Airline Reservation Systems

AIRLINE

RESERVATION

SYSTEMS

By:

David J. Wardell

July, 1991

Airline Reservation Systems

July 5, 1991 ©1991 by: David J. Wardell

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AIRLINE RESERVATION SYSTEMS A REPORT & OVERVIEW

BY:

DAVID J. WARDELL

Airline computerized reservation systems (CRS) are the primary form of travel agency

computerization in the world. These systems manage the millions of reservation requests

and cancellations, fare, and reservation pricing requests1 that are initiated by travel

agencies using these systems—not to mention the thousands of database changes that

occur daily. The CRS function as extremely powerful and valuable distribution and

marketing tools for their airline owners. Today's travel agency competitive environment

is largely defined and controlled by airline CRS.

This report describes:

Airline reservation and distribution systems

CRS processing and communication concepts

Relationships between CRS and other industry components

CRS and airline competitive strategies, as these pertain to reservation technology

Non-reservation systems that interconnect with airline CRS

Profiles of the major international airline CRS

1 Pricing in this sense refers to the application of fares, as contained in a fare database and as

specified by a rule database to specific itineraries as reserved by a traveler. Thus a travel agent will

make a reservation and price the itinerary—yielding a total fare, or price, for all segments within

the passenger's itinerary, when considered as a whole.

This is significant as airline reservations are frequently flight or itinerary-specific. For example,

fares between destinations A and B maybe lower if the passenger travels round-trip, if a certain

flight is used that the airlines desires to promote, or if flights with intermediate stops (as opposed

to non-stop flights) are used.

Fare databases are used to quote rates based upon passenger inquiries, but only a complete

itinerary price is used to issue a ticket and is guaranteed to the traveler.




Airline distribution has been greatly shaped by deregulation and the rise of travel

agency computerization. Critical to understanding how travel distribution is managed

is an appreciation of the influence computerization exerts over travel agency

reservation and purchasing practices.

The role of automation in this area must not be underrated, as automation provides the

vehicle for airlines to effectively enfranchise dealerships among the travel agency

community2.

These dealerships play an important role in broader carrier distribution strategies.

Computers are routinely cited as representing significant competitive barriers to domestic

U.S. and international carriers operating within the U.S. (as well as in other areas), when

in reality market leverage is gained through much more subtle and effective means.

The marketing relationships described here are supported by automation within the travel

agency community, based upon the conditions existing in the U.S. market. Although not

directly applicable to many areas of the world, these U.S. experiences are indicative of

what other markets may expect as regulation is relaxed and competition increases. As

U.S. carriers expand beyond their national boundaries, both as to routes and agency

distribution, other countries make expect U.S. style distribution practices to be introduced

and competition to become more aggressive.

A HISTORY OF TRAVEL AUTOMATION

The fundamentals of airline reservation handling have not changed substantively for

decades. From the first basic, no-frills scheduled air service between Amsterdam and

London, inaugurated May 17, 1920 by KLM - Royal Dutch Airlines3 using a leased De

Havilland DH164, passengers have required reservations and reservation record

management of some type.

Objectives of a Reservation Process

The systemization of commercial air travel in the 1920s and 1930s introduced the same

basic trip components that are used today:

2 Dealerships as understood herein are distributors that represent the primary interests of a

single principal or small group of principals (vendors) to the overall detriment of

other vendors. The dealership may or may not effectively meet the needs of its

customers, depending upon the precise nature of its business practices.

Dealerships are typically thought of as automobile distributors or appliance stores.

Travel dealerships are looser and are rarely, if ever, identified as such publicly. The

airline vendor's relationship with its dealers allows significant benefits to accrue to the

enfranchising principal, regardless of how the relationship is described.

3 KLM is the world's oldest airline still operating under its own name, and the Amsterdam - London

route is the world's oldest air route.

4 Aviation “firsts” are always subjects of considerable discussion. While some airlines put their

beginnings prior to 1920, they carried mail, and not passengers. May 17, 1920 is used by most

sources as the beginning of scheduled, passenger transportation.




Scheduled services that potentially navigate a number of intermediate stops,

where a passenger may desire to travel only a portion of the aircraft's complete

route.

Fares5 that apply to each portion of the passenger routing.

Documentation, in the form of tickets which certify payment has been made and a

traveler has a right to transportation on a specific flight schedule between a

specific origin and destination.

The necessity of managing reservations and cancellations, so that passengers may

rely upon the airline’s ability to accommodate them on their desired flights.

Commercial aviation and retail travel services revolve around the public’s desire for

certainty of accommodation on airline flights, and therefore, the necessity of pre-

reserving and preissuing airline tickets6. Some air services, such as no reservation air

shuttles, eliminate the need for pre-planning (all travelers are accommodated) and the

need for complex ticketing (a single or very simple fare structure is used). In general,

however, the role of airline tickets are ticket issuance has not changed in 70 years.

Early Reservation Management

Prior to the electronic age, reservations were managed manually using record books and

manifests, reservation cards, and other printed media. Many simple reservation

requirements are still (1990) met in this way7.

5 Fares are charges that apply for passengers between a specific origin and destination point, using

a specific class of service and a particular routing, as determined by the carrier.

In earlier times, fares were tied to distances traveled more closely than they are today. Now,

promotional and yield management considerations make it very difficult to project or establish

fares based upon distance alone. Outside the U.S., airlines often operate in regulated

environments, where prices are fixed by international agreements or government decision, rather

than by competition.

This occasionally results in considerable consternation on the part of travelers and consumer

groups, as these fare and pricing inequities are difficult to justify when examined outside the

larger airline pricing context.

Two of the world’s busiest air routes - London to Paris, and New York to Washington, DC- are both

around 220 miles. An unrestricted London-Paris ticket as of this writing (Fall, 1990) is £88 ($172),

whether the customer flies British Airways or Air France, whereas the price of a New York

Washington shuttle ticket is $129 (The Economist, 1989).

6 Some travel agencies perform a financial function, in that they organize payments on behalf of

business travel purchasers and issue consolidated statements and invoices for tickets purchased.

This can also be a credit or cash management function, if the travel agency does not require either

payment on delivery or payment through a charge card with ticket issuance.

In either case, this is a minor part of any value-added by the travel agency to its business travel

customers.

7 Although “hard-copy” reservations management is more common in the hotel industry, many

substantive airline operations, operate in a primarily manual mode. These often use CRS inventory

displays for communicating sales made to a central facility, where the actual database resides in




After the Second World War, air travel and airlines expanded rapidly. The “jet age”

arrived in 19588, and with it more passengers and larger aircraft, as air travel quickly

replaced train and bus as the main form of mass public conveyance. As airline schedule

planning became increasingly complex, reservation management systems reached

unwieldy proportions.

Reservations were typically recorded on cards, each card corresponding to a trip between

specific city-pairs. Cards were then organized by departure date and stored in tubs that

were rotated among various reservation agents as necessary. Reservation requests from

outlying offices were either telephoned to a central facility or transmitted via

teletypewriter9 and processed manually upon receipt. Reservations could only be made

30 days in advance of flight departure.

In the early 1950s, when the idea of electronic reservation systems first became practical,

it took approximately 2 hours to completely process an average reservation transaction10.

By the early 1960s, this time had been shortened to 45 minutes—still in a mostly manual

mode.

Early Computerization

During these same years, electronic, digital, computers were entering what is termed the

“second generation” of modern computational devices. Whereas the “first generation”

relied upon vacuum tubes and a number of competing mass storage systems,11 “second

generation” devices used the much more flexible and reliable transistor and magnetic

core memory almost exclusively.

manual form. This is one illustration of the absolute necessity of CRS as distribution tools, if not

inventory management tools.

8 BOAC (later consolidated with British Airways) began transatlantic service from New York to

London October 4, 1958. National Airlines (later purchased by Pan American World Airways)

began domestic U.S. service from New York to Miami December 10, 1958.

9 Telegraphy has a long history in the travel industry and is still an integral part of data

communications for many suppliers (as discussed later in this chapter). The term telegraphy

describes a telecommunication system whereby graphic symbols (using a small character set of

letters, numerals, and a few special control characters) are transmitted using a signal code that

describes each character so transmitted individually.

Frequently the 5-bit Baudot encoding system (from which the term “baud” is derived) is used,

particularly in print-based teletypewriter machines. Data processing (non-print media) telegraphy

can use any number of encoding systems, the essential quality being representation of discrete

characters by specific codes without intermediate states or gradation.

Teletype is the trademark of the Teletype Corporation for their teletypewriter devices.

10 (Software Magazine, 1989)

11 These included electrostatic storage, which was insufficiently reliable for most applications;

mercury delay line storage, a very slow (on the order of 500ms, or about 50 times greater than

1990-era storage media) system used only by UNIVAC; magnetic drum storage, widely used but

also slow; and magnetic core, the most successful process for both commercial and scientific

applications.




In the early 1960s, work commenced on “third generation” digital computers. This era,

usually described as lasting between 1964 and 1975, is characterized by the introduction

of integrated circuits12 13, but which also produced operating systems, machine

instructions, and methods of data and memory management that were sophisticated

enough to form the basis for many of the large-scale commercial computers used today.

Thus, it is not uncommon to find large, important programs and systems that are rooted

in this era.

Development of “PARS”

This is the period when commercial data processing technology matured to a point where

large-scale airline reservation systems were practical. The early airline reservation system

projects were managed by IBM14 and UNIVAC15, with the most successful projects

developed in connection with IBM. There were several initial development projects

pursued by competing airlines, including United Airlines, Eastern Airlines, Trans World

Airlines and SABRE,16 developed in conjunction with American Airlines.

American invested what was, for the time, the tremendous sum of $40 million which

“would have bought the airline four Boeing 707s at a time when the entire fleet consisted

of fewer than 25 aircraft”.17

SABRE development began in 1958 and required four years of planning and two years of

programming. The system was introduced in 1964, using a modified IBM 7094, a second-

generation system. The essential SABRE operating system was proprietary to American

at this time.

In 1964 IBM also introduced the System 360, which represented an almost complete

departure from many machine design concepts employed by IBM prior to that time.

System 360 architecture was the most successful computer design up to that time, and

among the most successful of any to date. Although the 360 did not use integrated

circuits in many of the key areas usually associated with third-generation systems, its

design has much more in common with third than second-generation devices.

Understanding the basic premises of the 360, which was supplanted by System 370 in the

early 1970s, is important to appreciating many of the strengths and limitations of PARS-

12 During these years, LSI or Large-Scale Integration devices were produced. These are similar to

the VLSI or Very Large-Scale Integration devices (broadly defined as a device containing more than

10,000 transistors on a single circuit) used in today’s circuits, but on a less sophisticated level.

13 It is interesting to note that integrated circuitry, although pioneered in the late 1950s and

commercially available as early as 1961, was helped immeasurably on the road to wide acceptance

and practicality by the early U.S. space program.

14 International Business Machines, then, as today, manufacturers of the most successful, highly

reliable, commercial data processing devices and operating systems.

15 Now merged with Burroughs to form Unisys.

16 Semi-Automated Business Research Environment

17 (Software Magazine, op. cit.)




type CRS. System 370 architecture is still (1990) central to IBM’s mainframe commercial

processor line.

American faced serious implementation

problems with the early SABRE system, among

them capacity limitations. Shortly after the

introduction of System 360, American

implemented a machine that provided supportive

processing functions to SABRE, but did not

migrate to the newer and much more powerful

and efficient System 360 environment.

In 1968 American reached an agreement with

Eastern Airlines that allowed American to modify

and implement Eastern’s Programmed Airline

Reservation System (PARS) on its System 360.

PARS18 was another IBM project, working along

different lines from American’s SABRE effort, and

built on behalf of Eastern. Other airlines had

launched similar, but unsuccessful, reservation

system development projects19. These

eventually adopted the basic PARS system, and

modified it to meet their own needs.

PARS concepts, designs, and features still form the primitive foundation of most airline

reservation processing and management systems today. An international variant of the

PARS system, IPARS, followed the initial PARS project.

PARS was designed to run on IBM’s latest 1960s vintage commercial processors, System

360, and used a variety of existing and proprietary tools and software systems. Since its

introduction, IBM has assumed a leadership role in developing, enhancing, and

upgrading airline systems, supportive programs, protocols, and the hardware on which

they run.

System 360/370 architecture assured PARS’ usable life in the 1990s. As IBM upgraded its

commercial mainframe processor line, newer, faster, more powerful machines replaced

older systems in existing PARS installations. This was made practical because upward

compatibility was an important feature of the System 360 concept. Even though many

essentials of the PARS environment remained fundamentally unchanged over the years,

18 Eastern PARS is distinct from the proprietary airline CRS developed and market by TWA, and

which is now part of Worldspan, in partnership with Northwest Airlines and Delta Airlines.

Although the platform used by TWA developed from IBM/Eastern PARS, the CRS is a distinct

product with its own pedigree.

19 Trans World Airlines (TWA) has a similar development project with Burroughs, and United

Airlines worked with Univac (both Burroughs and Univac are now part of Unisys). Although

Univac did finally implement a somewhat successful reservation system, which was used into the

1980s by airlines such as Northwest Orient, the initial United Airlines effort was abandoned.

Key Aspects of System 360 Architecture Large, complex instruction set intended to build

many capabilities into the basic design of the machine, thereby limiting, to a degree, the need for many complicated programming steps.

Employed instructions embedded in microprogramming, stored in ROM components, allowing application portability across a number of machines using the 360 instruction set but employing a range of circuit designs and speeds.

First large-scale commercial use of emulation, whereby applications not directly employing the System 360 instruction set could be run by simulating conditions on the hardware for which they were designed.

