The GDSs that perform trillions of computer tasks each day to put travelers in airline seats, hotel rooms or rental cars are facing unprecedented pressures for a technological overhaul that could reshape the reservations network that has served travel agents and their clients for 50 years.
The multibillion-dollar players who process all this ticketing and reservations data -- Amadeus, Travelport GDS and Sabre -- all acknowledge that they are scrambling to cover the needs of U.S. airlines as the carriers overhaul their own costs and revenue models under the crush of high oil prices.
With an urgency that now reflects concerns about the day-to-day financial stability of major U.S. carriers, the airlines are pressuring GDS operators to move faster to upgrade systems to enable them to promote, sell and collect fees for a la carte services.
Airlines are also looking for more efficient and pinpoint-accurate technology to recover the small fees they pay for credit card transactions and similar costs, which add up to tens of millions of dollars annually.
The failure of GDSs to move quickly enough to accommodate the accounting for unbundled, a la carte add-ons like checked baggage, premium seats, meals and beverages, while simultaneously enabling travel agents and online travel agencies to up-sell those products, has caused friction between the airlines and the GDSs.
"Collection of fees by airlines is an accounting nightmare, and the nightmare is a horror story when fee collections must be done in the legacy airline hosting and distribution systems," said Richard Eastman, a technology consultant with extensive GDS experience. "Keep in mind that fees did not exist in the airline business when the legacy systems were created in the 1960s."
But the new ancillary service fees mean tens of billions of dollars to the airlines over time, certainly through an economic downturn that economists say could trouble airlines well past the end of the decade.
US Airways CEO Doug Parker said last week that his company expected some $500 million in ancillary services revenue over the next year, cash flow it needs to cope with soaring fuel and other costs.
Four years of talking
All major U.S. airlines are now demanding that the GDSs at least get systems in place to efficiently enable a la carte pricing.
Enhancing systems to handle unbundled pricing has been under discussion for four years, observers noted. But airlines' financial crises have now moved discussions, and developments, to the front burner.
Central to the challenge is the GUI, an acronym for "graphical user interface" (pronounced GOO-ee), the interactive computer interface that integrates Web services with traditional green-screen services of the legacy GDS technology to which travel agents are accustomed.
Travelport GDS said recently it was moving to a new platform in connection with its acquisition of G2 SwitchWorks, which is still in development but will move to beta testing shortly. It provides a more Web-like environment and accessibility to reservations data and travel options from multiple GDS sources as well as Internet sources.
In the meantime, say analysts, Amadeus, whose own technological evolution to open systems architecture began a decade ago, is now leading the race. Two weeks ago it unveiled its Air Service Fees program, which will enable airlines to make cost recoveries and fee breakouts in direct channels -- typically their websites -- and will follow soon with similar services for indirect channels, including travel agencies.
But Humberto Rivero, IATA's regional director for the Americas, said even that was not cutting-edge technology. He added that GDSs were far behind the curve in supplying needed systems. They are also, he said, only now beginning to understand the depth of the dilemma that affects both airlines and the reservations systems that serve them.
"We need to meet this situation quickly and efficiently now," Rivero said. "At this point, it is not about how pretty you make [the technology] but how quickly you can get it done. The airlines' need of cash and need of trying to charge for certain services is ... being driven by survivability."
That makes air service fees and cost recovery systems mission-critical for the airlines, especially as oil prices, capital markets and access to credit now fluctuate for airlines on a daily basis, Rivero said.
Relationships between the airlines and GDSs, which were originally created by the airlines and later spun off as separate businesses, have taken on a tone of sibling rivalry of late, with IATA's director general, Giovanni Bisignani, firing salvos at the GDSs last month for holding airlines "hostage" with high fees.
But the symbiotic nature of the relationship could take more serious turns, especially, Rivero said, if GDSs do not ramp up efforts further and faster to help airlines make it through an economic crisis that Bisignani described as the "perfect storm."
"The situation we are facing now with supply and demand and high fuel costs at the same time is [worse economically] than what we faced after Sept. 11," Rivero said. "We know that if this continues, we will have multiple bankruptcies -- Chapter 11s and Chapter 7s -- that we and the GDSs are all going to have to face."
GDSs are trying to help airlines as quickly as they can, he said, but little capital for technology investments is available. Besides, he said, GDSs were increasingly concerned about their own survivability.
"Airline CEOs are sitting down every day looking at everything," he said, "cutting employees, cutting routes, trying to save costs. And, certainly, 'everything' means even the contracts of the GDS are on the table."
Incentive that can't be ignored
But Rivero said systems technology must advance so that other changes in airline cost-cutting will be meaningful. As employee cuts are made, more automation, self-service and technological advances are needed to move passengers through airports and to destinations with the fewest humans possible.
That is an incentive that can't be ignored, said Owen Wild, director of marketing for Amadeus North America. He said a shift toward open architecture that began a decade ago at Amadeus was showing results.
"We don't want to panic, and we don't need to panic," Wild said. "The answer is not to develop a one-off solution for a financial crisis for the airlines ... but a solution that is long-term."
Ruth Standring, vice president of product strategy for Travelport GDS in London, has been closely involved in discussions about resolving the issues. Levels of urgency and acceptance of a la carte pricing vary between the U.S. and Europe, she said, as do the need for systems to accommodate ancillary services.
"The airlines are all at different stages on how their infrastructure is supporting optional services and making those services available through different channels they sell in, and how the payment is going to be collected," Standring said. "From an industry perspective, there are lots of meetings going on around industry standards and collection of fees via ... [those] standards."
Sabre officials said they were ready and willing to move forward with technology and had already made progress in a hosting environment.
They are also applying ancillary fee collections and handling in other markets, including with carriers in Asia/Pacific and Europe, but not yet in the U.S.
Kyle Moore, Sabre's vice president of product marketing, said the company was moving aggressively to assist the airlines quickly and was even willing to offer solutions before standards are determined, if that is what airlines want.
"Clearly, we are trying to do everything we can to address the broader economic issues, to help ensure the travelers are paying for the value and help to get the ancillary fees collected. We believe it is an absolute imperative."