3 major airlines join forces to create global reservation system

3 major airlines join forces to create global reservation system

Mumbai: Even as they compete in the skies, Kingfisher Airlines Ltd, Jet Airways (India) Ltd and the National Aviation Co. of India, or Nacil, which operates Air India, are joining forces on the ground to develop and market a new ticket reservation system for airlines.

The carriers will engage a software company and travel agents to pick up a stake in the venture that will create and launch a so-called global distribution system, or GDS, said an airline executive associated with the project, on condition of anonymity.

GDS is a computer reservation system that airlines use to book and sell tickets, as well as offer other services such as hotels, cruises, and car rentals, globally. Sabre Holdings Corp. is the world’s largest GDS company; the main GDS firms in India are Amadeus IT Group SA, Abacus International, in which Sabre has a controlling stake, and Galileo International Llc.

The size and share of investment in the GDS project has not yet been finalized, said the executive. The new company will generate revenue by charging international and domestic carriers, as well as travel agents and agencies, on a per-ticket-sold basis. Current GDS systems charge $3-5 (Rs137.40-229) per ticket sold.

The idea was discussed by the Federation of Indian Airlines, or FIA, a lobbying group for domestic carriers, as well as between the three airlines, this executive said.

Another executive, from Jet Airways, said Jet is likely to take the lead in the venture while a leading Bangalore-based software company will provide the software and pick up a stake in the company. The Jet executive also spoke on condition of anonymity because he is not authorized to speak about the project.

A senior executive at Kingfisher Airlines confirmed the development without disclosing any details. A Nacil spokesperson declined comment.

A representative of the Travel Agents’ Federation of India said there is no formal proposal to buy a stake in the proposed venture.

“Travel agents will take a call shortly. However, we are also thinking in similar lines," he said, also on condition of anonymity because travel agents are in negotiations with airlines to charge a transaction fee following the cancellation of a 5% commission they got earlier

This won’t be the first time that an Indian carrier has entered the GDS domain.

In 1993, Air India tied up with Texas-based Sabre Holdings in a venture called Sitar. That project, however, failed to take off and folded in 2004.

“India is huge market for domestic and international airlines, therefore it makes commercial sense to start an Indian GDS company," Sudheer Raghavan, chief commercial officer of Jet Airways had told Mint in an earlier conversation.

“We have the technical and marketing capabilities. So there is nothing to stop us from making an Indian GDS rather coughing out money to others," Raghavan had said at the time.

The person associated with the new project said the three carriers—Nacil, Jet Airways and Kingfisher Airlines—pay about Rs1,000 crore a year to foreign GDS companies.

“We are paying huge amount in terms of fee to these GDS players. This will help to cut our cost drastically," said the Kingfisher executive.

Domestic airlines, which are projected to post a combined loss of $2 billion in fiscal 2009, have already decided to abolish the existing 5% commission to travel agents beginning 1 November.

A former airline official, who asked not to be identified because he now works with a travel agency, countered the idea of a new GDS, saying if airlines can cut travel agents’ commission, they should collectively bargain to reduce GDS fees.

“There is no need to reinvent the wheel as there is existing software system. Why would these loss-making airlines want to invest in a new system?" he said.