Introduction of memory cache to aid overall machine speed. Successful introduction of large-scale virtual memory operating systems and applications, permitting time-sharing among a very large group of simultaneous sessions.




hardware advances have allowed PARS to continue meeting the needs of ever expanding

CRS networks.

What Is PARS?

Rather than a monolithic program set or product, PARS is the essential foundation and

conceptual basis for airline systems. Because these concepts were replicated in later

modifications and revisions of the original PARS, there is great similarity among all PARS

systems, particularly the major U.S. CRS. This applies to operational practices, operator

formats, system capabilities and limitations, and ongoing enhancements. There has been

significant cross-sharing of PARS functionality because of IBM’s role as developer and

maintainer of the software tools that comprise much of the PARS environment.

Although this text speaks of “PARS and IPARS systems”, it does so in a generic sense, as

frequently there is little or no real difference in the software of one PARS-based system as

opposed to another. Where there are functional or architectural distinctions, these are

clearly identified. In reality, however, all major U.S. CRS have operated as independent

systems since the late 1960s.

Inventory vs. Passenger Systems

The initial airline automation efforts, including PARS, were inventory systems, and not

passenger systems. Based upon the management priorities defined in the late 1950s,

gaining centralized inventory control was the most important priority. These early

transaction systems processed reservation requests against declining inventory

allotments, but lacked even the relatively simple passenger record, service request and

file access capabilities of later PARS-type systems. The extensive schedule information

for offline (non-host) airlines was also lacking.

More extensive databases were partially visualized, but were only incorporated into later

PARS software releases after the initial inventory systems had been operative for some

time. These were also implemented in varying degree of sophistication, depending upon

the airline and system in question. There is more commonality between the schedule,

reservation, and booking modules of various PARS-type systems than there is in other

databases and functions.

Communication Limitations

Early airline systems lacked the sophisticated communications capabilities that are taken

for granted today. Large public data networks, sophisticated data transfer protocols, and

standardized interfaces were unknown. System planners operated in an environment

where even long distance telephone calls were relatively rare and expensive.20

20 The era where long distance telephone communication was routine really did not arrive until the

1970s. Although nationwide direct dial service had existed for many years previously, line

conditions were poor and rates high by today’s standards. The public generally limited long

distance telephone conversations to unusual circumstances. Although reliance upon the telephone

was more common in business, written correspondence still played a more prominent role in the

conduct of long distance business than is true today.

The extensive commoditization of telephone communications was brought about by the gradual

deregulation of long distance services, and subsequent lowering of rates, beginning in the early




This necessitated low-cost, reliable, easily implementable and maintainable

communications methods to support information exchange between airline host systems.

Because of their role as product distribution tools, not just inventory systems, airline

computers in particular rely upon data communications to exchange information rapidly

and effectively. This is because interline21 reservations and ticketing have been

fundamental to world travel for many years. An airline’s biggest “customers” are other

airlines’ internal reservation centers and computers, who make reservations for

passengers as both as a pure convenience to their customers and as a source of

passengers that may transfer or “connect” from these airlines.

Communication between airline systems is necessary because the operator of one

system needs the ability to update the inventory and create reservations in another

system that operates independently of the one the operator is using. The system

functions as a computerized work environment and productivity tool for the operator. If

inventory sales and updates in “offline” systems can be accomplished electronically the

reservation process is much faster. The alternative is for the CRS operator to use the

te1ephone, which always increases the time required to make a passenger’s reservation

many times.22

The passenger also wants reliable schedule, availability, and reservation information as

quickly as possible. Particularly in the U.S., travelers are accustomed to “instant” results

and are dissatisfied if lengthy delays are introduced. Electronic messaging, together with

airline database practices, makes virtually instant reservation confirmations practical.

Early airline communications used teletypewriter-based messages that could operate

reliably at low transmission speeds, using existing, inexpensive, communication circuits.

These communications operated in a network-based mode, thus eliminating the need for

1980s, and the introduction of more advanced telecommunication technology, such as facsimile

machines (FAX) in the mid 1980s.

21 Interline refers to tickets (or ticket-related transactions such as reservations) issued by one

airline on beha1f of another. This is done because airline schedules often require coordination with

other carriers in order to fulfill customer needs. Thus, a traveler flying from Portland, Oregon to

London, UK must change planes at some intermediate city because there is no direct service.

The traveler’s itinerary might involve United Airlines between Portland and Seattle, Washington,

then British Airways from Seattle, non-stop to London. Only a single airline ticket would be issued

that would contain two valid flight coupons—one for the United flight and another for British

Airways. The traveler would also probably pay a single price, which would be divided between the

two airlines based upon formulas agreed to by the airlines involved. The passenger’s reservation

and ticket could be issued by either United Airlines or British Airways, because of the interline

agreements in place between them.

The overall effect is to simplify the transaction for the traveler and any travel agent that would

issue the ticket on behalf of the airlines involved.

22 Telephoning is very common in the travel industry, as some airlines do not make reliable

inventory information available to “offline” systems; others are not automated at all. Telephone

calls for reservations routinely take several minutes at best, and can take much longer, if the

reservation center called is busy or telephone communications are unreliable. This contrasts with

electronic inventory sale messages which the operator completes in a few seconds.




dedicated circuits between each reservation system. Airline messaging systems are

described later in this report under the heading Connectivity.

These basic communication formats and practices are another legacy from the early days

of airline computerization and still serve much of the industry today, albeit in an

enhanced and upgraded form23. While the original interline communication methods are

practical, they are neither flexible nor particularly efficient and have been extensively

replaced by modern communication technology.

It is interesting to note that considerable work had been done on developing more

efficient data communication methods during the same years airline systems were

developing, particularly to support military projects24. For various reasons this technology

was not incorporated into the early airline system projects25.

Software Development in the 1960s

It is difficult for many people, regardless of their familiarity with computers and

programming, to appreciate many of the constraints large-scale developers operated

under in the 1960s. Today, most commercial programmers are avid PC enthusiasts and

are accustomed to working “online” both at home and professionally. Using a CRT that

directly accesses a computer workspace, they write program “code” or instructions

electronically in a disk file, “compile” their programs (produce a set of machine

commands ready for execution by a computer based upon the “source code” or

instructions created by the programmer) online, and test them as each portion of the

program is completed.

Sometimes emulation programs are available that permit PCs or other small systems to

behave like large commercial mainframes, so that programmers can experiment in an

environment much like that where their final work will reside26. Modern programming has

23 These are detailed in the publication: Reservations Interline Message Procedures -- Passenger

(ARIMP), current edition, Montreal: International Air Transport Association.

24 Univac played a large role in this development.

25 Partly this was doubtless because a comparatively “low-tech” approach to meeting the

communications needs of the embryonic worldwide airline systems industry, where all phases of

communications technology were underdeveloped and not completely reliable, was deemed more

appropriate.

It is also partly true that the right applications and designs were simply not made available to the

right airline system designers at the right time.

26 There are numerous other programmer tools that make the production of machine instructions

easier and more reliable. Most rely upon close interaction with a processor of some type, so that

the programmer gains real experience as the work progresses.

An illustration is Microsoft’s excellent PC-based Quick-BASIC programming environment. Here

programmers use an online screen editor to create their code, assisted by online help files and

self-editing features that identify potential errors as they are made. Programs, parts of programs,

or even individual steps can be tested at will through an emulation feature that avoids the

“compile” step and demonstrates what the final product will actually do on the host computer.




come to depend upon interaction with a processor and “debugging” or error-correction

almost at will.

It was not uncommon for programmers in the 1960s to never actually see the computer

they worked on--indeed, programmers working exclusively on software of similar vintage

are sometimes similarly disadvantaged. Instructions were written on pre-printed forms

and transferred to punch cards by clerks specially trained for that task. Those cards were

then “loaded” into the computer in batches and the program was run. Debugging was

always necessary, but the programmer could not depend upon constant interaction with

the processor, because the input, load, and run functions were much more complicated

and time-consuming.

Hardware in the 1960s was limited and expensive. Computer time was valuable and also

expensive, so much so that skilled programmers often spent considerable time trying to

reduce the number of steps their programs required. Modern programmers have much

greater and less expensive machine resources available to them, which eliminates the

need for such precision27.

Computer Languages

Computer languages are sets of symbols, instructions, and statements used by

programmers to control the operation of a computer and its peripheral devices. In its

basest sense, computers “understand” only binary code - series of Os and 1s, or “on”

and “off” conditions. While it would be possible to construct programs using binary code,

it is so difficult that it is almost never done. Other “languages” are used that can then be

translated or “compiled” into instructions that the computer can execute.

Assembly Language is a term loosely used to describe symbolic instructions that a

programmer uses to direct specific, predetermined responses from the computer. The

programmer does not work directly with binary code, using instead alphabetical or other

symbols that equate directly to binary instructions28. Since assembly language directly

controls individual actions or series of actions that the computer performs, it is specific to

each machine where it is used. In other words, an IBM System 370 uses a different

variation of assembly language than does an IBM PS/2. Many early programs were

written using forms of assembly language, and this form of programming is still used

where programmers must optimize the responses of the machine for which the program

is developed.

Most airline system and application programmers use a form of assembly language,

which accounts for much of their development and maintenance. IBM is introducing

enhancements to the programs used by airlines that, once implemented, will allow more

flexible development tools to be used.

27 To illustrate, the first computer the author, used was an IBM 360/20 that had 48k of magnetic

core memory and very few peripheral devices. Contrast this with today’s PC which is routinely

equipped with at least 640k of semiconductor memory, a CRT, and numerous peripherals.

28 Sometimes, depending upon the type of assembly language used, a program called an

assembler is used to translate certain parts of the program into a form suitable for the computer.




So-called “higher-level languages” approximate human communication and are

compiled into object programs that can be executed by computers. Whereas an assembly

language programmer exercises significant control over each action the machine

performs, a high level language programmer focuses on the result desired and relies

upon the compiler to control individual machine instructions. While this obviously results

in greatly increased programmer productivity, a given program can and often does result

in very inefficient object code that does not optimize machine resources or capabilities.

Transaction Processing

At the time PARS was developed there were several successful “high-level”

programming languages in use29. Online transaction processing systems, similar to those

required by airlines, had also been built or planned by this time. The architects of PARS

were able to build on this body of experience, while tailoring a system to meet the

specific needs of the airline planners that also participated in the project.

IBM’s Airline Control Program (ACP)was the first transaction processing tool applied

PARS-type airline systems, beginning in1965. The Transaction Processing Facility (TPF)

was part of ACP, but developed more specialized applications and was used more

independently as time progresses.

In 1984 IBM positioned TPF as a strategic product that would serve a different specific

market segments together with MVS and VM, IBM’s state-of-the-art operating systems.

IBM modified TPF by introducing numerous extensions that dramatically increased its

power and attractiveness to users30. TPF now runs in native mode31 on IBM 3090

machines, the system used by the majority of current generation airline systems,

meaning that a host operating system is no longer required.

An early problem with TPF, indicative of the era when it was developed, was that only a

uniprocessor32 could be used.

This was corrected with releases subsequent to the 1984 announcement. An equally

important enhancement was TPF support for compiled source code, whereas previous1y

TPF programmers used assembly language.

29 Fortran (1958), Cobol (1960), and Algol (1960) are examples of several that are still used (with

ongoing revisions and refinements) today.

30 This, in part, accounts for American’s decision to migrate to a “pure” TPF environment—a

project undertaken with significant expense and risk. SABRE’s access to product enhancements

and IBM support is thereby significantly enhanced. Further, the programming upgrades introduced

into TPF promise to make it a much more productive environment. These advantages were not

available to hybrid systems.

31 Native Mode usually refers to a computer operating environment that is specific to a particular

type of machine, within which applications can be run without the need for interpreters or

specialized operating environments that are foreign to the machine in question.

32 Uniprocessing means that instructions are executed by the processor sequentially, as opposed

to multiprocessing, where several processors function in parallel, executing coordinated

instructions.




Although TPF enhancements were successfully embraced by many airlines, some

airlines, including American, continued to use a highly optimized form of ACP for years.

American converted to TPF from a hybrid ACP/TPF environment completely in 1991. This

is very significant, as it allowed American to operate directly on hardware and software

that are part of IBM’s product mainstream, thereby reducing American’s long-term

software maintenance expense and giving it a much more direct path to the latest

technology33.

Current Airline Automation

Some idea of the complexity that current airline reservation systems have achieved can

be gleaned from the accompanying description of TWA’s PARS system34.

By comparison, SABRE, the largest system in used by travel agents today, currently

operates its Passenger Service System, one of five major divisions of SABRE, on 6 IBM

3090/200 series machines and 224 IBM 380 disk drives. Each drive has approximately

1,320 mb, giving the system a total storage capacity of 296 gb per volume. Current

memory is 726 gb.

SABRE has announced figures of over 1,800 transactions processed per second during

exceptional peak periods, and anticipates 2,200 or more in the future.

33 Although American’s implementation of mainstream technology is a significant and correct

strategic step, it is debatable whether the new environment provides as much high-volume

transaction processing flexibility and capability as did American’s hybrid ACP/TPF system

While a detailed discussion of this question is beyond the scope of this text, it is well to remember

that American’s decision was a strategic move, undertaken for reasons apart from pure transaction

processing capability.

34 Per Vijay Kumar (Kumar, 1990). Vijay Kumar is an assistant professor of computer science at the

University of Missouri—Kansas City. His research areas are distributed systems, object oriented

and expert database systems. Copyright Association for Systems Management 1990, used by

permission. This material is based upon (Gilford & Spector, 1984) and (Buckley, 1989).

TWA PARS Snapshot TWA’s system has about 50,000 communication terminals in the field worldwide. The size of the database is about 850 gb (two to

the thirtieth power; significant storage for its day) and is stored on 340 of 3380s DADS. It is fully duplicated for performance and availability reasons. About 8% of 850 gb are occupied by passenger records.

