Skype Synergies

Silver Lake, the private investment company that teamed with Texas Pacific Group to buy Sabre and Travelocity in 2007, just led an investment group which agreed to take a 65 percent stake in Skype for about $1.9 billion.

eBay will retain a 35 percent equity position in Skype.

When investors buy something like Skype, often there is no topic they like to expound upon more than the "synergies" they will generate from their purchases.

So, on a lazy Saturday afternoon, that got me to thinking.

Can you imagine the synergies if Silver Lake decided to mandate Skype use for customer call center agents in Sabre's Bangalore, India, and Montevideo,Uruguay, facilities?

And, if Silver Lake and Sabre required agents phoning in with questions about formats to don headsets and use Skype, as well?

I've heard a few complaints from travel agents about dealing with call center agents in faraway lands, but can you fathom the potential synergies and cost-savings?

With ideas like these, I could save Sabre billions of dollars.

OK, I'm just having a little fun here with Silver Lake-Skype-Sabre and the alliances, partnerships and unexpected bedfellows that arrive in the travel industry and the larger world of business.

Anyway, that reminds me: I was supposed to have downloaded Skype a week ago.

TripCase: Sabre's Case for Disruptive Mobile Strategy

Sabre's TripCase, already available as a downloadable app on iPhone and Blackberry smartphones, could be a disrupter in the trip-management, itinerary-swapping sphere.

As you probably know, TripIt is a leader in the field and Sabre is a minority investor in TripIt. Despite differences, of course, TripIt and TripCase have a lot of overlapping functionality in the trip-management domain.

And, to make matters more incestuous, Traxo just put its feet on the ground in a beta launch, and several Traxo execs have a lot of years at Sabre's Travelocity on their resumes.

So, we're seemingly in store at some point for a Wild West shootout or perhaps some consolidation as things play out and other players emerge, as well.

Industry veterans have seen this sort of dynamic kick around over and over again as new, innovative solutions emerge and vie for market share.

I wrote in Travel Weekly how tension between TripCase and TripIt likely led to a changing of the guard on the TripIt board.

In January, John Samuel, an exec in Sabre Travel Studios, which developed TripCase, gave up his seat on TripIt's board and was replaced by Chris Kroeger, the president of Sabre GetThere.

In my opinion, Samuel was in an untenable position.

Meanwhile, Sabre is positioning TripCase as both a consumer and corporate tool. For now, it has one big advantage over TripIt, Traxo and other emerging players which are not affiliated with a global distribution system.

If a TripCase user books their travel through a Sabre GDS-connected agency, then their itineraries get automatically updated on their iPhone or Blackberry. On the other hand, users can still keep their itineraries up to date with non-Sabre bookings. If the consumer books a hotel themselves on a hotel or car-rental website, for example, then they can manually enter the reservation information in TripCase.

In contrast, TripIt users have to manually e-mail all of their reservation confirmations to TripIt. And Traxo, armed with consumers' user names and passwords for supplier websites, is engaged in what could be the dicey game of scraping those supplier websites for reservations updates. Although Traxo says it scrapes very lightly, off-hours and once daily.

I plan on speaking with Sabre next week to hear more about its mobile and social-networking strategy. Sabre Travel Studios' cubeless product, a business to business social-networking solution, also seems worthy of some more ink.

So, what is going on with Sabre TripCase versus TripIt?

Norm Rose wrote about the tension several months ago in his blog.

Rose, a senior corporate and technology analyst at PhoCusWright, believes Sabre is employing a typical second-mover strategy in sorting out its position in the mobile arena. [Full disclosure: I recently became a PhoCusWright analyst/contractor.]

"Going back to the early days of corporate booking, the innovators were Internet Travel Network [it became GetThere), TravelNet [no longer around] and eTravel [purchased by Oracle and then sold to Amadeus]," Rose recalls. "In those days, Sabre quickly recognized the innovation and came out with BTS as a competitor. A few years later Sabre acquired GetThere."

So, as a second-mover, Sabre may be able to learn from TripIt's experimentation, attempt to steal its thunder and market share, or eventually buy it.

