Ecommerce Application

American Airlines Case

Presenter: ThS. Nguyễn Văn Thoan
Trưởng Bộ môn Thương mại điện tử
Trường Đại học Ngoại thương
Overview of case
 Case study is on American Airlines (AA) –
2002
 Largest airline in the world
 Describes the post-9/11 scenario in which
AA operated
 Threat of terrorism, weak economy,
decline in business and vacation air travel,
and increased airfare price competition
 AA took several steps to contain the
threats in the external environment
Internal issues
 Airplanes aircraft average age was 9.9 years
 Followed the widely practiced hub and spoke
arrangement
 Adopted global alliances and code sharing with
partner airlines and airlines networks
 AA’s performance on most operating parameters
declining through 1999 – 2001. In airlines
industry are revenue-passenger miles, available
seat miles, revenue per available seat mile, and
load factor
 Price-based competition major factor in
marketing. Other factors are loyalty programs,
and ticketing through Internet.
http://vi.wikipedia.org/wiki/American_Airlines
Value Chain for American Airlines
 Airline Industry Experience
• We have a worked with leading airlines on the development of a technical architecture, the introduction of
new object-oriented and web-based technologies and the development of major implementation projects
• We focus our expertise on channel integration and customer relationship management

Touch Points Customer Interaction CRM & Middleware Services Back end Services

Internet
Visitor, Registered User, Customer id and Author- Flight Information
Web
Customer Enrollment isation, Entitlements

Email Reservation
Fax Customer id and intent
Customer Profile Frequent Flyer Program

Mobile Reservation & Booking

Personalization Manager Campaign Manager
Booking
Voice Trip itinerary and
SMS Destination Information
Wireless Workflow Manager Customer Analysis
Notification
Customer recognition and Flight
• Email
Call Center • Voice Allocation to check in agent Planning
Transaction/Trip Manager Content Management
• SMS Internal & Syndicated
• Fax Check in
Greeter
Check in
Customer Profile In-flight Customer Relationship Tier Flight
Check in Operations
Agent Routing
Personalized Connection
Information
Cabin
Crew Transaction Manager
Enrollment
Schedules &
Availability
In-flight
Entertain. Personalized View Business Components
Fares &
Greeter
Arrival Flight Information Pricing

Unified User Profile

Greeter Lost Baggage
Luggage
Loyalty
Programs
Travel Service Lapse
Agent Business Component Tier

Confidential © MphasiS
 Get Electronic Shelfspace on the Global
Distribution Network - Example: GDS

A 'GDS' is a Global Distribution System, aka a Central Reservation System (CRS).

There are 4 main systems:

 Amadeus owners include Lufthansa, Air France, Iberia
 SABRE owned by American Airlines
 Galileo owners include United Airlines, BA, KLM, USAir, Swissair
 WORLDSPAN owners include TWA, NorthWest and Delta airlines

These systems dominate the world of airline bookings. When these systems expanded to
accept hotel and car rental bookings worldwide, they became global.
Now, travel agents can book air tickets, hotel rooms and rental cars all at the same time from
the one terminal.

This requires to regularly load the inventory (eg. hotel description, rates) into these systems.
For more info.: http://www.hotel-online.com/Neo/Trends/Andersen/1998_GDNShelfSpace.html
Max Palisson - 2nd Annual Micronesian Tourism Executives Conference - April 5, 2000 - Hyatt Guam
Max Palisson - 2nd Annual Micronesian Tourism Executives Conference - April 5, 2000 - Hyatt Guam
Travel - American Airlines wireless
home page.
 e e-Commerce in passenger air transport

c
o Airline

m
m Booking Sys.

e
r
electronic Telephone Travel Agent Web
commerce


c strategy
technologies
and
e
applications
Passenger

E-Commerce ©David Whiteley/McGraw-Hill, 2000

 Airline booking systems
e
c  Developed in the late 1970s by some large airlines.

o  Notable examples are:

m  United
 Apollo
m  American Airways

e
 Sabre

r
electronic
commerce  Initially a competitive weapon for the owning airline.


c strategy
technologies
and
 Latterly developed as ‘unbiased markets’ to sell

e
applications seats for any airline.