A typical daily workload is about 20 million transactions. The peak performance rate is about 800 TPS. The average rate is 552 TPS with a response time of 1.5 second. Reliability of these systems is also an important parameter. A partial database recovery (recovery from transaction or system

program failure) takes about two minutes. A cold start (total failure or starting system from scratch)takes about eight hours. In 1972, TWA lost about $2 million and in 1976 about $250,000 due to system unavailability. However, the airline has improved its software reliability and did not have a major system outage for the last two years.

Initially, it had a 9083 CPR that ran on a 3083 uniprocessors. Since then, it has gone to multiprocessors (3390), four of which are dedicated to on-line processing. TWA can accommodate up to eight processors that might give it adequate power to reach 1,000 TPS




Airline systems share the same goals as other high-performance transaction processing

environments:

1. Reliability. As illustrated, downtime can significantly affect revenue and costs.

2. Responsiveness. User productivity degrades rapidly with decreasing response

times. In the highly competitive CRS area, small variances can result in a lasting

competitive disadvantage.

3. Price/Performance. An optimal environment must be in p1ace at an acceptab1e

cost, both to the CRS and the user. This is a major challenge as CRS continue to

develop and user appetites for new and more extensive applications increase.

4. Enhancements. The CRS environment must be sufficiently adaptable to allow

creation of the functionality users require. This has been difficult using old-style

ACP/TPF systems, but will change as more standardizes and sophisticated

operating environments are created.

5. Process and System Integration. The most effective development path for the CRS

will be to effectively integrate local, distributed systems and microcomputer

based workstations into the CRS environment. This is an extraordinarily difficult

task to do effectively, given pricing limitations35 and the restrictive nature of CRS

communications, architecture, and databases.

Transaction Processing Fundamentals

Today all airline systems operate as online transaction processing systems36. A

transaction system allows operators to initiate queries and requests for specific

applications, view the results of these applications in real-time, act upon the results of

this process, initiate follow-on transactions that are determined by the results, and update

files or records based upon information resident with the user rather than within the

system. These events are driven by a series of independent interactions between the user

and the system, known as transactions.

Transaction-based systems differ from other conventional computer applications (here

applied specifically to airline systems which are among the largest and most complex

transaction systems):

Transactions Discrete and Independent. While the information contained within

one transaction may affect other transactions (perhaps because they use a

common database where updates initiated by one transaction may be passed to a

subsequent transaction), one transaction is usually not dependent upon another,

nor connected with another as to time.

35 Most CRS highly subsidize user (travel agency in the main) hardware and software. Rea1 CRS

revenue is obtained through transaction fees charged to vendors. There is a complex relationship

management challenge facing not only the CRS but others who would use the CRS as a value-

added network. This is a fundamental premise that is usually overlooked by would-be CRS

application developers.

36 By far the majority of transaction-based systems produced today, regardless, of application, are

online systems.




Batch-oriented systems, by contrast, manipulate data elements as a group. There

may be extensive data dependencies in such systems, and omissions of some

elements would require the entire application to be rerun.

Databases Updated and Queried as Needed. The transaction system works using

information stored in a database and the results of online data entry are usually

recorded in a database.

Geographic Separation. Transaction systems function without regard to where

their users are located (as long as the requisite communication services are in

place) Users working on the same system may be separated by thousands of

miles.

Concurrent Sessions. Because transaction systems usually must support many

(sometimes thousands) of users, they emphasize performance and throughput37.

Since many system users may require access to the same databases

simultaneously, transaction systems must support user sessions38 running

concurrently, while maintaining performance and the integrity of individual data

elements.

Queries and Requests for Applications Responded to Real-time39. Thus the

timeliness of data supporting an online system become critical, as old data cannot

be used to make reliable decisions. Data must also be synchronized within the

system, so that databases are consistent for all users and transactions initiated or

updated by one user available to other users and do not conflict with updates

made by other users.

Limited Functionality. Airline CRS attach functions to the database query and

update portions of the online system. These functions act upon data retrieved

online from the CRS, or input online at the user’s site, and produce specific

responses, such as calculated prices for traveler itineraries, printed itineraries, or

tickets. Online transaction systems offer few functions to their users, as compared

to the range of functions that could be designed for the system, and these have

limited, specific purposes.

Data Accessibility. Most required CRS data are available continuously while the

system is operating40 and can be accessed at random. This contrasts with batch

37 Essentially meaning the time a transaction takes from its initiation to completion—including

manual and computerized steps and processes.

38 In this sense, an individual user’s interaction with the system in order to accomplish a specific

purpose (such as make a reservation for a passenger) is termed a session. A session might include

dozens of transactions and database queries, all of which would come together in the completed

passenger’s reservation.

39 A real-time application delivers a response during the time that the application is physically

running on the computer, so that the process can receive interaction from the user and be directed

accordingly. In airline reservation applications, for instance, requesting flight availability is an

interactive, real time application because the user determines specific parameters and modifiers

that are used to deliver “correct” flights, making the decisions as to what modifiers to use while

interacting with the system.

40 There are CRS databases that are used for internal MIS or other purposes not essential to system

operation. These may not have continuous availability.




oriented systems where data necessary for one application may not be available

unless that application is running, and where offline storage (such as on magnetic

tape),and sequential data access is required.

Event-Driven. Transaction systems must undergo regular maintenance, as must all

complex systems. CRS also have scheduled database updates, as for schedule

changes among other purposes. The CRS will also schedule certain applications

affecting many transactions to be executed at specific times. This helps shift

system load to “off hours”41.

Most transaction-related processing, however, begins when users initiate

transactions by entering or retrieving data and not based upon any particular

schedule. It is impossible to predict when specific transaction-based functions will

be required or from where on the network they will originate. This necessitates

complex capacity planning and continuous availability of basic system functions at

all times when the system is operative.

Point-of-Entry Editing. Online transaction systems reject incorrectly formatted

instructions or data blocks as these data are entered and return an error message

to the users real-time, so that a correction can be made and the entry reattempted.

This must be done because interaction with the user is essential to the online

transaction system’s successful operation, and only “good” data can be used for

this purpose.

Transaction Size. Most batch or single application computer systems take several

minutes to execute all but the simplest applications. Many larger programs can

take hours or days to complete. The real-time, event-driven nature of the

transaction system requires responses within seconds42. This means that systems

must be designed and programmed for optimal speed43 and transactions are kept

small to achieve the best responsiveness. CRS reservations, for example, are

compilations of many individual transactions, each executed individually but

which, together, complete the traveler’s desired reservation.

Data Integrity. Each part of the CRS database, particularly passenger reservation

records, must be current at all times and reflect the best possible condition of the

data44; no delayed updates are acceptable. This is necessary because the random

nature of transaction systems makes it impossible to assume that any available

41 A good example is the electronic filing of passenger reservations that have been coded to be

ticketed on a certain date. This typically occurs overnight, when system usage is at a minimum.

42 1.5 seconds is the standard for most responses using SABRE. In other words, a user receives a

response to any entry made within this time. The sole exception is the complex “best fare” pricing

program, designed to locate the lowest air fare for a particular itinerary, which can take

approximately 5 seconds.

Users are very conscious of system responsiveness and routinely complain if even a few seconds

are added to familiar response times.

43 This is part of the reason assembly language programming, which is intrinsically faster than

many (not all) high-level compiled object programs, is used extensively in airline CRS.

44 This means that there may be inaccuracies in the database, but these must not be planned or

intentional. The system cannot assume that some inaccuracy or old data is tolerable.




record or data element will not be the next required by some user on the system.45

This applies only to CRS data that are used for transaction processing.

Understanding TPF

TPF is a proprietary development and processing environment specifically designed to

facilitate entry and processing of a large number of simultaneous transactions from

multiple network terminals, where extensive database queries must be managed against

large quantities of data and where overall responsiveness is a critical factor. A transaction

is defined as a single entry, or a series of entries that are assembled in an electronic work

area and completed at one time and that, in turn, initiate other actions within the system.

Industry experts define airline transaction systems as high-performance, in that they

typically process in excess of 500 transactions per second, with an efficiency rate of one

second response time over approximately 95% of transactions processed.

TPF is based upon a variant of assembly language. The entire work environment is so

unique that programmers skilled in its application and management are called “TPF

Programmers” and are among the highest paid professionals in that aspect of the data

processing industry.

Online transaction systems are becoming more common ways to access and update

databases. As these applications grow in size and complexity, more powerful and fully-

featured development environments and tools, such as TPF, become important. TPF

development is very expensive and demanding, causing many potential users (who are

not already committed to installations partly dependent upon TPF, as are the major CRS,

or who simply cannot use a less powerful transaction processing facility) to explore more

affordable alternatives.

It is important to define TPF’s role as a transaction management, rather than a database

system. TPF controls terminalbased queries and responses, and disk access, while other

programs are developed or purchased and integrated to handle true database functions.

1960s era software development defined database management as strings of commands

directed at multiple files (as opposed to the hierarchical or relationship-based structures).

These older techniques are decidedly less flexible than is today’s database technology,

but are efficient to access and store in an online environment while requiring relatively

little (per transaction) machine overhead.

Because TPF, and the airline systems that use it, are reflections of this environment, they

are not especially powerful, based upon today’s standards, as transaction processing

tools. Effective airline systems rely upon other applications, independent of TPF, to

support the database functions required of online systems.46

45 CRS do contain “non-essential” data that do not fit this definition. For instance, there are text-

based reference pages in every PARS-type CRS that contain general information of definite value

to system users but not essential to, or directly involved with, transaction creation or update.

46 “The Bank of America plans to use TPF as the basis for a high-volume transaction processor

front-end using IMS as the back-end system, and is also planning to enhance the power and

capability of TPF.”




Role of PARS Today

All this contributes to the characteristics that still shape PARS-based systems. The legacy

and limitations of PARS-type systems have been very frustrating to CRS suppliers and

users. Agents appreciate the basic commonality

between PARS-type environments, that makes it

fairly easy to learn a new system once one has

been mastered, but do not appreciate the cryptic

formats it uses (characteristic of 1960s-era

systems). Suppliers like the high-reliability that has

been achieved through constant refinement and

diligent maintenance of their PARS environments,

but, with agents, are dismayed at the difficulty (and

expense) of introducing modern functionality.

Many people believe that PARS systems are

nothing more than antiquated 1960s technology

and must ultimately be replaced by current

technology. Several years ago this was a common

theme particularly among misinformed government

regulators who criticized airline software

development and management practices as not

being in the public interest.

“… a good example would be the April 6, 1982 issue of The Travel Agent, which

reported then CAB47 Chairman Marvin Cohen as having ‘scored one point with

travel agents’ by telling a Washington, D.C. ARTA48 meeting that airline computer

reservation systems should be criticized for being unable to track complex fare

changes under deregulation.

(Kumar, 1990). Note: IMS or Information Management System is an IBM database support

product.)

In this same article, the author expresses the opinion, “In its present form, however, it (TPF) does

not offer a solution to transaction processing problems.” It is correct that TPF does not offer a

comprehensive solution to the range of difficulties associated with transaction processing, and its

longevity (at least in present forms) may be questioned, but the large, high-volume, successful TPF

operations in place today are sufficient testimony of its value as a transaction processing tool.

47 The Civil Aeronautics Board, a U.S. federal governmental airline regulatory body dissolved as

part of the Airline Deregulation Act of 1978. Many of its functions are now assumed by the

Department of Transportation; others by the Justice Department.

48 The Association of Retail Travel Agents, an industry group that limits its membership to

businesses actively involved with the sale of travel to the public at a retail level.

PARS Characteristics

Careful, intricate design, where many programs

and applications work in concert to produce desired results.

Relatively inflexible structure that must incorporate modernized versions of very old programs with new applications to meet today’s business needs.

An ACP/TPF basis that is intrinsically expensive and difficult to maintain, and very challenging to update and that does not always have the latest technology tools available to it.

Non-standard communication protocols and interfaces that are unique to the airline industry, are character rather than data-oriented, and are not efficient when used to support modern applications.




“Mr. Cohen expressed numerous errors of fact. One was:

‘If an agent seeks one display of the lowest prices of all airlines (flying)

between Washington and New York, he or she will fail’, which drew light

applause.

“In reality, I believe all major systems did an acceptable job of providing this

information …”

“His remarks also included a statement that the software used by United and

American is 20 or more years old and that it would take as long as two years to

“reprogram the computers”49.

“The technology to place remote computer terminals in almost every travel

agency location did not exist 20 or even 10 years ago50.

“No major airline today uses operating systems from 1961. Some of the basic

formats and functions have been in use for a long time, but they are continually

revised and updated. This is the nature of any complex data processing system.

Programs for the major systems will not be re-written now or over the next two

years. The systems will update and modify their current procedures, but will not

start over.”51

All airline CRS use the most modern communications, storage, processor, and related

technology available. PARS-based systems preserve the remnants of their beginnings,

but each CRS has developed along different lines and operates and is maintained

independently. Today’s CRS often struggle with significant expense and effort to free

themselves of their inbred limitations, but each works with programs that are

comparatively modern and bear the mark of their own unique development histories.

HISTORY OF TRAVEL AGENCY AUTOMATION

In the mid 1970s, prior to initial travel agency automation, ticket preparation and

distribution were usually performed more cost-effectively by travel agencies than by

carriers directly. Estimated average airline ticket office reservation processing costs were

49 In the same talk, Cohen stated:

“The technical capabilities of today’s computerized systems reflects the old regulated

industry and they (the airlines/CRS) must adjust to the new, competitive regime.”

