NEW YORK -- In a
move that is certain to trigger changes in the GDS marketplace,
United plans to move its internal reservations and inventory
management system from the Galileo/Apollo platform to Amadeus in
late 2008.
The move -- the
largest hosting migration in aviation history -- is part of a plan
by the Star Alliance carriers to adopt a common IT platform for
airline solutions. But it takes on special significance because it
was United that created Apollo in the 1970s.
Galileo
Internationals Apollo GDS, which is used by agency subscribers in
North America and Japan, has been the technology platform for
Uniteds reservations and inventory management systems for some 35
years.
Cendant, the
parent of Galileo, said Uniteds move to Amadeus had been expected
and would have no impact on users of the Apollo GDS. However,
industry experts said Cendant may have little reason to maintain
the Apollo platform without Uniteds hosting business.
When United
Airlines moves to the common IT platform of the Star Alliance, I
expect that Apollo will pass into history, said Richard Eastman, an
aviation and technology expert who owns the Eastman
Group.
As part of
Amadeus new 15-year contract to host United in an Erding, Germany,
data center, the two have also agreed to enter into a strategic
relationship with a marketing component, although the two companies
have yet to work out the details of how the marketing component
will evolve.
Owen Wild, the
marketing director of Amadeus North America, said the new alliance
may have extensive benefits for Amadeus, which is fourth behind
Galileo in GDS market share in North America.
It clearly gives
us the opportunity to work with agencies who are large producers
for United to consider Amadeus in a different light, Wild
said.
A United
spokeswoman said urging agencies to switch to Amadeus might be one
of several marketing options the airline would consider.
Cendants Galileo subsidiary
is unique among its rivals in that it supports two GDS platforms,
Apollo and Galileo. The Apollo platform is used only in North
America and Japan, while Galileo is used elsewhere around the
globe. A Cendant official described Apollo and Galileo as two
different cores that share development resources and several
systems, including faring, hotels and cars.
United is
Galileos largest customer, accounting for $140 million, or 8%, of
Cendant Travel Distribution Services (TDS) segment revenue in
2004.
But that 8%
figure for all of TDS, which includes more than 20 businesses,
downplays the importance of United to Apollo. One executive in a
position to know said United and Cendants Cheap Tickets, which also
is powered by Apollo, account for about 25% of Apollos
segments.
That, coupled
with the fact that the lions share of Galileo Internationals
revenue is generated outside of North America, may compel Cendant
to consider shuttering Apollo, an option that Galileo has
considered several times over the years. And outfitting Cheap
Tickets with sister company Orbitzs direct-connect technology might
make transitioning away from Apollo even more attractive, said the
executive, who declined to be identified.
The Galileo and
Apollo platforms have similar functionalities, although there are
differences. The command codes that agents enter into the systems
are different, for instance. So migrating from Apollo -which has
the second-highest number of travel agency locations in North
America -- to Galileo would entail a massive retraining effort and
cultural shift.
Misinformation?
Despite such
speculation, a Cendant spokeswoman insisted that talk of phasing
out Apollo is complete misinformation.
There will be
absolutely no impact to Apollo users as a result of Uniteds
decision, the spokeswoman said, noting that Apollo will host United
for at least several years during the transition. We already run
the two systems operationally as if they were one, and there is no
benefit to combine the platforms or migrate users.
She added, Today,
we balance and transfer workload on a real-time basis between the
two platforms so that they behave and act as one. In fact, because
of this unique relationship we are actually better able to support
our customers and achieve greater operational and support
efficiencies and workload management than if we were residing on
only one platform.
Whatever changes
lie ahead stem to a large degree from the Star Alliances selection
of Amadeus as its IT vendor as part of an initiative to wean the
reservations systems of all 16 member airlines off of disparate,
legacy technologies and incompatible infrastructures and onto a
common platform.
That agreement
sets up Amadeus as the Star Alliances IT vendor but does not
necessarily carry over into a distribution relationship.
The first two
Star Alliance airlines scheduled to migrate to Amadeus Altea
solution are United and Lufthansa, which is expected to complete
the move by the end of 2007.
Peter von Moltke,
senior vice president of Amadeus North Americas Airline Business
Group, said Uniteds inventory and reservations systems would move
to Altea early in 2008, and its departure control systems would
move by the end of that year.
Cendant
saw it coming
Cendant said it
initially participated in Uniteds request-for-proposal process with
Amadeus and another technology company in 2002. But it eventually
decided to drop out because Cendant would have had to fund Uniteds
migration to a new technology platform and because the company
determined that hosting legacy carriers no longer made business
sense. (See "In the Hot Seat, Flo Lugli.")
Instead, Cendant
renewed its hosting agreement with United in October 2003 for 10
years, with the understanding that eventually the airline would be
transitioning to a new vendor.
The way the deal
was structured and the economics of the deal basically accounted
for the fact that they at some point would move off the system,
said Flo Lugli, Cendants senior vice president of airline
solutions. Thats one component of the neutrality of the
economics.
The second
component is that we are pretty far down the path of resizing the
business and where those revenue streams come from, she
added.
Hosting
low-cost carriers
In that regard,
Cendant revealed last week that it will revamp its airline hosting
business, in partnership with IBS Software Services, to go after
the low-cost carrier market.
Canadian low-cost
carrier WestJet is Cendant TDS launch partner for its new passenger
services system, AirRes.
And, Lugli said,
Cendant is in hosting talks with about a half-dozen other
airlines.
As for United,
Lugli pointed out that Cendant will still provide the technology
for United Escapes, is building a new booking engine for United.com
and is about ready to help United launch a corporate portal for the
unmanaged travel segment.
Cendant
disparaged the terms of the Amadeus-United deal, saying Amadeus
will have to devote millions to fund the development of the new
United host system and that the fees United will pay Amadeus will
be much lower than had been the norm.
Cendants Galileo,
of course, is not immune to the airlines efforts to rein in
costs.
Industry sources
said the deal is worth more than $1 billion to Amadeus over the
15-year term.
The is the
largest airline migration globally from one system to another in
the last 30 to 40 years, von Moltke said.
Holistic
relationship
From a long-term
strategic position, it remains unclear whether the United
relationship will help Amadeus, which owns Vacation.com, make a
drive for agency share in North America. The answer will depend to
some degree on how fervently the Madrid-based technology company
intends to focus its business on airline solutions going
forward.
Clearly, when you
have a broad-range relationship like the one we are entering into
with United, its a holistic relationship, von Moltke said. Well be
looking with great interest into all of the components that are
possible in that relationship, including e-commerce and the IT side
as well as the distribution side.
If it yields the
opportunity for us to expand our market share in North America,
well certainly want to seize that, he said.
To contact
reporter Dennis Schaal, send e-mail to [email protected].