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Ticketing and Distribution in the Airline Industry - International - March 2009

This report reviews developments in the area of airline ticketing and distribution and provides an outlook for future trends. Air ticket distribution is carried out both directly by airlines via their websites, call centres or dedicated ticket sales offices and via third-party intermediaries – including global distribution systems (GDSs) and travel agents – both on- and offline. Most of the major legacy (traditional) airlines continue to sell the majority of their tickets via traditional intermediaries such as GDS, and, by and large, only the low-cost carriers (LCCs) have succeeded in distributing the greater part of their tickets via their proprietary websites.

As the trade association for the international air travel industry, the International Air Transport Association (IATA) plays an important role in the billing of transactions, the accreditation of travel agents worldwide and the implementation of e-ticketing.

While the scope of this report is international, it is not comprehensive and is limited to the scheduled services of airlines. As such, it does not attempt to cover the air charter and flight-only services of tour operators.

Key findings

  • In 2007, the worldwide sale of air tickets reached an estimated US$275 billion.

  • E-ticketing became universal as of mid-year 2008, following a four-year campaign led by the IATA.

  • Premium tickets accounted for 7% of the total issued in 2007.

  • Major legacy carriers generally succeed in selling between 10-30% of their tickets via their own websites. Most tickets continue to be sold by traditional third-party channels (travel agents and GDSs).

  • Proprietary websites are by far the most important distribution channel for LCCs, accounting for between 70% and almost 100% of ticket sales.

  • While the legacy carriers are trying hard to boost the proportion of bookings on their own websites, most of the major LCCs (with the notable exception of Ryanair) have reached agreements with GDSs and online travel agents (OTAs) to distribute their flight tickets. This move is in a bid to capture a higher share of the managed business travel market, which still tends to book by traditional channels.

  • Frequent-flyer awards generally account for about 3-8% of airline passengers or revenue passenger kilometres (RPKs).

  • Third-party intermediaries, including GDSs and travel agents – both online and bricks and mortar – are finding air ticket distribution increasingly unprofitable, since the airlines pay little or no commission on transactions. For instance, only 15% of Expedia’s revenues are generated by selling air tickets.

  • There have been drastic cuts in airline capacity due to corporate policy, mergers and bankruptcies, which means that load factors are likely to hold up better than in prior downturns. This bodes ill for the merchant business of third-party intermediaries, since it implies a shrinking stock of ‘distressed’ inventory available from the airlines.

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Table of contents

  1. Introduction

      • Key findings
      • Data Sources

        • Overview

          • Passenger traffic
            • Figure 1: Air passenger volumes by route and rate category, 2007
            • Figure 2: Trend in passenger traffic and capacity on international flights, October 2007-08
            • Figure 3: Trend in passenger traffic and capacity on international flights, October 2007 versus October 08
          • IATA forecasts drastically lowered
            • Figure 4: IATA’s revised forecasts for global air transport volumes, December 2008
            • Figure 5: Comparison of IATA’s forecasts with its recent survey of airline industry forecasts, December 2008
          • Air travel leveraged to GDP growth
            • US carriers quick to slash capacity
              • RPK growth
              • Role of the IATA

                  • Travel agency accreditation
                    • Travel agent accreditation benefits
                      • Europe-Accredited Agent (EAA)
                        • Prerequisites
                          • IATAN 
                            • E-ticketing
                              • Billing and Settlement Plan (BSP)
                                • Participation in a BSP
                                    • Figure 6: Trend in agents using BSP and BSP sales and bad debts, 2001-07
                                  • How a BSP works
                                    • Working processes for travel agents
                                    • Legacy Carriers

                                        • American Airlines (AA)
                                          • AAdvantage
                                            • British Airways (BA)
                                              • Figure 7: Proportion of RPKs generated by frequent-flyer programme, 2004-08
                                            • Continental Airlines
                                              • Electronic boarding passes
                                                • Frequent-flyer programme
                                                  • ‘EliteAccess’ service
                                                    • Lufthansa
                                                      • Miles & More
                                                        • ‘Preferred fares’ programme
                                                          • Travelport and Sabre agreed to Lufthansa’s terms
                                                            • Amadeus is the dominant GDS in Germany
                                                              • United Airlines
                                                                • Mileage Plus
                                                                • Low-cost Carriers

                                                                    • Air Berlin
                                                                      • Figure 8: Seat-only sales by channel, 2006-07
                                                                      • Figure 9: Charter sales by channel, 2006-07
                                                                    • easyJet
                                                                      • JetBlue
                                                                        • Ryanair
                                                                          • Southwest
                                                                          • Global Distribution Systems

                                                                              • Figure 10: GDS ownership breakdown, 2009
                                                                              • Figure 11: Summary of airline distribution via GDS, 2006-07
                                                                            • Amadeus
                                                                              • Figure 12: GDS market share by worldwide air transactions, 2007
                                                                              • Figure 13: Amadeus’ flight distribution network participants, 2008
                                                                            • Amadeus’ Altéa Suite
                                                                              • Figure 14: Overview of Altéa Suite features, 2008
                                                                            • Amadeus e-Travel Management
                                                                              • Sabre
                                                                                • Travelport
                                                                                  • Figure 15: Trend in segment* sales at Travelport GDS**, 2008
                                                                              • Online Travel Agents

                                                                                  • Expedia
                                                                                    • Dynamic packages
                                                                                      • Agency business
                                                                                        • A large brand portfolio
                                                                                            • Worldwide Travel Exchange and Interactive Affiliate Network
                                                                                              • Expedia Corporate Travel
                                                                                                • eLong
                                                                                                  • TripAdvisor Media Network
                                                                                                    • Relationships with suppliers, distribution and fulfilment partners
                                                                                                      • Fulfilment partners
                                                                                                        • Business depends on supplier relationships
                                                                                                          • Impact of turmoil in the air transport sector
                                                                                                            • High load factors a negative for Expedia
                                                                                                              • GDS remittances have been reduced
                                                                                                                • Orbitz
                                                                                                                  • Publicly quoted since 2007
                                                                                                                    • Agreement with Travelport GDS
                                                                                                                      • The risks involved
                                                                                                                        • Air bookings down 8% at end of September
                                                                                                                          • Travelocity
                                                                                                                            • Global Reach
                                                                                                                              • Opodo
                                                                                                                              • Business Travel Agents

                                                                                                                                  • American Express (Amex)
                                                                                                                                    • Carlson Wagonlit Travel
                                                                                                                                      • Hogg Robinson Group
                                                                                                                                      • Role of the Airlines Reporting Corporation

                                                                                                                                          • Figure 16: Travel agency rankings* by arc transactions, 2007
                                                                                                                                      • What Next?

                                                                                                                                          • Traditional carriers to promote their own websites
                                                                                                                                            • Low-cost carriers
                                                                                                                                              • What will happen to corporate travel policies and the GDS?
                                                                                                                                                • Airlines to expect more flexibility from the GDS in future
                                                                                                                                                  • Sabre cancels agreement with Farelogix
                                                                                                                                                    • Sabre deal with Concur
                                                                                                                                                      • GDS fear losing ground
                                                                                                                                                        • New Travelport roll-out to accommodate optional services
                                                                                                                                                          • Amadeus welcomes third-party providers
                                                                                                                                                            • Sabre- United agreement

                                                                                                                                                            Companies Covered

                                                                                                                                                            To learn more about the companies covered in this report please contact us.

                                                                                                                                                            Ticketing and Distribution in the Airline Industry - International - March 2009

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