What, at the time, was mistaken for technological limitations was really an unavoidable

consequence of deregulation. This is so because the most challenging CRS consequence of

deregulation is database maintenance, which is hampered by significant, nontechnological,

limitations. There have been significant pricing and fare-search tools developed for the major CRS,

but the fundamental database problem remains and has not changed significantly, although the

trave1 agent’s and the public’s ability to deal with the problem have improved greatly.

50 This is because the transaction load experienced by today’s CRS, based upon their broad travel

agency user bases, could not be accommodated by systems of that vintage.

51 Excerpted from a four-part series, The Right Decision for the Right Reason (Wardell, 1982),

published in The Travel Agent. Copyright 1982 by David J. Wardell. All rights reserved.




approximately 16.2%, whereas agency commissions were only 7%. Overall distribution

costs could be reduced if a carrier’s agency volume increased, particularly regarding

largely point-to-point business air tickets.52

Agency commissions during the regulated years were set by industry agreement,

whereas today carriers determine compensation levels independently. General practice,

with some exceptions, has held base commissions to 10% of net air ticket value (the total

price less the 8% federal transportation tax), for an effective commission cost of 9.2% to

the carrier53. At a 7% commission level, when the 8% tax was also in effect, the effective

rate was 6.44%.

Airlines regarded travel agency distribution as cost-effective, without any fixed overhead

costs, and, because travel agencies are found everywhere, a more efficient method of

ticket distribution than was opening their own ticket sales offices.

Other strong incentives were present to direct more sales to agencies, among them the

need to control steadily increasing costs which a regulated environment did not permit to

be fully borne by the traveler. Distribution (or agency) costs can be influenced directly,

unlike fuel, as an example, where costs increased dramatically during these years and

over which a carrier has little direct control. The airline industry also expanded greatly

during these years and needed a broad, relatively economical distribution system.

CRS as Travel Agent Productivity Tools

As manual processing methods do not permit great expansion of most agency

transaction volumes, automation was made available as a tool to raise booking and

document preparation productivity. The almost concurrent development of CRS and so-

called “back room” (agency accounting systems)automation made large regional

agencies and nationa1 chains a reality. A1though large agency networks existed before,

mega-agencies with sales counted in the 10s and 100s of millions are impossible without

automation, specifically CRS.

Value of Tools to the Agency

The primary reason the CRS suppliers are also interested in travel agency accounting

automation relates to the overall effect such automation has upon agency operation and

competitiveness. Because tools are so critical, particularly concerning large agencies, the

vendors perceive significant opportunities to control agent loyalty through access to

these tools. Where the vendor can provide comprehensive automation to the agency,

front and back room, the value chain is strengthened regarding total services provided by

the carrier as is the agency’s overall commitment.

52 This is costs refers specifically to airline City Ticket Offices (CTOs), which are storefront

1ocations handling ticket sales much as a retail travel agency does. Airport processing costs were

somewhat less. Ticket-by-mail programs, never universally adopted by airlines, have consistently

represented the most cost-effective distribution mechanism, but cannot meet the needs of high-

volume business accounts and are also unattractive as some risk must be assumed where tickets

are sent through the mail.

53 The federal transportation tax is currently 10%, making the airline’s effective commission rate

9%.




Sophisticated tools are very expensive for a large agency, making conversions from one

CRS to another much more difficult because of outright costs and retraining expense,

were a conversion attempted. The vendor assumes that agencies receiving full

automation support from a single source (accounting and CRS) are more committed,

financially and practically, to the vendor than is an agency with partial recourse to an

independent supplier.

This has caused most of the CRS suppliers to experiment (some less successfully than

others) with supplying agency accounting system products. The aggressiveness with

which the CRS vendors have pursued backroom agency automation as part of overall

distribution strategies has largely decimated certain segments of the independent

accounting system market.

Teleticketing

As early as 1960, some major airlines began installing teleticketing machines in select

travel agencies. This service was based upon standards implemented by the ATC54. Any

airline could transmit tickets electronically to any travel teleticket machine by adhering to

these standards. Many, but not all, airlines offered the service.

The machines were modified teletypewriters that were accessed by the airline’s

reservation center using normal telephone circuits. Once accessed, the machine could

print a ticket, using special stock, in between one and three minutes. The most common

(and for many years the only) supplier of teleticketing machines was RCA55. Agents

purchased the machines and provided the telephone circuit necessary to operate it.

Agencies received teleticket machines under the sponsorship of a major airline, which

took responsibility for ordering and installation of the machine, periodic maintenance56,

and informing other airlines of the telephone number necessary to access the agency’s

machine57. Agencies were initially offered the machines based upon their sales volume,

but the practice later became so popular that the smallest agencies used teleticketing.

Travel agencies paid small fees, of between 50¢ and $1.00 (there were several fee

adjustments over the years) for each ticket issued.

The travel agency benefitted because laboriously writing tickets by hand (with not

infrequent errors) could be reduced and because the airline issuing the ticket computed

the price and assumed responsibility for its accuracy. The airline benefitted because

54 Air Traffic Conference of America. An airline industry cartel that set standards (both commercial

and technological) for relationships between airlines and travel agencies, and policed these

relationships.

55 Radio Corporation of America, a pioneer in the electronics industry; merged with General

Electric in 1986.

56 Which was minimal because the teletypewriter machines used by RCA were extremely rugged

and reliable; later machines from other suppliers had more problems.

57 Airlines sponsoring teleticket machines varied based upon the carriers represented in various

markets. Where one airline was stronger than others it usually took responsibility for installing the

machines in select agencies.




agency ticketing errors were reduced and productivity improved, which was important for

reasons just explained.

Teleticketing enjoyed widespread usage until well into the 1980s (past the beginning of

the CRS era). Widespread agency computerization eventually rendered the machines

obsolete, but many were still in place as late as 1985, although new installations had

ceased.

Teleticketing was popular because it was the only semiautomated productivity tool

available to most travel agencies. It was not without problems:

1. Ticket issuance was not instantaneous. The earliest teletickets were composed

using teletypewriter terminals designed for the purpose and transmitted once all

relevant data had been input. Agents usually tried to give an airline 24 hours to

complete this process, as even a “rush” same-day request could take hours.

2. The more technologically sophisticated airlines eventually began transmitting

teletickets directly from their computers but, as pricing software in particular was

not fully developed, manual composition was still frequently necessary.

3. As travel agency ticketing volumes increased, the burden of issuing tickets

centrally became unacceptable for the airlines.

4. While, overall, the teleticketing process was very reliable technologically, there

were frequent mechanical problems, sometimes caused by using 9-part forms

(necessary because airline tickets require this many copies) in the teletypewriter

machines, resulting in misalignments and retransmissions.

5. Not all airlines offered teleticketing services. This was particularly inconvenient

where foreign airlines and frequently complex pricing and itineraries, were

involved.

Airline Reservations in the Travel Agency

It was clear to agents and airlines that substantive agency productivity gains could only

be achieved by making the same general type of automation used by airlines for

reservations available to travel agencies. Initial projects were launched to explore

technological and commercial options through industry trade groups. All these failed

because of government regulatory difficulties, impractical business propositions, or poor

technological vision.

Many airlines made reservation systems available to select agencies, chosen either

because of their value and importance to the airline or simply as test sites, with the first

systems installed by American Airlines in 1968. Trans World Airlines and United Airlines

installed their own systems beginning in 197258. These early systems were very limited

functionally, as they displayed availability only for the host airline and were more airline

reservation systems than travel agency CRS.

What is a CRS?

Several large airlines have created CRS entities that make reservation and related

function systems available to travel agents. These are specialized online transaction

58 The Trans World Airlines and United Airlines reservation system experiments were discontinued

in 1973, while American Airlines continued to maintain equipment in some large agencies.




processing systems and databases that are specially designed to meet the needs of travel

agents. A CRS provides:

Airline and AMTRAK (rail) schedules59.

Availability for transportation carriers that have agreed to pay booking fees (the

CRS’ primary revenue source) for reservations made through the CRS.

Fares for services (air and rail) maintained in the CRS Storage of user and

customer-specific databases.

Communication facilities necessary to support interline reservations and special

service messages (such as seating and meal requests) that users may initiate on

behalf of travelers whose reservations are made through the CRS.

Storage of traveler reservation files (PNRs) Applications, such as ticketing and

itinerary issuance, that produce printed documentation based upon reservation

files and other CRS data.

These services are adapted for travel agency needs. While the airline’s own reservation

and ticket office operations require similar functions, they are not the same. For instance,

there are very strict rules (federally mandated) specifying how the CRS may display flight

availability, in order to give all airlines participating in the CRS equal access to potential

customers, based upon the merits of their flights (departure, arrival, and elapsed time,

stopovers, and origin and destination airports). An airline is under no such limitations for

its own reservation system and will display availability and schedules for its own flights

to the exclusion of competing services.

Thus the airline’s own reservation system is a different application, even if it shares

computer resources with a travel agency CRS. The early attempts at travel agency

automation preceded the development of the CRS60 and were simply terminals for the

airline’s system.

The First Travel Agency CRS

By 1975 the last of the “industry” system projects, this time an effort called MAARS61, a

switching system that would allow agency users to be connected directly to it and

conduct sessions in individual airline reservation systems, as desired by the operator,

59 AMTRAK schedules, availability, reservations, and ticketing are offered by the major U.S. CRS.

There are projects underway to make similar services available for European rail services and

ferries, but none has thus far been finalized.

According to John Desmond (Desmond, 1989), Writing in Software Magazine and quoting Max

Hopper, Senior Vice President for information systems at American Airlines:

“The effort to include the trains and ferries of Europe into the reservation systems is a

massive, continuing project. But it is essential to compete in Europe, because so much

travel in that market uses multiple modes. He (Hopper) indicated the situation is analogous

to the 1960s in the U.S., when airline transfers prolonged the minimum two hours

necessary to make a reservation.”

60 Indeed, the concept of a travel agency CRS was not well-defined at that time.

61 Multi-Access Airline Reservation System. Multi-access is discussed in more detail in the

connectivity section of this chapter.




was over unsuccessfully. A multi-access system called MARS62 was eventually brought to

market by ITT, with significant help from Eastern Airlines and a number of smaller

carriers. It was never operationally or commercially successful and eventually folded after

Eastern withdrew marketing support to pursue its own sales for its own CRS product,

SODA63, later SystemOne.

Figure 1: Relative CRS Market Share

American Airlines and United Airlines began aggressively marketing SABRE and Apollo,

their respective CRS, at this time. Their stated intentions were to invest in travel agency

automation to the extent necessary to establish automated distribution networks

nationally. Both corporations allocated millions of dollars to the project. TWA also

actively marketed PARS at this time, but more on a regional basis.

These three systems were sophisticated travel agency-oriented reservation tools, for the

time, and were free of many limitations that faced earlier efforts. A number of other

airlines, among them Western Airlines (now merged with Delta Airlines), Allegheny

Airlines (now US Air) and Alaska Airlines, offered reservation products to selected

agencies within their primary markets. These were far less sophisticated than SABRE,

Apollo, or PARS and were quickly eclipsed by the superior products.

Demand for CRS automation far outstripped the suppliers’ ability to install and support

the systems, so the largest agencies were selected to receive systems first. Smaller

62 Multi-Access Reservation System.

63 SystemOne Direct Access.




agencies were frequently unable to automate for months after their larger competitors64.

Once in p1ace, however, the CRS allowed agencies of all sizes and descriptions to achieve

massive productivity gains and support sales volumes previously unreachable.

For example, using today’s CRS environment, good reservations agent productivity in a

commercial (as opposed to leisure) sales environment is $1 million in air sales annually.

Without a CRS, an agent would find it difficult to maintain commercial agent productivity

much in excess of $250,000 annual air sales.

Later CRS Developments

CRS quickly proved itself as a good business and, more importantly, a distribution tool of

unparalleled effectiveness in the travel industry. This motivated Eastern Airlines to market

SODA (SystemOne) beginning in 1981 and Delta Airlines to market Datas II in 1983. Both

vendors started late in the CRS game and found it difficult to build market share,

particularly among the larger business travel agencies that are the most valuable

distributors.

Eastern and Delta did create credible products and were able to protect their own primary

markets from competing CRS to a large degree (the importance of this is discussed later).

Delta merged its system with PARS in 1989, while SystemOne continued to be marketed

independently into the 1990s.

Figure 2: CRS Market Share Trends

64 It is interesting to note that some of the first CRS installed nationally were placed in commercial

accounts (corporations with large travel volumes and in-house travel arrangers), rather than in

travel agencies. This was also true for many of the first teleticket machines.




Aggressive marketing and product sophistication allowed SABRE and Apollo, in that

order, to establish the largest market share of any U.S. CRS, followed by PARS as a

distant third. SystemOne and Datas II, when introduced, took market share from each of

the earlier three, with a slightly greater percentage coming from PARS. SystemOne

exceeded PARS in number of installed CRTs by 1987, although not in booking volume,

due to the somewhat larger average size of PARS agencies. PARS installed base

recovered rapidly, due to ongoing operational and business problems at SystemOne.

CRS Bias

After travel agency automation became an accepted business tool, the CRS recognized

that manipulating screen displays results in incremental bookings, for one carrier at the

expense of another, depending upon how the screen display is influenced. Between 70%

and 90% of airline flights booked by a travel agent are reserved from the first CRS

availability screen displayed, assuming the agent’s initial availability request was

accurate, with 50% of flights being booked from the first line of the first screen. In a

competitive industry, where product differentiation is often tenuous, some CRS e1ected

to actively influence agent flight selection based solely upon screen management.

So-called screen bias in the Apollo and SABRE was well-documented, while PARS and

SODA were less overt and DATAS II used its unbiased nature as a point of competitive

differentiation.

Extensive user and consumer pressure eventually lead to the introduction of federa1 CRS

standards that eliminated the most overt forms of screen bias. Some experts believe that

displays can still be manipulated,65 but certainly to a much lesser degree than in the past.

