelogix's part, of course, because it would hope to gain some customers and revenue by supporting the application, if companies approach it for an assist.

But, this is not a requirement: Companies can download the code for free, run with it, and innovate the hell out of it, just as so many developers did with Mozilla.

Project Hawkeye, with its open-source effort, is a big deal in the travel industry, which has been stifled by proprietary technology and what might be called partisan politics in the geekosphere.

Because companies or individuals can take the Hawkeye code without any further obligations to Farelogix, it is hard to gauge what they are doing with it, if anything.

But, this is what Farelogix knows so far, according to Davidson.

• Farelogix is engaged with three travel management companies which are developing their own highly customized versions of the application, tweaked to their own workflows.

• Some 10 companies have pinged Farelogix back with questions or issues with the code.

• All of the GDSs, which hold onto their own code as if it were the key to Iranian nuclear technology production, have downloaded Hawkeye, as have some airlines.

• Farelogix is aware that "a couple of other technology companies" are developing the code in some way, but the details are unknown. Davidson surmises that the fruits of their efforts may be public in some form in six months to a year.

• Meanwhile, Farelogix, which has developed a few new versions of the code since it was released March 26, is readying another major release of the application in September or October.

So, is Project Hawkeye a success or a failure?

Too soon to tell, really.

Davidson says Farelogix would have considered Hawkeye a success even if Hawkeye had hit 100 downloads -- let alone, 450.

So, the travel industry will have to wait to see if Farelogix's release of an open source desktop application will light the industry's innovation fires.

Hawkeye, a business application, assuredly will not become another Mozilla.

But, maybe Hawkeye will lead to further efforts to tear down the travel industry's "walled garden" -- and that would be a good thing.

The American Dream: AA to Try to Turn Distribution Costs Into Distribution Revenue

In AMR Corp.'s first quarter earnings call yesterday, CEO Gerard Arpey spoke of his "long-term vision" to make travel agencies and global distribution systems (GDSs) pay for the privilege of distributing American Airlines' flights rather than the reverse.

And, even short of that goal, the move could be, well, priceless.

Arpey was quoted as saying: "Tom [CFO Thomas Horton] can jump in here, but I think the same approach that we’ve taken here in the U.S. certainly lends itself to the international distribution of our tickets where we’re still paying much higher levels of commission and booking fees, etc., and I think a lot that hinges on the use of technology and the competitive environment because a lot of those commissions or overrides or booking fees are paid in order to stimulate traffic and if we can, as an industry, do a better job keeping the supply of seats in line with the demand, I think that will help us on those fronts."

Warming to the topic, Arpey spoke of his dream: "So I think there are significant opportunities around the world to make the kind of progress that we’ve made here in the U.S. and not to be too dramatic but I can see a day, and maybe I’m dreaming here, where those folks who are the intermediary between us and our customer, have to pay for access to our product rather than us paying them to distribute our product. So that would be my long-term vision."

Any airline, GDS or travel agency executive in the U.S. recalls the distribution dramatics of 2005 and 2006, when the airlines threatened surcharges and radically cut the distribution fees they paid to GDSs and the incentives that Sabre, Galileo, Worldspan and Amadeus passed on to travel agencies.

Well, Arpey is signalling two things:

1) American Airlines, and others no doubt, are set and already are trying to export to the international arena the slash- and-burn distribution tactics that they successfully employed in the U.S. several years ago.

2) In the U.S., the next round of GDS-airlines booking-fee negotiations in a couple of years may make the prior face-off look like amateur night.

Airlines, of course, have every right to trim their distribution costs to reasonable levels. Before GDS deregulation, the GDSs used their clout and virtual monopoly power to tack on excessive fees to airlines that had little bearing to actual costs.

But now, as Arpey's comments show, the airlines are poised to try to force intermediaries to distribute flights to airline customers for free -- or, taking it to dream-like proportions -- to make online travel agencies, traditional agencies and GDSs pay for access to flights, which, of course, the airlines control.

Between Sabre, with its still-sizable distribution grip, terminating its relationship with Farelogix, and airlines poised to wield their hold over flight inventory to pummel intermediaries, it almost -- but not quite -- makes one wax nostalgiac about the days when these sectors were regulated.

The disruption that the travel industry faced in 2005 and 2006 would be considered a tremor compared with the earthquake that would occur if the airlines succeed in forcing through payless distribution in the next round of contract talks.

These days, the brouhaha may not sell a lot of newspapers, but it would drive a lot of traffic to travel news websites.

Meanwhile, another interesting point about American's first quarter results, is that although AMR's revenue declined 15 percent to $4.8 billion, those checked bag fees and other ancillary services indeed are paying off.

American's revenue from change fees, on-board meals and checked bag fees jumped 6.9 percent to $558 million in the quarter.

In the American (Airlines) Dream, those feels increasingly will be in the picture.