E-Commerce ©David Whiteley/McGraw-Hill, 2000

 Airline booking systems
e
c  Currently three major e-Market airline booking
systems:
o
m
 Sabre

m  Galileo

e  Amadeus

r
electronic
commerce


c strategy
technologies
and
e
applications

E-Commerce ©David Whiteley/McGraw-Hill, 2000

 Sabre
e
c  Sabre (American Airlines):
 Started in the early 1960s

o  Installed first terminal in a travel agency in 1976

 Provides web based access via travelocity.com

m  At the time of writing Sabre:

m  Is processing over 400 million bookings a year for over

440 airlines (about 40% of the world market);

e  Is linked to more than 210,000 terminals;

 Uses 30 mainframe computers (US based);

r
electronic
commerce  Has peak processing exceeding 7,450 messages/second.


c strategy
technologies  Checkout www.sabre.com
and
e
applications

E-Commerce ©David Whiteley/McGraw-Hill, 2000

 Galileo
e
c  Galileo (United + European Partners):
 Started in 1971
o  At the time of writing Galileo:
m  Is processing over 250 million bookings a year;

m  For over 530 airlines

(about 30% of the world market);

e  Is linked to about 160,500 terminals;

 Uses 21 mainframe computers (US + UK);
r
electronic
commerce  Has peak processing of about 5,000
 messages/second.
c strategy
technologies
and  Checkout www.galilieo.com
e
applications

E-Commerce ©David Whiteley/McGraw-Hill, 2000

 Amadeus
e
c  Amadeus (Four European Partners):
 Founded in 1987
o  Continental joined in 1995

m  At the time of writing Amadeus:

m  Is processing for over 469 airlines;

e
 Is linked to more than 190,000 terminals;
 Is based in Germany.

r
electronic
commerce

 Checkout www.amadeus.net
c strategy
technologies
and
e
applications

E-Commerce ©David Whiteley/McGraw-Hill, 2000

 Web booking systems
e
c  The web provides:
 A new sales channel
o  Less opportunity for price comparison
 Chance to develop brand loyalty
m
m  Value-added features can include:
 Customer’s Frequent Flyers account online

e  Pre-allocation of seats
 Online selection of meal options
r
electronic
commerce  Additional travel services


c strategy
 Travel and airport information
technologies  Access to seat sales/auctions
and
e
applications  Personalisation of the web site

E-Commerce ©David Whiteley/McGraw-Hill, 2000

 Web booking systems
e
c
Analysis of airline web sites (1999)
With web site With online booking

o North America
(%)
58
(%)
22

m South America 33 8

m Western Europe 42 12

e
Eastern Europe 7 1
Pacific 44 9

r
electronic
commerce Asia 23 3


c strategy
technologies
and
Africa
Average
26
33
3
10

e
applications

E-Commerce ©David Whiteley/McGraw-Hill, 2000

 Airline Web sites
e
c Customer Information:

o  Alternatives:
 Requirement for prior registration

m  Take details when purchase is made

m
 Prior registration:
 Can annoy/put-off customers

e
 Might tie customer into site

r
electronic  Details at time of purchase:
commerce  Time-consuming (if done every time)


c
 Sales can be mixed mode:
strategy
technologies • Web enquiry / telephone sales
and
e
applications  Discuss / Check out AA site

E-Commerce ©David Whiteley/McGraw-Hill, 2000

 Airline Web sites
e
c
Product (flight) Information:

o
 Alternatives:
 Show Timetables

m
 Take date, time and airport details

 Issues:
m  Knowing airport names / codes
 Several airports for one city
e  Alternative dates and times

r
electronic
commerce  Check out AA sites for cheap deals:
  London to New York:
cstrategy
technologies
and
 Several airports for each city
 Cheaper tickets may be available on alternative dates

e
applications

E-Commerce ©David Whiteley/McGraw-Hill, 2000

 Airline Web sites
e
c  Payment and Delivery:

o  Payment by Credit Card:

m • Security Issues

m  Delivery:

e
• By post
• Collect at airport

r
electronic
commerce • e-Ticket


c strategy
technologies
and
 What issues?

e
applications

E-Commerce ©David Whiteley/McGraw-Hill, 2000

 Options for booking airline seats
e
c Airline

o Booking Sys.

m
m Telephone Travel Agent Web

e Passenger

r
electronic
commerce  Main options:


c
 Telephone airline direct
strategy
technologies  Conventional Travel agent
and
e
 Online Travel Agent
applications  Airline web site

E-Commerce ©David Whiteley/McGraw-Hill, 2000

 Exercise 1
e
c  Check out booking of airline seats online – the
requirement is for the best price for Hanoi to San
o Francisco – out 23 May and back 02 June.

m  The following sequence of steps is

m recommended:
 Use the web to find out a list of carriers that fly
e the required route.
 Use two or three airlines to find the cheapest
r
electronic
commerce available return flight.