Bias is discussed in greater detail on page 40 of this report.

BASIC CRS OPERATION

The following sections illustrate basic CRS operation by following a typical transaction

from beginning to end. The SABRE system was chosen for these illustrations; however

the similarities between PARS-type systems will make the examples applicable to most

other CRS. The examples also assume that a travel agency, and not a corporate travel

manager or airline reservation center, is using the system, and that the most current

hardware and software releases are available.

Sign-On

Most travel agencies do not “power-down” their CRS equipment overnight. Restarting

the LAN, once an installation is completely shut down, can be difficult and requires some

expertise. Most suppliers also believe that normal hardware “wear and tear” is reduced if

restarts are minimized66. No CRS start-up procedure is usually needed.

65 One way this is said to be done is through manipulation of display algorithms and flight times.

66 This fact is clearly demonstrable in medium and largersized computer installations. A complete

power-down for many large computer centers would create problems of near disaster proportions.

The effect is far less clear with small systems. In the authors opinion, regular power-downs of

small computers is not harmful and probably prolongs equipment life for two main reasons: (1)




The agent’s first step is to LOGON to the system. This is a two-step process which

involves a unique operator identification code and a password. While this is the most

obvious level of security, there are others.

Each CRS user location is assigned a unique identification code, termed a pseudo-city

(PCC) because it is not a true “city” code, as far as an airline is concerned. A CRS city

code is a unique identifier that is assigned to each airport location the carrier serves. A

pseudo-city, therefore, identified a physical location that is not an airport.

A PCC is a 4-character alpha-numeric string67. Normally only a single PCC would be

assigned to each agency location, but some installations requiring special services, such

as multiple communication circuits, may have several. The PCC allows the CRS to route

reservations (PNRs) to electronic files, known as queues that belong to the location. The

PCC also identifies reservations made by agents working at the location so that agents

from other PCCs cannot access the same PNRs, unless that access has specifically been

authorized by the agencies involved and the CRS.

This process is known as cross-access or bridging, depending upon the CRS. There is

normally a monthly charge for each crossaccess privilege open.

Each reservation created or modified by an agent is marked by the PCC of that office. If a

reservation was created by one agency and later transferred to another, as customers

occasionally request, the “ownership” of the PNR follows the last agency to modify the

reservation.

Security

Travel agencies are concerned about security. They believe that their PNRs should not be

accessible to agents they do not authorize. There is considerable evidence to support the

claim that even non-malicious “snooping” can create financial or perhaps worse,

customer relations problems for an agency. An unscrupulous competitor might try to

solicit new customers based upon information gained from examining PNRs, for

example. While CRS security is a real travel agency problem, its actual effects are

probably overstated.

The CRS have developed security procedures, such as those outlined above, which are

sufficient to prevent most forms of unauthorized access. Similar measures are in place at

the sophisticated CRS, although these vary considerably in their composition and

effectiveness. In most CRS travel agents cannot view:

Small computer mechanical devices, such as hard disk drives in particular, are far less robust than

those designed for larger systems and suffer due to extended wear; (2) Office (and home) power

conditions are not nearly as well conditioned as are large data centers, which makes office

systems much more vulnerable to power surges and other anomalies if they are left running

unattended for long periods.

67 SABRE uses 4-character PCCs; other CRS use three.




Reservations created by another travel agency using the same CRS, where no

cross-access is authorized.

Reservations created by another travel agency using another CRS

Reservations created by the host airline’s own general reservations center-

although some CRS do allow agents to access these reservations.

For obvious reasons, airline reservation centers, ticket offices, and CRS support staffs can

access any reservation created by any travel agency.

Transaction Synchronization

Once initial SIGN-ON is complete, the agent is working in what is known as an AAA68 or

Agent Assembly Area. “Agent” in this sense refers to any CRS operator as an “agent”.

The AAA is a short-term electronic file where the elements of the PNR, the passenger’s

actual reservation, will be “assembled.” This is a key concept in CRS operation. Each

agent, when signed-on to the CRS properly, has several AAAs available for use. The

agent can toggle between them at will, and have reservations in various stages of

completion in each -all functioning totally independently. The agent cannot move

reservations or information between the available AAAs.

All work that a CRS “agent” does in a session is completed only in the AAA until a

specific CRS “event” is invoked. This means that the agent can reserve flights, seats,

special meals, and enter all other required parts of the PNR prior to permanently

modifying the CRS’ major databases. In other words, the work the agent does is

temporary—it exists only within the AAA until it is made permanent.

The agent does this by ending the transaction, that is, closing the AAA and updating the

databases that will be affected by work previously done in the AAA. Each CRS has an End

Transact (ET) button or command string (as in SABRE) for this purpose. Nothing done in

the AAA is permanent until the “ET” event takes place.

This CRS process is both a valuable feature and a significant inconvenience. In fact,

however, the CRS could not operate effectively without it. One ongoing challenge for all

online transaction systems is transaction synchronization. The temporary nature of CRS

work helps to address this challenge.

Reservations that the agent desires to modify must be retrieved into the AAA. As with

new reservations, no change made to the reservation is permanent until ET. If another

agent, perhaps from the airline or from another authorized travel agency location,

displays the same reservation and begins to modify it, a conflict must result- which one is

working with the “real” reservation? This conflict can also be programmatic from within

the CRS. If an agent is modifying a reservation while an SSR message is sent from an off-

line carrier or while a schedule change comes through, that agent is no longer working

with the latest version of the reservation—any changes made might be irrelevant, based

upon the new information.

The CRS resolves this conflict by saying that the first agent (or internal CRS process) to

remove a PNR where potential conflicts exist by ET has created the latest version of the

reservation.

68 Termed “The Triple A.”




Other agents working with the same reservation can continue to make changes in their

AAA, but the CRS inhibits ET by sending the “simultaneous changes” response.

SIMULT CHANGES TO PNR69

Once this condition is created, nothing agents can do will allow the system to accept their

changes, because these were made on a version of the PNR other than the “latest.” If a

great deal of work has been done, this can be a frustrating experience. The agent must

invoke another CRS command, “Ignore” (I). This clears the AAA and allows the agent to

retrieve the reservation and begin the process over again.

All changes or reservations made in the AAA when “I” is invoked are “ignored”.

Reservations and seats return to inventory, and nothing is stored from that session in any

CRS database. This applies only to host seats and inventory. When working in the AAA

on the host carrier’s flights, desired inventory is pulled on a provisional basis. The host’s

availability listings are reduced by the number and nature of services reserved in the

agent’s AAA. Thus, if there was 1 seat left on AA flight 1 for a certain date, 0 seats would

be shown as available once a reservation for 1 person had been started in an agent’s

AAA. If a reservation in progress is “ignored”, 1 seat is returned to inventory.

If an agent is forced to “ignore” prior to completing the transaction, there is a possibility

that the same services (flights or perhaps individual seat assignments) may not be

available when, the process is attempted again. This does not apply to “offline” inventory

and seat assignments, as the CRS does not send sell messages to other systems until ET-

unless certain forms of direct access are used (explained later).

On the other hand, “ignore” can be valuable. If a traveler requests cancellation of a flight

so that alternate reservations may be made, the exact services desired frequently are not

available and the traveler decides to “stick with what they have”. Since all AAA changes

are provisional, the agents only has to “ignore the transaction” to return the PNR to its

last state.

Manipulating the AAA

The AAA may be displayed by the agent at will. In SABRE this is done by using the *A

command, where * is the “display” character and “A” the delimiter for “all”, meaning all

data in the AAA. If the command is invoked without a reservation in progress occupying

the AAA, the response “NO PNR IN AAA” is generated. Agents may also display parts of

the data in the AAA, such as “name,” “itinerary,” “passenger data," and so on, by using

the appropriate code. These commands are used because lengthy itineraries may be too

large to display on one CRS screen, and the ability to segment parts of the AAA for

display as necessary makes the transaction easier to manage.

Other parts of the PNR are not normally displayed and must be specifically requested.

Once a PNR is changed after its initial creation, a “history” file is added that contains a

complete listing of all changes made to the reservation, in descending chronological

69 “Simultaneous changes to PNR.”




order. The agent uses “history” where there are questions as to why a reservation was

modified or who authorized the modification70 by invoking *H.

Once the AAA is occupied by a reservation in progress, that reservation must be ended

by ET or I if it is a new reservation or if changes of any type are made to an existing

reservation. If the agent tries to display another existing reservation before this is done

the response “FINISH OR IGN PNR” is generated. If no changes have been made to an

existing reservation, that PNR is automatically “ignored” when a subsequent request to

display an existing PNR is initiated.

Text Reference

Once logon is complete, SABRE displays one or more brief informational messages that

may be of use to agents. These are usually changed daily, but may be changed at will.

Their purpose is to bring information to the operator’s immediate attention that might

otherwise be overlooked, such as a major air traffic system or weather delay, a labor

dispute that will disrupt air service, or particularly in the age of deregulation, the

bankruptcy or cessation of operation of an air carrier.

These specialized text messages are related to the CRS’ general or Direct Reference

System (DRS), which may be invoked by the agent at will, even while transactions are in

progress in the AAA. The DRS is a very simple text-based file system, which is used to

store information that is supportive of CRS operation but that does not require frequent

updates, such as availability or flight information (scheduled arrivals), which changes

constantly. Some typical DRS examples include:

Marketing messages from airlines, hotels, car rental companies, and others that

participate in the CRS and pay a fee for the privilege of including information on

selling their products through the CRS. Information about the products may also

be included.

Immigration and visa information.

Ground transportation from major airports to the cities they serve.

Local weather conditions71.

Information on shows found on Broadway, in London, Atlantic City, Las Vegas, or

Reno.

Information on the correct operation of the CRS itself.

DRS “pages” are displayed by referencing their location within the filing system by

means of a unique character string. The CRS then copies text from that “page” to the

screen originating the request. Data in the AAA are not affected. This is done so that

agents may break their work flows to answer customer questions or obtain information

70 Passengers may be unhappy if reservations during peak periods of demand are canceled, for

instance. A complete “history” file makes it possible for the agent to inform the passenger of the

date, time, and individual who authorized the change, thus relieving the airline or other CRS user

from responsibility for unsatisfactory reservation changes.

71 These displays are updated frequently—usually several times daily. Some CRS have weather

information systems that operate independently from DRS.




required to complete a transaction in progress, then return to that transaction without

losing continuity with whatever work was underway.

Help System

DRS is not the only way a modern, sophisticated CRS, such as SABRE, has to make

information on its correct operation available to users. A text-based “help system” is

often available for operator reference.

FOX, SABRE’s help system, is illustrative. FOX is not context-sensitive, in that it cannot

reference work in progress in the AAA and suggest commands or procedures based upon

the transaction presently before the operator. Individual FOX text “pages” must be

referenced directly by the agent.

FOX differs from ordinary DRS in that more complex commands, employing keywords,

are used to locate desired pages. The agent builds strings of related words so that

searching for the desired page is greatly reduced. Once an initial FOX page is retrieved,

the agent is directed to additional references containing more detail.

Reservation Process Flow

The CRS agent begins work on a transaction by requesting availability of flights, based

upon the traveler’s particular needs. Usually air availability is requested prior to cars and

hotels, with the air itinerary forming a shell around which added services may be

deve1oped, a1though a PNR need not necessarily contain air reservations.

Cars and hotels are the other large availability systems within the CRS. They operate

separately from the air availability system, although many of the same principles are

employed.

In any major CRS, the ratio of car reservations to air reservations is very low, and the

ratio of hotel to air reservations still lower. This is partly because the availability and

reservation environments offered by the CRS for hotels and cars are very limited and

imperfect, but it is too simplistic to ascribe limited CRS use in these areas to functionality

alone. The simple fact is that travel agents, the primary users of CRS, do not routinely

make (or even offer) hotel reservations to their customers- CRS-based or otherwise. This

is a selling deficiency and predates the introduction of CRS in travel agencies.

The basic SABRE availability screen is displayed by forming a command string beginning

with the 1 delimiter, followed by the date of travel, cities for which availability is

requested and a desired departure time:

120JANJFKLAX7A

The CRS responds with an availability screen that is organized based upon algorithms

and display criteria unique to that CRS, and that are designed to display schedules that

will be more desirable to the passenger first. Thus non-stop flights are shown before

flights with stops, and direct flights (non-stop or otherwise) before connections where

p1ane changes are involved. Schedules with the least (scheduled) elapsed travel time are

also shown first. The availability display also indicates what type of aircraft is used for

each flight and a numeric grading, based upon U.S. Federal Department of Transportation

data on flight timeliness. The number of stops made by individual flights, if any, is also

shown.




In the accompanying illustration, American Airlines flights (the “host”) show 9 seats as

available for each class of service offered on the flight. If less than 9 seats are shown,

then that number represents the exact number of seats allotted by the airline to that class

on a specific flight. Offline flights show either 4 seats (the maximum number that can be

sold under the “sell/no-sell” conventions used by the CRS)72, or 0 seats, if availability has

been closed for that flight and date by the airline in question.

If no flights meeting the traveler’s requirements are displayed on the first availability

screen, the agent may request numerous subsequent screens until the optimal flight is

located, based upon the CRS’ internal availability logic, these screens are offered in

generally descending order of flight desirability.

The several classes of service are indicated by letters accompanying the number of seats

available in that class. An individual airline determines what classes will be displayed for

each flight. These “classes” are mostly for inventory control purposes, in order that the

airline may allocate a given number of seats for discount or promotional fares. There are

usually only two physical classes of service on an aircraft - first class and coach class;73 all

other discounts sit in the coach cabin. Some flights add a third “business class” to

specific flights, which represents a differentiated physical service on the flight and

normally is not open to discounts or promotions74.

