Introduction
The airline industry follows cyclical patterns in many ways. The most popular is the boom and bust pattern of growth with good profits, leading to excessive new aircraft orders, followed by over-capacity, fare wars and major losses. Other patterns can be discerned as well, and one which should interest us, is the driving focus of the reservations systems.

Prior to 1987, the world of reservations systems had been stable for 15 years. All the major ones had been installed in the late 1960’s and early 1970’s, although many late-comers joined the elite owners on into the early 1980’s, providing welcome additional income to BA, KL & SR. These late-comers were small, flag carrier systems, justified primarily for national prestige, not hard economic reality, and many have (or in the next few years will) disappear.

Without us being really consciously aware of it, from the early 1980’s the AA Sabre system started doing something new: installing reservations terminals at travel agents. This turned out to be revolutionary and led to the rise and predominance of Global Distribution Systems (GDS).

GDS-Centric World
From 1987 onwards, the TPF world has gravitated around the GDS’s: Amadeus, Galileo, Sabre and Worldspan. It has been their success, their power and their requirements which have driven a major part of TPF development, both systems and applications, since that time. Apart from IBM, which has fingers in all pies, the software suppliers such as ourselves tended to be in one camp and not the others (at least initially). Because of Datalex Netherlands origins in KLM, as Hyperion, and KLM’s participation in Galileo, our major market through to the mid-1990’s was the Galileo group. It took us 6 years of beating on the door to get into Amadeus, but we finally succeeded as the intense rivalry between the groupings subsided once the market shares between the GDS’s had stabilised.

Hence, from 1987 through to the mid-1990’s we were operating in a GDS-centric world. All the major airlines are in one, and only one, GDS sphere of influence:

Some airlines remained aloof from this process (e.g. GA, JL) and some changed allegiances (e.g. the Abacus sub-group moved from Worldspan to Sabre), but the core of each GDS has remained stable for 10 years.

Alliance-Centric World
Once again, without us being really consciously aware of it, the TPF world is changing and there will be a significant re-grouping of the spheres of influence and a change to the primary thrust of TPF development as a result of airline alliances.

This alliance trend was all initiated by the KL-NW link-up, which actually started in 1993 and was the first to apply for and get the essential ‘anti-trust immunity’ from the US authorities. The result was a boom for KL and NW (the latter had been on the brink of bankruptcy) and hundreds of millions of dollars accrued to their bottom line profits. Not to be outdone, others followed suit. The next major one was LH-UA, which went through US approval fairly quickly and then came BA-AA, which has been bogged down since 1996 in the regulatory process on both sides of the Atlantic.

The 3 main alliances currently congealing are:

One interesting thing is that there is someone who is conspicuous by their absence: DL. The core of each alliance is a transatlantic pact between a major US carrier and a major European carrier plus hangers-on. The uncommitted European is AF and DL is wooing them aggressively, but they are being wooed equally seductively by Wings. AF has stated they will make a decision by the end of 1999: if it is Wings, then DL is up the creek without a paddle (if one accepts that alliances are the way to go); if it is DL, then we have a fourth alliance of significance because the Qualiflyer group around SR will undoubtedly be part of that.

The other interesting thing is that these new groupings cut across the GDS-centric groupings of our familiar world and add a new dimension too it. However, it is possible that GDS allegiances will change as the alliances consolidate their hold and strive for efficiency and seamless service (not to be confused with the reality of current air travel: ‘seems less service’). To achieve seamless service, IT integration is essential and again the Wings alliance is taking the lead in this with, as first step, all KL reservations destined to go to the PARS multi-host system of Worldspan where NW resides. Probably AZ and CO will make the same move in the same time frame, which may very well signal the demise of the Shares multi-hosting system (CO is in excess of 50% of the operation plus provides the lion’s share of the development funding) and EDS’s final exit from the TPF world.

The other alliances will again follow: the logic is clear and the writing is on the wall. I hear that talks are already underway between AA & BA about doing the same thing with Sabre & RTZ reservations. The technical improbability of being able to execute such a project successfully never seems to deter Sabre.

Alliance Processing Scenarios

• String & Rubber Bands   (Eg. STARNET)

• Half-Way House   (Eg. 1A System User concept)

• Single System  (Eg. the KL/NW intent)

All experts seem to agree that the optimal solution is Single System, but the more partners there are in an alliance the more difficult it is to agree and implement that optimal solution. One consultant has proposed that the complexity of the undertaking, from a business, organisational and technical viewpoint, is proportional to the square of the number of partners involved. Hence, at present, STAR has the biggest potential problem and we already see efforts within that alliance to form a sub-grouping (in this case, UA carrying along AC, AN & NZ) to try to create a Mini-STAR Single System.

Conclusion
We are entering a new phase in our marketplace and the emphasis of what we do, who we work with and for and for what purpose, is going to change. I believe that we shall maintain our position in our current marketplace and, in addition, because of our cultural ties to KLM, will play an ever increasing role in the Wings alliance. Wings in turn will become intimately tied up with Worldspan, which in turn is going to ‘merge’ in some form sooner or later with either Amadeus or Galileo. Worldspan’s GDS market share is probably too small (about 9%) to be self-sustaining.

These alliance IT integration projects in the areas of reservations, DCS and cargo are very large (hundreds of man-years of TPF effort for each one) and will keep us off the streets for many years to come.

A change is as good as a rest…