Rose points out that Sabre long has offered Sabre VirtuallyThere, a co-branded Sabre-agency product that overlaps in its role with TripCase and TripIt, too.

He believes Sabre could decide to blend TripCase and VirtuallyThere in some fashion or let them to co-exist.

Of course, I think if TripCase takes off perhaps Sabre might choose to phase out the VirtuallyThere brand.

At any rate, there is much potential for Sabre and its travel agency customers to leverage TripCase, Rose believes, by upselling things like tours and other destination-oriented products, similar to how airlines are enhancing their bottom lines with ancillary services. Technologies are emerging, including the OS 3.0 operating system for the iPhone, that facilitate such purchases within third-party apps, he adds.

One source, a travel executive who has no dog in the TripCase-TripIt-Traxo fight, speculates that Sabre's mobile strategy and TripIt investment collided because Sabre tends to display a "not-invented-here" mindset. And, since Sabre can't control TripIt as a minority investor and mold TripIt to fit Sabre's mobile strategy, the company indeed decided to build its own.

The strategy also has parallels to the practices of some Web players when they partner with a provider, develop their own solution and then dump the vendor. Rod Cuthbert, founder and chairman of Viator, forever will remember his experiences with Expedia on that front.

As a second-mover, but first-mover among GDSs in mobile trip-management, it might be a nifty move for Sabre to consider making TripCase an agnostic device -- namely offering connectivity to and itinerary updates from multiple GDSs.

Travelport tried to do that with its universal-agency desktop in Canada, but I don't believe it has received much love from Amadeus and Sabre on that front.

As likely will be the case with Sabre's TripCase and its mobile strategy generally, we've seen repeatedly, much to the detriment of innovation in the travel industry, that leading companies prefer to retain their walled gardens.

Amadeus Common IT Platform May Have Been Too Common for American Airlines

On the same day, Aug. 26, that Amadeus IT Group President and CEO David Jones was introducing former President Bill Clinton at the high-profile NBTA conference in San Diego, Amadeus was forced to issue a statement reinforcing its commitment "to airline IT in the North American marketplace..."

The awkward juxtaposition occurred because American Airlines chose that day to announce that HP had signed a letter of intent to develop a new passenger service system, Jetstream, for American, replacing the Sabre host system.

For months, Sabre knew it had been out of the running to get the new contract, and the competition had been narrowed down to HP and Amadeus.

The timing of the HP-AA announcement has people scratching their heads.

Was there a pointed message there for Amadeus? Seemingly so.

While the impetus for American's decision undoubtedly was complex and based on numerous factors, one reason making the rounds is that the Amadeus common IT platform, adopted by Star Alliance carriers and used by some of American's partners in Oneworld, including BA and Iberia, takes a sort of community-governance approach.

In other words, airlines using the platform, which is based on the Amadeus Altea Suite, have a say in establishing development priorities, even voting on major platform decisions.

And, American, according to a source, bristled at the idea of being somewhat of a commoner in this regard within the Amadeus common IT platform set-up.

One little matter starkly absent in Amadeus' statement on its ongoing commitment to the North American market was mention of its 2005 deal to replace Travelport's Apollo system as the host for United Airlines.

Forrester Research analyst Henry Harteveldt said United decided some time ago to go slow on the transition to Amadeus out of cost concerns and on-again, off-again banter about merging with Continental.

Harteveldt said United's move to Amadeus may never take place and the absence of an established carrier client in North America hurt Amadeus' wooing of American.

Harteveldt wrote an excellent piece in the Forrester Blog, detailing the context of American's move to HP.

As we know from United's stilted transition to Amadeus, replacing an airline reservations system is a gargantuan, problematic task, and so far HP merely has signed a letter of intent to get the ball rolling with American.

Another example of host-system interruptus was Air Canada's recent decision to put the brakes on its host-system development contract with ITA Software.

Meanwhile, Sabre, born out of American Airlines and still counting the carrier as among its largest customers, can take solace that any transition to HP will be protracted.