Agents access inventory in what we have described generally as an online, real-time

environment. Under such conditions, when seats are reserved, inventory is decremented

and the same space cannot be sold to another system user unless a cancellation ensues.

Airline inventory is defined as seats available to be sold on any particular flight segment,

as determined by the actual number of seats on-board the aircraft together with inventory

management adjustments - upward or downward—that compensate for anticipated

conditions such as necessary overbookings due to no-show experience on the route.

When reservations are requested for the CRS supplier or user host, inventory is

instantaneously decreased by the required number of seats.

Off-line carriers, those with their own inventory systems that are not part of the CRS host,

operate in a sell/no-sell environment. The CRS user may “sell” typically up to four offline

seats in any one transaction. The “sale” is recorded in the agent’s AAA until an ET is

initiated. A sell message is then transmitted to the computer system where the inventory

72 More than 4 seats could be “requested.” This means that the agent could initiate the transaction

and wait for a teletype writer message from the airline in question to verify that the number of

seats required had been reserved. In such cases, reservation confirmation is not automatic.

73 Outside the U.S., coach class is referred to as economy class.

74 Business Class is a compromise between first class and coach or economy class. It lacks the full

set of in-flight amenities found in first class, but is still a grade above coach. It is intended to

appear to business travelers where budgets may not tolerate first class fares, but where a

comparatively modest fare differential for business class may be acceptable.

Business class seating is very popular on international flights, where long distances make the extra

amenities attractive.




is managed, and appears in that system in the same way as do reservations made directly

in it. When a mathematically predetermined point, (which differs between flights and time

periods) is reached, a no-sell condition is created and inventory is closed in the offline

CRS system—no further sell messages are accepted from offline systems.

The airline manages no-sell messages to other carriers so as to permit as many bookings

as possible, but not so many that the inventory management parameters for that flight

are violated- in other words, to limit the possibility that the time lag between the instant a

CRS generated sell message is created and the instant that message enters the

reservation system where inventory for that flight is stored might cause too many seats

to be sold.

Because inventory is usually closed to further sales from other systems prior to the point

where all available seats are actually sold, there are some variances between CRS. In

other words, SABRE might show space available in economy class on a British Airways

flight from London to Stockholm, whereas British Airways’ own BABS CRS (where the

airline actually maintains and manages its inventory) shows no space available on the

same flight.

In practice, when a discrepancy of this type is identified, BABS would automatically send

a message to SABRE instructing that inventory be closed to further economy class sales;

given the huge number of airline flights daily, such discrepancies are fairly rare.

The agent reserves flights based upon conversations with the passenger, then enters data

necessary to identify the traveler in the AAA:

Name

Telephone contact

Person making the reservation

Ticketing arrangements (date the traveler will pick-up the ticket)

This is the required information for any basic PNR. Other information, such as traveler or

travel agency addresses may also be entered, as necessary. In SABRE, the agent can

enter two addresses: one that will be electronically transmitted to car and hotel

companies whose services form part of the PNR, and another that would be used for

accounting purposes, if the CRS is interfaced to an external travel agency accounting

system. Typically the travel agency enters its own address in the transmitted field and the

passenger’s address in the accounting address field.

The agent can also request seating and special meals for travelers. These can be

confirmed real-time for the host carrier, but require that electronic messages (usually

teletypewriter) be dispatched for off-line carriers. The agent can also display actual seat

maps for the host and certain off-line carriers where the required connectivity has been

achieved (discussed under Direct Access, page 39).

Normally, however, off-line seating would be requested by general location (aisle or

window; smoking or non-smoking), rather than by specific seat.

All U.S. CRS have special fields for recording frequent traveler identification numbers.

These are marketing programs, sponsored by the major U.S. airlines, which regard

participants based upon the number of flights they take. The number must be part of the

traveler’s PNR in order for credit to accrue. If an offline carrier is involved, the agent




enters the appropriate number which is then transmitted to the reservation system of the

airline providing service75.

The larger U.S. airlines offer their frequent travelers benefits that increase by levels based

upon the number of flights taken. This affects the CRS reservation process because some

CRS functions are made available only to the most frequent travelers, as identified by

their frequent traveler numbers.

United Airline’s Mileage Plus frequent traveler program is the best example. United

rewards its most frequent travelers with Premier status within the program. A premier

member’s number is identified as such when entered into United’s Apollo CRS. Premier

status entitles members to preferred check-in at the airport and special seating on some

flights. The CRS recognizes a premier traveler when the number is entered and makes

these seats avail able. They are usually located in the front of the coach cabin. Thus aisle

seating in the forward part of the cabin may be available to United’s best customers—

Premiere Mileage Plus members—when that seating is not offered to the public generally.

Car and Hotel Reservations

The agent may also access car and hotel availability systems and make these services

available. In SABRE, a car availability screen is requested for the city where a car is

desired. It is maintained much as is flight availability—in the sell/no sell environment -

unless special connectivity (explained under Direct Access, page 39) is in place. Each car-

type offered is represented by a unique coded identifier. The availability display, as

shown in the accompanying illustration, is organized to offer a large number of cars from

several vendors simultaneously76.

The car transaction identifies the type of car and length of

time required. Information is included to identify the

agency making the reservation, so that the car company

may remit commissions after the rental is complete77.

Other optional information that can be included with the

reservation identifies the traveler for any enhanced

services the car company may offer.

75 This process is fairly imperfect at present and, even where properly formatted and entered,

frequent traveler number transmission is notoriously flawed.

76 This reflects the commodity nature of the car rental product, as perceived by the CRS. In other

words, one car is pretty much like another, there is little substantive information that can be

passed by the CRS to the user about specific car-types, so the important information becomes type

and availability only.

77 Agencies issue airline tickets and deduct their commissions when tickets are issued. Car rentals

are not generally pre paid, hence this system is impractical and commissions must be remitted

once final charges have been established.

Commission payments are a major source of travel frustration, as many vendors are extremely

careless about and accurate commission payment, while others simply ignore agency

commissions due entirely.

Car Preferred Customer Programs Hertz Number One Avis Wizard National Emerald Aisle Budget Budget Express




The major U.S.-based car rental companies have developed preferred customer

databases that reduce customer processing times when renting cars.

When the traveler includes a unique identification number with a reservation, all relevant

data pertaining to a car rental is automatically made available to the station where the car

is to be rented. This includes driver’s license number, credit card number, car preference,

and type of optional insurance desired. The information can be pre-printed on the

customer’s rental contract, thereby greatly reducing the amount of information that a

rental agent must request from the traveler upon arrival.

This number is entered into a CRS-based car rental reservation, along with numbers

identifying the traveler as eligible for any discounts that may be offered.

Since so many potential rate combinations are possible, based upon corporate,

organization, or individual discount programs78, optional insurance, taxes, as well as car

type and date, it is extremely difficult to accurately quote car rental rates using a CRS—in

advance of a final statement received from the vendor after the rental is complete. While

all major CRS contain car rates, these are useful only as illustrations and not as definitive

charges the customer will actually pay.

Hotels reservations follow the same basic process, except that there is considerably more

differentiation in hotel products, less commonality of rates and room-types, and therefore

more descriptive information required. All CRS-based hotel availability and reservation

processes use the sell/no-sell methodology no enhanced connectivity has been achieved

between any hotel vendor and CRS.

The agent must be careful to include a credit card number or other information (as

specified by the hotel in question) to guarantee a reservation, if required under the hotel’s

policy. Usually travelers arriving after 6:00pm are required to guarantee their

reservations. In the event the traveler does not honor the reservation, a credit card charge

for a one night stay would be processed. Reservations may also be guaranteed to an

address (agency or business) in some cases, or by advance deposit. This information is

accommodated by the CRS and transmitted to the hotel’s reservation system along with

the sale message.

Changes

Most CRS reservation changes are simply cancel and rebook processes - a reservation

segment is canceled and a substitute replaces it. There are no true changes or

modifications to reservations already existing without canceling them in PARS-type

systems.

The sole exception is when reservations containing multiple passengers require

modifications that do not affect all members of the party. In this case a divide function is

provided that separates one or more individuals from a reservation so that their file can

be changed.

78 These programs are quite pervasive in the industry, to the effect that most car rental business is

covered by a discount program of some sort.




The agent initiates the divide function by specifying the individuals that require changes.

A new file, showing only these names, is created in the AAA. Cancel and rebook is then

performed on this reservation, as appropriate. Once this is complete, the agent uses a file

command (F), which places the reservation in temporary suspense. The original

reservation, less the individuals that were separated out, is then displayed. CRS

procedures indicate that the agent cross-reference the two reservations using OSI

messages, indicating that passengers previously traveling on a single reservation were

now separated. Changes affecting only this group of travelers can also be initiated on the

reservation, as appropriate.

Once both reservations are complete the ET command is invoked, which completes both

files. Messages are then sent to offline airlines that may be involved in the reservation,

indicating that the PNR should be divided and changes made. This is an obviously

complex process that is somewhat unreliable because all airline reservation systems do

not accept the complicated stream of messages necessary to properly divide reservations

equally well. For this reason, many CRS users routinely create separate reservations for

all passengers, regardless of whether they are traveling together or not, in order to avoid

the potential necessity of dividing reservations later.

Training

All major CRS have online training environments that allow simulated reservations to be

made. Accessing this environment requires using a specialized sign-on code. Agents

using the CRS that have logged-on under this code can access most functions of the

system, but any reservations they make cannot be ended by ET - they are automatically

“ignored” once completed79.

The CRS also have online scripted lessons that are used as basic educational tools for the

system. Again, specialized sign-in codes are used. Once in the lesson system the agent

cannot create individual reservations but can access pre-scripted files that demonstrate

the operation of the system and provide commentary on its correct use. The 1essons

must be accesses sequentially and correct responses given before the trainee can move

on to following pages80.

CRS Connectivity

Communication between CRS is critical to the interchange of availability updates and sale

messages. This communication must be reliable and quick, and must also support

communications between varieties of reservation systems that vary considerably in their

sophistication. While by far the majority of airline reservation communications are

handles electronically, some smaller local carriers still rely upon voice or paper

communications.

The most basic form of electronic CRS communications involves telegraphy. Here,

character-based messages are formatted using accepted delimiters and character

79 The main limitation of the training environment for travel agents is that tickets cannot be printed

unless a completed PNR is on file. Reservations created by the training environment cannot be

used to simulate ticketing because they never leave the AAA.

80 U.S. airline CRS were among the first extensive users of online simulation and training systems.




schemes agreed to by the majority of international airlines. Several types of messages

are used depending upon whether reservation, availability, schedule, or other data are

involved.

These messages may be transmitted between reservation systems using direct

telegraphy circuits that connect two systems to each other or shared telegraphy circuits.

There are several shared systems in common use, including ESS, SITA, and ARINC.

These are essentially networks that facilitate connectivity between participating airlines.

Messages may be addressed to any participant that is connected to the system. This

eliminates the need for direct or dedicated circuits, but does not give equivalent

performance.

Because shared system messages are slower and somewhat less reliable than are direct

circuits, many airlines bypass the common networks and use more advanced system-to-

system data communication channels. In recent years these have been built using

modern protocols instead of character-based telegraphy. IBM’s SNA81 and bisync82

protocols are in common usage, as is a variant of the X.25 protocol.

Another form of enhanced connectivity is so-called “direct access”, which bypasses data

messages entirely and uses actual sessions conducted in offline systems. In order to

understand how this works, we must first explain how CRS “sessions’’ are managed.

Concurrent Session Theory

All CRS workstations are connected to the host and have more or less equal access on its

resources as needed. They are not physically connected and exchanging data with the

host at all times, however. The thousands of terminals supported by a CRS would require

tremendous system resource to support if they were all active constantly. Instead, the

CRS use a system of virtual connectivity.

When a CRS session is opened in the agent’s AAA the CRS recognizes the “address” of

the terminal that is conducting the session. Whenever that terminal transmits data or

character-based commands to the CRS it is directed to the same AAA location within the

system’s memory. The AAA remains active (subject to an overriding, general time-out

limitation) until the transaction is ended. Although the agent’s terminal remains

physically connected to the CRS at all times, and although it is logged-in as active, the

CRS does not interact with it until the next data transmission or request is received.

Since most terminals are sitting idle on the system at any given moment (even when a

transaction is in progress, most of the time required to complete that transaction is idle

time- such as while a conversation is taking place with the customer), the CRS can

support thousands of terminals that are virtually connected, in that they appear to be

connected and active to the user, whereas in reality they are only connected when it is

necessary for them to be so.

81 Systems Network Architecture. The IBM data communication standard, widely implemented in

the computer industry, which describes the relationship between IBM’s virtual telecommunication

access method and the network control program.

82 Bisync or Bisynchronous transmission is a standard used for controlling synchronous data

transmissions. The Bisync standard specifies message format and line protocol.




Direct Access

Direct access uses virtual connectivity to interrelate sessions between CRS. An agent

using direct access uses a specialized character string to invoke the process. The CRS

recognizes the commands coming from the agent’s

terminal and translates them into a form

understandable to the system where direct access is

in place. It then opens a virtual session in the offline

system and processes the agent’s request. This can

be a request for availability, a sell message, a fare

request, or a DRS request.

The offline system responds to the CRS and includes

the address of the agent terminal where the request

initiated. The response is then passed directly to the

agent’s screen, where action is taken, as indicated.

Thus the agent is able to gain the benefit of virtual

access into multiple CRS, without the need to learn a

variety of commands as would be required if a

multi-access system or gateway were used (whereby

the agent’s terminal actually became as if it were

connected to various CRS, as specified by the

agent). Because the database of an individual

carrier’s reservation system normally has better data

concerning that carrier, the agent can work from a

more complete database and provide more accurate

information to travelers.