c strategy  Find an online travel agent and check for the

technologies cheapest price there.
and
e
applications

E-Commerce ©David Whiteley/McGraw-Hill, 2000

 Global Distribution Systems (GDS)
Galileo www.galileo.com
 Slogan: ‘Together we can achieve more’
 Owned by: Aer Lingus, Air Canada, Alitalia, Austrian Airlines,
British Airways, Olympic, Swiss Air, TAP, United
Airlines, US Airways
 Set up: In 1991 with the merger of United Airlines’ Apollo
system and Swiss-based Galileo International (BA,
KLM, Swiss Air)
 Based in: Denver, Colorado in the USA
 Located in: 66 countries, 33,000 outlets
 Airlines: 500
 Hotels: 208 hotel chains – 37,000 premises
 Car-Hire: 47 firms
 Enquiries: 66 million per day
 In Ireland: Galileo is used by over three-quarters of Ireland’s
travel retail outlets
The Welcome Business
© Glenn Mehta
 Worldspan www.worldspan.com

 Slogan: ‘Travel Technology so Advanced, It’s Simple’

 Owned by: Delta, Northwest, TWA
 Set up: 1990
 Based in: Atlanta, Georgia in the USA
 Located in: 60 countries, 15,000 outlets
 Airlines: 414
 Hotels: 29,000
 Other: 38 other travel service providers (e.g. cruise and tour
operators). Also linked to ferry operators, railway
operators, Eurostar.
 Enquiries: 250 million per day
 In Ireland: Growing in importance

The Welcome Business

© Glenn Mehta
 Amadeus www.amadeus.com

 Slogan: ‘Your technology partner’

 Owned by: Air France, Iberian and Lufthansa
 Set up: 1987
 Based in: France, Germany and Spain
 Located in: 215 countries, 86,000 outlets
 Airlines: 440
 Hotels: 35,000
 Car-Hire: 55 firms
 Enquiries: 30 million per day

The Welcome Business

© Glenn Mehta
 SABRE www.sabre-holdings.com
(Semi Automated Business Research Environment)
 Slogan: ‘Connecting people with the world’s greatest travel
possibilities’
 Owned by: American Airlines
 Set up: 1976, although separate from American Airlines since
1995 (but still a major shareholder)
 Based in: South Lake, Texas in the USA
 Located in: 45 countries, 59,000 outlets
 Airlines:4,540
 Hotels: 53,000
 Car-Hire: 54 firms
 Other: Cruise operators, ferry operators, railways operators,
Eurostar, Tour operators

The Welcome Business

© Glenn Mehta
Priceline.com
 Demand Collection - Reverse auction
– Customer makes a bid for a ticket
– Priceline.com lets the airline decide if they accept the bid

 Launched about two years ago

– Billing $400 mill a year in airline tickets and $100 in hotel
rooms

 Brand Shield
– Airline name is revealed after booking is made

 Cheaper than airline sites and online agents

– Test April 2000 : Oslo - New York 1 week
– Airline 1 and 2 -> 9 573,- NOK and 7 250,-
NOK
– Expedia and Travelocity -> 5 418,- NOK and 5 350,- NOK
– Priceline -> 2 975,- NOK (from airline 1)
Lastminute.com - UK
 Handles last minute request from customers
– Guaranteed lowest prices everywhere (Travel Weekly Jan 24
2000)

 Launched in Oct. 98
– 600 000 user and 14.5 mill page visits a month by Jan 2000
– Cheap deals with carriers, hotels and tour operators

 Partly brand shields

– Company name revealed after booking is made
– Civil Aviation Authorities demands earlier revelation

 Commission
– 55% commission for hotel booking (Travel weekly (UK) Jan 31)
 Furious agents
– Lastminute.com’s fares not available to them
.
 SABRE www.sabre-holdings.com
(Semi Automated Business Research Environment)
 Slogan: ‘Connecting people with the world’s greatest travel
possibilities’
 Owned by: American Airlines
 Set up: 1976, although separate from American Airlines since
1995 (but still a major shareholder)
 Based in: South Lake, Texas in the USA
 Located in: 45 countries, 59,000 outlets
 Airlines:4,540
 Hotels: 53,000
 Car-Hire: 54 firms
 Other: Cruise operators, ferry operators, railways operators,
Eurostar, Tour operators
 Evaluation Criteria

 Legal requirements
 Technological requirements (functions)
 Financial requirements (price)
 Experience

… Relationships
… Others
Computer reservations system
Airline Reservations System
http://en.wikipedia.org/wiki/Travel_technology
http://en.wikipedia.org/wiki/Amadeus_IT_Group