But, as any kid will tell you, it still really hurts to be shunned by a parent.

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.

Travel Metasearch, OTAs Sweating the User Interface, Stupid

When it comes to the new availability of optional services data for the airlines' fee frenzy, the travel metasearch engines and online travel agencies (OTAs) are sweating the user interface (UI).

How do you cram the options into search choices and displays when checked-bag fees may be suited for apples-to-apples comparisons among airlines, but in-flight entertainment choices or paid seats may not?

The challenges for Kayak, FareCompare, Mobissimo, Farecast, TripAdvisor, CheapFlights and the OTAs is how to present a clean UI to consumers that would entice them to pick their optional-services preferences before they execute their search so travelers can take advantage of the new data without the metasearch engines and OTAs totally messing up the UI.

There also still is a technology debate, I'm told, concerning whether the new ATPCO standards are robust enough for airlines bent on those incremental revenue streams that optional services will generate.

Although 13 global airlines, ITA Software and Amadeus made some travel news by testing optional services' feeds with ATPCO, some carriers undoubtedly will build their own nonstandardized solutions, as did United Airlines, Midwest Airlines and Frontier Airlines with the Sabre GDS before ATPCO had completed its standards-crafting.

The GDS UI issue can be easier and more complex than the problem for the metasearch engines and the OTAs. On the one hand, putting optional services on green-screens and in the hands of travel professionals might be easier from a display perspective. On the other hand, the GDSs need to jump through hoops to make all this work with their legacy technology.

Meanwhile, there was an interesting debate yesterday in the comments section about my post, "Airline Optional Services: TripAdvisor, Kayak, Farecast, FareCompare, OTAs to Get the Data."

Hudson Crossing and Valyn Perini of Open Travel Alliance fame cast doubt on whether many consumers will choose to shop for flights based on optional services choices.

A very legitimate point.

But, the more I think about it, the more I think that the issue is a chicken or the egg kind of question.

I think if the metasearch engines and OTAs succeed in creating clean, compelling UIs out of this admittedly morass of optional services choices, then a significant segment of travelers will take advantage of the choices.

That's because it is in consumers' interests to know what they will be paying for in advance, especially if the airlines are offering any new services that actually add value.

On that point, I like the comments yesterday in my blog by Sam Shank, the CEO of Dealbase.com.

Shank wrote: "I've long felt that if a la carte products are positioned as upgrades (vs. add-on fees), and strategically-placed within the purchase decision process, they'll represent a key new source of airline revenue. Metasearch, with their focus on innovation and rapid iteration, is the logical partner for airlines to roll this out to consumers."

He added: "As an air traveler, I'm looking forward to spending more money to have a better flight experience. But, if the only products offered are things I used to get for free, my wallet will remain shut."

Mine, too.

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.

Sabre Edges Past Travelport in Market Share

Sabre, the company that owns Travelocity, went private in 2007 so all those stats that journalists and analysts love to crunch were MIA (as in Missing In Action) over the last two years, until March 5 when the Southlake, Texas, company released its fourth quarter and full-year 2008 earnings report and accompanying data.
Sabre lost a bunch of money for the year, but a review of the stats shows that it actually gained global market share, surpassing Travelport GDS (i.e. Galileo and Worldspan.)
In a declining travel market, the Sabre global distribution system (GDS) crunched 383 million transactions in 2008, 3 percent fewer than in 2007. But Travelport's segments fell faster, 11 percent, to 372.1 million. Of course, it is possible that Amadeus may have processed even more segments than Sabre. It's hard to say because Amadeus is a private company and hasn't publicized its numbers. It also counts transactions differently than Sabre and Travelport do.
So, how did Sabre overtake Travelport? Methinks that one major factor is that Expedia swapped out longtime partner Worldspan in favor of Sabre as Expedia's primary res system. And, all of those Expedia.com bookings definitely add up.
You have to love the travel industry. Expedia helps Travelocity's owner, Sabre, overtake Travelport, which controls Orbitz. So many plot twists:)