A variant of direct access is used by several CRS to

enhance their performance. Sometimes the CRS

programmatically opens direct access sessions in

offline CRS, without specifically being commanded

to do so by the agent, in order gain access to the

vendor’s complete availability.

This process is used by some CRS to enhance car

reservations also. Here a direct access session is

opened in a car vendor’s system. When a sell

message is generated, the CRS takes traveler name,

phone number, and address data directly from the

agent’s AAA, without the need to end the

transaction, and submits the sell message to the car

vendor’s system83. A confirmation number is

received and returned real-time to the agent’s AAA,

so that a car can be confirmed and assured through a confirmation number immediately.

83 This process obviously requires that complete passenger name and other data be present in the

AAA before a car reservation is initiated. If these data are not present the direct access connection

fails and the system reverts to standard communication methods.

Major International CRS

SABRE American Airlines

Covia United Airlines British Airways Alitalia KLM - Royal Dutch Airlines Swissair USAir Abacus Partnership

Worldspan Delta Airlines Northwest Airlines Trans World Airlines

SystemOne Continental Holdings

Gemini Canadian International Air Canada

Galileo British Airways Alitalia KLM Swissair Austrian Air Aer Lingus Sabena TAP Amadeus Air France Lufthansa Iberia SAS Finnair JAT Adria Airways Air Inter Braathens Safe Emirates Airlines Icelandair Linjeflyn Abacus Cathay Pacific Singapore Air Malaysian Airways China Airlines Philippine Airlines Covia partners




CRS AS MARKETING TOOLS

The principal U.S. CRS vendors have individually invested hundreds of millions of dollars

to automate travel agencies. This was done for purely economic reasons, initially

unrelated to computer profits. Only recently have the CRS vendors viewed data

processing and automation as revenue centers independent of airline marketing benefits

accruing to the sponsoring carrier. All the U.S. CRS have created independent computer

subsidiaries not only to provide automation services to the airline but also to exploit data

processing opportunities within other industry segments as well as in unrelated fields.

Airline Economics and CRS

Incremental volume is critical to any discussion of airline distribution, as in any high

fixed-cost business. Airline fixed costs average between 80% and 85% of total costs.

This simple economic principle is important to understanding how drastically incremental

passengers affect overall carrier profitability, as this accounts for a range of activities

which, taken in isolation, may be perceived to be economically questionable.

The cost/revenue structure is such that relatively small negative passenger shifts result in

large losses, most of which cannot be compensated for through cost-cutting. Small

positive passenger shifts, so-called incremental passengers gained at the expense of a

competitor- produce substantial profits, so much that the carrier may be willing to make

significant investments in agency “loyalty” programs, tied to CRS or otherwise.

Screen Bias

Overt manipulation of CRS displays (termed screen “bias”) was practiced for several

years, to the benefit of the CRS vendor carrier (the “host”) and, to a lesser degree, other

carriers willing to pay fees in return for preferential displays (termed at the time “co-

hosts”). The existence of bias has been thoroughly documented and described by

governmental and independent private researchers. Although precise financial impact is

difficult to measure, it is generally accepted that the “have-not” carriers (those without

travel agency CRS) lost tens of millions of dollars in incremental passengers to the

“Hosts” and “co-hosts”.

The co-host issue was heavily debated during this period. It is generally understood that

co-host fees secured general parity in screen display but that overall benefits remained

greater for the Host. Each CRS vendor had unique co-host programs that changed from

year to year.

Many airlines objected strenuously to the degree of control the CRS vendors exercised

over the distribution system, as did some (but not all) travel agency groups.

These culminated in a 1984 U.S. Federal Government regulatory decision that overt CRS

bias should be eliminated and that certain standard practices guaranteeing “have-not”

airlines generally “free access” to the major CRS networks should be adopted.




Table 1: Estimated Internal Rates of Return (IRR) Earned by

Airline-Owned Computer Reservation Systems

Contribution to Airline Earnings

End Year APOLLO SABRE PARS/ Worldspan SystemOne

BO% of bias & halo revenue (a)

1984 106.6% 128.2%

63.9% 144.4%

1986 108.9% 129.5% 75.2% 137.2%

1992 109.6% 129.7% 91.9% 145.0%

40% of bias & halo revenue (a)

1984 43.6% 63.9% n/a n/a

1986 53.4% 68.7% 19.8% 54.2%

1992 58.1% 70.5% 42.1% 74.1%

Actual % of tkt revenue (a)(b)

1984 n/a 5.7% n/a n/a

1986 13.3% 22.8% n/a 9.6%

1992 25.5% 31.5% 24.7% 37.8%

SourceComputed from historical and projected cash flows and residual asset values reported by the entities in question.

Noten/a indicates that no positive cash flows were reported during the period and thus no return was earned on the investment over that period.

(a)

Including indicated percent of vendors’ estimates of CRS contributions to host airline revenues (incremental revenues) from bias and halo effect through 1984, and from the halo effect only after the CAB rules went into effect.

(b)

Including same percent of incremental revenues as the percent of domestic passenger revenue actually passed through to airline operating profit during the period of commercial operation for each CRS. These figures are 5.1% Apollo; 5.6% SABRE; 0%/2.5% PARS/Worldspan; 3.2% SystemOne.

Although there continue to be complaints regarding CRS displays and timeliness of

system updates, the focus has largely shifted from overt screen favoritism to a more

subtle process of agency incentives, market support, and strategic affiliations, which are

tied to CRS practices only in part. The principal means of direct CRS involvement in

agency dealership maintenance is the so-called Halo Effect by which incremental

bookings accrue to the CRS sponsor.




Understanding the Incremental CRS Halo Effect

A travel agent, using any CRS, has a natural tendency to book the flights of the carrier

providing the system. This behavior has been well-documented and is routinely accepted

as fact by CRS, although the precise mechanism causing incremental bookings to accrue

is complex and not dependent upon any single factor.

The travel agent has greatly increased confidence that the information available about the

CRS vendor’s services, fares, and availability are accurate, as opposed to those of off-line

carriers that may participate in the CRS. Since most agents can cite numerous instances

where inaccurate information has created customer dissatisfaction or otherwise adversely

affected business, the agent tends to favor a carrier where the best information is

available.

This is partly because the nature of airline computers does not encourage timely updates

or accurate information. Availability is usually not real-time, with “OK” or “Not OK to

sell” status being employed; true seat inventory is not maintained for off-line carriers.

Tariff updates are also inconsistent as most CRS use limited sources for these data, such

as ATPCO and OAG and not the off-line carrier itself, with changes often lagging severely

from the time they become effective until the updated information is available to a CRS

user.

Part of a successful CRS-based dealership

strategy involves consistent contact with

the agent, so that the confidence stemming

from information access and reliability is

reinforced. CRS gives the vendor a cost-

effective vehicle to maintain agent contact

both on a personal level and through

electronic or informational messages.

The computer’s functional range is

generally greater respecting the CRS vendor

because no computer-to-computer

communications are involved and no

nuance of interpretation between the

command structure of differing machines.

Customer requests such as special meal,

seating, or boarding passes are easier for

the agent to provide.

This is because airline computer communications, whether using ARINC, SITA (ALC or

SLC command structures) or through direct communications links (which may employ

industry-standard protocols or the same ALC/SLC technology) are typically primitive by

current communications standards and do not permit advanced queries or information

exchanges. There are several extensive modernization efforts underway, principally by

SABRE and Covia, that will enhance communications between airlines as well as between

other vendors (such as hotels) also using CRS.

For many reasons agents often feel a sense of loyalty to their computer supplier. This is

much like a club or an Alma Mater, a relationship encouraged by most CRS vendors. In

Figure 3: CRS Cash Contribution (Assuming 80% Halo Revenue)




essence, many agents believe a CRS vendor somehow deserves booking loyalty when

other more immediate factors, such as client preference or cost, do not interfere.

Successfully quantifying the Halo

Effect is limited due to the number of

factors that may influence agency

carrier selection and the inability to

isolate CRS placement from among

them. Research conducted by the

author, on behalf of several U.S. CRS,

shows approximately a 10%

incremental effect is typical (although

some estimates go much higher),

namely:

1. That the agency uses one CRS

as its principle reservations booking

tool. Incremental volume is far more

difficult to realize where bookings are

split between two or more systems.84

2. That the incremental effect is to

be realized by re placing one CRS with

another. Introducing CRS into an agency for the first time brings a wholly different

set of booking dynamics into play which may or may not benefit the CRS vendor.

3. That the CRS being placed in the agency enjoys general functional equivalency

with the one it is replacing. It is not necessary, contrary to popular belief, to

replace one CRS only with a functionally superior one. Precisely the opposite will

be acceptable to the agent, given the right circumstances and a sufficiently

lucrative support program apart from purely CRS considerations. Any system will

generate incremental bookings provided the basic elements necessary for the

agency to do business are present.

4. That the agency does not book trips exclusively or largely over routes the CRS

vendor does not fly. This does not necessarily limit productive CRS conversions to

agencies located in the CRS vendor’s on-line cities, as large commercial agencies

will do business over many routes.

There are other important benefits to a CRS vendor, apart from incremental passengers.

Under the CRS regulations, vendors are permitted to charge participating carriers for

reservations made through the systems. These fees are not dependent upon actual

passengers flown.

This creates a financial incentive for the vendor simply to place CRS terminals as widely

as possible, irrespective of the Halo Effect. Installing a CRS in a substantial agency in a

84 Some travel agencies elect to use two (sometimes more) CRS within their organizations in an

attempt to preserve optimal relationships with several airline marketing organizations. While the

commercial reasons for such a course can be appreciated, the agency suffers obvious lapses in

productivity and management control (which most can ill-afford), while the CRS receives far less

benefit from placing the system that would otherwise be the case.

Figure 4: CRS Cash Contribution (Assuming 80% of Halo Revenue)




large market where the CRS vendor does not enjoy a large share of passenger traffic can

be more directly profitable (from a data processing perspective) than placing the same

system in one of the carrier’s own best agencies.

Booking fees in such a case could amount to hundreds of thousands of dollars annually

for the CRS (and indirectly for its owners), at the direct expense of competitors- general

estimates place the benefit of having a travel agent using a particular CRS at

approximately U.S. $35,000 per agent reservation terminal, in booking fees alone.

ENFRANCHISEMENT OF DEALERS IN THE AIRLINE INDUSTRY

The development of modern CRS and automation-related issues is important because

computers are the tangible representation of most carrier dealerships in the United

States, and are inseparably tied to the most successful agency management strategies

now employed. It would be a mistake to consider, as some carriers have done, that

computers define the full extent of the dealership. Automation is but one of several of

interdependencies that together create such a strong tie between carrier and agency that

the influence exerted over the distribution system greatly exceeds that possible when

CRS bias was practiced or under other strategies previously employed.

In manufacturing, the concept of “captive” distributors has been employed since the

beginning of industrialization. Airline dealerships are more subtle and, for the carrier,

more effective, as they are not exclusive distributors but rather remain representative

agents for a number of agents while enfranchised by one primary vendor. This gave

dealership-creating carriers the ability to effectively redirect passengers from their

competitors, by accessing the competitor’s own distribution network.

Automation serves as the first and most visible contact point between dealership-creating

carriers and agencies both by design and by perception. Often these ties are very

informal, such as the common travel agent perception that an agency using Apollo is a /

“United” agency. The more pervasive relationships are those wherein the CRS vendor

has supplemented this foundation with programs and commitments going far beyond

perception.

The two largest CRS collectively enfranchise roughly 75% of the market. This position is

one of general dominance, rather than numeric superiority only, as this comprises the

largest and most important agencies in the United States. The other major systems are

almost exclusively comprised of “secondary” agencies.

While not lessening the general value of maintaining a CRS network, the composition of

that network greatly enhances both the incremental revenue available through dealership

creation and the amount of gross booking fees available. This is evidenced by the intense

competition for system “conversions” particularly between the major CRS.

Understanding Agency Segmentation

Agencies may be grouped into several broad categories, almost exclusively characterized

by size but where this is not necessarily the only index of business efficiency. Size is

somewhat reflective overall sophistication, as larger agencies are assumed to be better

managed (although there are frequent and notable exceptions), and also comprise the




general parameters within which airlines define the agency’s relative importance to a

dealership strategy.

These segmentations may be drawn using U.S. Dollar ranges as illustrated in the figure

below. The actual number of locations within each segmentation, based upon 1985 ARC

data, is shown below. These data indicate numbers of true ownership entities, as distinct

from locations; thus one national agency system with hundreds of outlets would appear

only once in the tabulation. This methodology is based upon the premise that common

ownership denotes common intent and management, which are key considerations for a

dealership program.

Table 2: ARC Travel Agency Statistics

Volume ($ MM)

EntityCount

% EntityCount

AverageSize ($ M)

Volume ($ M)

% TotalVolume

0 – 5 20,427 96.50 927 18,945,198 62.315 – 15 587 2.77 7,918 4,647,731 15.2915 – 40 111 0.52 22,295 2,474,778 8.14

40+ 42 0.20 103,247 4,336,354 14.26

Source: 1985 Airline Reporting Corporation (ARC) Data Tabulations

Note: 1985 is the latest year data are available for this publication. Later years would show some concentration in the 40+ MM range, fewer entities in the 15-40 MM range, and more entities in the lower two ranges, especially the 0 – 5 MM. Otherwise, the chart continues to illustrate the principles discussed, which remain applicable.

Airline dealership and distribution strategies are greatly complicated by the fact that

standard motivational and control methods do not apply. Not only do agency dynamics

not lend themselves to most traditional structures, but, as the figure illustrates, no

80%/20% seller-volume ratio, common to so many industries, applies.

By far the majority of agencies (96.50%) generate the bulk of agency-based ticket sales in

the U.S. (62.31%).

