The last remaining “rules” will expire on July 31, 2004 and the GDS industry will be fully deregulated. GDS – Global Distribution System – it’s like a warehouse of travel related inventories and content run primarily by 4 companies – Sabre, Galileo, Worldspan, and Amadeus. They provide connectivity and applications to airlines and travel agencies world wide for reservation services. Put simply, it’s the back end system that your online provider or travel agent uses.
Today’s systems were originally developed, owned and operated by airlines. The US government was concerned that the system owners would use their controlling position to unfairly manipulate flight and fare information which would ultimately create a huge competitive advantage. So, in 1984 (kind of Orwellian, huh) the Civil Aeronautics Board began regulating the GDS’. In 1992, regulation was transferred to the DOT.
So, on July 31, 2004 these will expire.
Prohibiting display bias - The GDS’ were not allowed to preference displays to favor or disfavor any airline. This rule did not apply to rental car companies or hotels.
Parity clauses that required participating airlines to buy at least the same level of service from other GDS’ - Remember, the airlines used to be major stakeholders in GDS’ and this rule ensured at least equal participation in competing systems.
GDS’ requiring access to all fares as a condition of participation – This was before any airlines had an online presence and it was a way for the GDS’ to ensure they would not be undercut by a traveler that went directly to the airlines reservation system.
At a high level, that’s it. Now, what does it all mean?
I think it will be good for competition and innovation. Up to now, the GDS’ were pretty close with functionality so differentiators were limited. I think the industry will see subtle shifts in business models early on, but as the availability agreements (Direct Connect Availability at Sabre, Preferred Fares Select at Galileo, and Total Rates at Worldspan) begin to approach the end of the three year time frame, new and move aggressive models will surface.
Do I know how it will play out? No, but one things certain, there will be change and I believe that Sabre’s strategies are well positioned and aligned to work well within a deregulated environment.