The development of CRS has signified a developmental condition far more significant

than computer technology alone. Although technology is the focal point, and there are

certain rationale for maintaining access and domination over as large a block of data as

possible for planning and intelligence-gathering purposes, major carrier marketing

strategies are definitively stratified in their approach to agency marketing.

This permits the carrier to dominate and reap incremental benefits not only from the

broad mass of smaller agencies through the “halo” effects associated with CRS, but also

to exercise tighter and more specific control over key distributors in major markets.

A critical part of this strategy is the overall marketing and competitive profile of the CRS

vendor. Dealership strategies, particularly those focusing upon incremental benefits that

accrue from many agencies, are successful because the five CRS vendors individually

constitute the largest carriers in the United States as well as the most aggressive




marketers. They are impossible to avoid, should an agency want to sell away from them,

represent major presences in most markets, even those where they are not dominant.

It is strategically acceptable for an agency to align itself with a any of these major vendors

(although some are preferable to others under given circumstances), because of their size

and economic power, whereas smaller carriers could not offer similar benefits in any

case. This would be true irrespective of technology in any form. The financial and market-

support programs available through association with these major airlines are too great to

be disregarded.

Major market presence is not the only ingredient to a successful dealership program.

Successfully motivating and controlling critical agencies or groups of agencies within the

market is far more significant. The extent to which this control may be exercised is limited

only by individual market conditions and is often extensive in scope.

The task is also not as difficult as would initially appear. Since agency behavior can be

categorized for marketing purposes within general size ranges, and the small number of

exceptions dealt with individually, programs may be structured that are attractive to

many agencies and are also financially effective for the carrier as well as strategically

efficient to administer and control.

Current Agency Dealership Programs

By targeting major agencies (those positioned to advance significant numbers of

incremental passengers) the dealershipcreating carrier is able to motivate vendor

preference and success of other program elements to a surprising degree. The vendor’s

objective is to extend as much control as is possible over the “accepted” distribution

process, thereby gaining preferential treatment at the expense of competitors.

This provides point-of-sale leverage without the risk of direct distribution channel

ownership and associated expense. Assuming the agency’s commitment is sufficient,

ownership becomes irrelevant while all the benefits of a “captive” distributor are realized.

The agency’s general sales stream may therefore be tapped without inviting overt

retaliation by competitors who might refuse to deal with a vendor-exclusive distribution

system.85

Even so, dealerships, as they now exist, are a phase of an evolutionary process that will

see distribution control migrate fully from an agency to a vendor-centered focus.

Although precise timing varies with individual carriers, with “have-not” airlines lagging

significantly behind the more technologically sophisticated CRS vendors, dealerships in

their present form are not long-term phenomena.

Understanding Travel Agency Economics

Many travel agencies are financially precarious at best. Inflexibility in adapting to the

needs of a deregulated environment, where price instability and rising costs coexist, has

seriously weakened many and brought some to the point of bankruptcy. A well-financed

carrier, where air sales will account for 60% or more of the agency’s total volume, can

offer a dealership relationship that is both pervasive and irresistible.

85 No agency could operate in the United States without the ability to represent all carriers.




Through front and backroom automation, the carrier can create dependency in all ways

and reinforce this position wherever possible. Long-term CRS and other automation

contracts, now usually specifying minimum usage levels, lock agencies in for years, often

with large “liquidated damage” clauses that impose penalties if a systems conversion

were undertaken, to the degree revenue would be lost by the vendor. Dependency is also

fostered through financial measures tied to bookings or other incentives. Instability in

some large agencies and rapid growth in others often creates a cash crisis which the

agency is unable to correct.

Although the entrepreneurial nature of most travel agencies permits reasonable

adaptation to some growth, many are overextended by debt incurred through

acquisitions and unnecessary operational inefficiencies. Others have lost business to

increased competition and consolidation of their major accounts with larger national

agencies.

Business contraction is contrary to the entrepreneurial tendency of most small businesses

and requires specific skills most lack if it is to be done effectively. The agency is therefore

greatly receptive to financial propositions that will relieve its economic difficulties, if only

temporarily. Many dealership initiatives capitalize on this agency “cash crisis” and create

such a financial dependency that the agency may have no choice but to support its

sponsor (many, if not most, large agencies have costs in excess of their basic per-ticket

revenue (less overrides or “incentive” commissions) and are therefore unprofitable

without some vendor support apart from normal commissions.

Financial support is provided in two direct and many indirect manners, each fulfilling

specific needs. Dealers receive override commissions which, although not unknown to all

agencies, are far more liberal for the dealer.

While these can be nothing more than percentage payments on gross sales volume, the

more sophisticated dealership-creators structure complex reward matrixes wherein

compensation is tied to exceeding a minimum production target that is driven by the

carrier’s overall share of market as well as the respective shares of market represented by

all dealers in the market.

This makes extraordinary commitment sometimes necessary in order for the agency to

realize any substantive payment. Agencies are often sufficiently dependent upon their

sponsor that they will redirect passengers using whatever means are necessary in order

to achieve their revenue targets. Sometimes this includes representing that a competing

carrier’s flights are sold out or more expensive when they really are not.

Good market intelligence and planning, sometimes evident in dealership creation,

permits a high degree of dependency to be built without sufficient support being offered

so that the strength of the carrier relationship could be lessened. This is especially true

when considering outright agency cash payments, usually associated with CRS contracts,

which infuse large sums into the business but do nothing to improve its overall position.

Frequently a CRS sponsor will pay a large agency hundreds of thousands of dollars to

change system affiliation and sign a restrictive long-term contract. While occasionally

these payments accompany a long-term dealership commitments and sales support

programs, often the carrier has no long-term interest in the success of the agency, as a

competing agency will fulfill the same purpose once the initial payment is recovered.




Agencies assume “golden handcuffs” provided by their sponsors to a degree not

experienced in most industries. If financial and market support is forthcoming, which

often results in the vendor making one agency more successful at the direct expense of

competing agencies in the same market (which are also “agents” for the carrier), the

agent may enter into the restrictive CRS contracts previously described, undertake

various other covenants regarding how the business will be operated and how business

will be conducted, and forego relationships with other vendors on even the most casual

of terms. Most agencies fail to recognize or accept the implications of airline-type

dealerships by continuing to assert their independence and customer orientation while

accepting the most restrictive of business environments.

Role of CRS In Dealership Maintenance

CRS permits the dealership-creator to implicitly encourage redirection of agency

bookings from dealers both formal and informal. Essentially any agency using the system

will be partly influenced by the “halo effect” and can be relied upon to produce

passengers disproportionate to the carrier’s “true” share of the agency’s business,

because of CRS. Other elements of dealership strategies serve to strengthen and

accentuate this phenomenon.

Overt screen manipulation, although alleged still to exist by many, need not be a

fundamental part of the incremental booking process. With the opportunity to affect

agency carrier selection in so many powerful ways, and with computer services profitable

ventures overall in their own right, improper display tactics make little sense for a

sophisticated vendor.

The most successful agency distribution programs, contrary to the great body of

academic speculation, are not currently technology-driven. Technology is the cohesive

element that ties the relationship between carrier and agency together and creates the

“halo effect” by its existence, but CRS could not, in isolation, create the dominant market

positions enjoyed by the most successful vendors. Only a combination of well-designed

programs, together with an airline that is naturally dominant by virtue of its structure, can

occupy the preeminent positions enjoyed by the CRS vendors in the U.S.

Internationally, where most of the CRS vendors have strategic expansion objects, this

presents both a challenge and an opportunity for competing carriers:

Technology creates an effective competitive barrier because it is time-consuming,

difficult, and expensive to replicate.

Given sufficient resources, however, technological advantage will be insufficient to

unseat many European or Asian carriers from the preeminent market positions they

enjoy, if effective steps are taken in the near-term to compete directly in a dealership

environment.

As the foregoing ARC statistical illustrations show, dealership maintenance in the United

States must be accomplished on two levels:

The largest portion of the market may be influenced indirectly, using the “halo

effect,” and through CRS as a principal contact point between carrier and agency.




The size of these agencies (and therefore their overall sophistication) precludes the carrier

from an economic strong dealership program, while limiting their ability to affect carrier

market share positively or negatively in any dramatic fashion. The best and most cost-

effective programs for these agencies are probably those informal preference strategies

based upon CRS placement.

Segmentation of the market permits the vendor to effectively address the larger

and more sophisticated agencies with more advanced programs.

As only a few businesses are involved, which collectively produce significant volume,

these can be approached and managed individually, with CRS serving as one tool among

many.

Dealership-creators also approach agencies within this group differently, often offering

better programs to regionally-dominant agencies with a significant but finite market

presence rather than to so-called nationals, which cannot concentrate their sales or

management efforts in specific areas to materially impact the vendor’s business.

Strong Dealership Agency Type Classifications

National Agency Systems are businesses wherein a common owner ship and

management structure controls outlets in numerous (sometimes hundreds) of locations.

These well-known companies collectively process significant portions of a vendor’s

business, but usually (with some exceptions) do not dominate specific city markets. This

creates booking fragmentation within the national, its principal point of weakness, which,

together with often unfocused and inconsistent management, renders it unable to

significantly impact most vendors positively or negatively.

Further, because the national has interests in a number of markets, one overall vendor

preference strategy or dealership alignment may be impractical. In order to grant support

in areas vital to the agency, the vendor may insist upon concessions in other areas where

the agency may enjoy leverage contrary to the vendor’s best interests. When considering

a large-scale strategic alignment, the agency’s negotiating position if often weakened

beyond repair due specifically to size and coverage, not strengthened by it as many

believe.

Regional Dominant Agencies control a large market share within a geographic area,

usually to the extent that they represent the most significant booking source and

distribution vehicle within the area and can materially influence the thin margin of

profitability realized by any vendor for the market. They are often among the better

managed agencies (a characteristic arising partly as a result of their regional focus and

partly responsible for their success in implementing a strategy based upon that focus),

and enjoy far more leverage with any single vendor (CRS or otherwise) than any other

agencies.

Large Local Agencies have grown usually through business development (a large-scale

acquisitions strategy is usually implemented regionally), and are typically aggressive

entrepreneurs. They build business by competing successfully within a small geographic

market and by capturing accounts from national and other local competitors wherever

possible. Among the most attractive of acquisition candidates, they cannot command

enough market leverage to influence carrier margins and are employed opportunistically




by dealership-creating carriers because they comprise blocks of volume that can be

influenced through general dealership management techniques

Future of Airline Dealerships

Under regulation, competition within the distribution system was circumscribed by legal

mandate, which guaranteed market orderliness irrespective of specific carrier

intervention. Deregulation permitted some vendors to create CRS which were difficult for

others to emulate, and seize control from uncertainty. Many carriers still have not

grasped the implications of their reliance upon a distribution system dominated by a few

principal carriers - irrespective of the role CRS plays in the process. Agencies have

formed alignments with carriers from competitive necessity, as others in their markets

would otherwise receive benefits they would not enjoy, and also because of financial

imperatives, many of which were created because of deregulation.

Dealership-creating carriers will continue to strengthen their dominance over agencies

accepting dealership status through the means previously described. On an opportunistic

basis, agency ownership will be explored, over a period of years. In general, however,

dealerships render ownership meaningless for vendors able to support a dealership

strategy.

As systems become available, carriers will begin to actively circumvent the agency

channel. With implied agency retaliation minimized through domination of the

distribution channel, and with the support of complex computer systems, vehicles such

as automated ticket machines, cooperation with other electronic vendors, and so-called

videotext services (in a form greatly expanded from that known today in the U.S. and

modified technologically to support airline-specific needs), agency services will become

less cost effective for certain types of tickets.

With reference to commercial or business travel, the agency serves few purposes apart

from order-taker and document-preparer. A large carrier reservation center can process

orders for only a few dollars each, far less than agency commissions. Technology will

provide more opportunities to distribute documents (among the most effectively

automated of functions and already highly automated within the travel industry) directly

to the customer, thus avoiding the agency as an intermediary. Future developments may

render tickets per se, and therefore the ticket-issuer, unnecessary - a concept a1 ready

tried experimentally by some carriers.

Although agency services of some type will always be desirable, for certain transactions

agency processing is already superfluous. The essence of dealership creation, that being

control of the distribution channel by a vendor, provides the carrier with significant

opportunities to eliminate the dealer where appropriate- something the agency can do

little to mitigate.

Non-dealership carriers will find dependence upon the dealership- controlled distribution

increasingly unacceptable, driving them much more rapidly toward non-agency

distribution systems wherever possible.

While many of these will be technology-driven, “direct dealing” (discounting to major

purchasers) will be implemented widely within the airline industry first from within this

group. Dealership-creators prefer to use the dealership system to pass along customer




discounts for a variety of strategic reasons, among them the desire to mask discounting

(and therefore minimize it) as much as possible. Without the dealership option, other

carriers will prefer to lock-in distribution using this method that the dealership-creators

will be reluctant to employ.

Non-U.S. airlines may choose to use their own market leverage to create dealerships they

are positioned to support and thus circumvent not only intrusion by aggressive U.S. CRS

vendors but also influences by other local or regional competitors.

The dea1ershi p strategy has been shown to be effective in achieving most carrier

marketing goals using systems currently in place and, in many cases, a distribution

system that is readily receptive to this type of support.

The significant point of this discussion is that CRS is neither the key to dealership activity

nor the insurmountable obstacle it is frequently portrayed to be. On the other hand, non-

U.S. airlines must avoid the Trojan Horse of relinquishing data control to successful U.S.

CRS vendors having internal agendas that have always included domination of

distribution, tied to computerization.

The evolutionary processes set in motion by deregulation in the U.S. have shown that

non-agency avenues must eventually be explored, and that systems do comprise the

lever that will make this practical. Dealerships are one phase of market control but cannot

be considered an end in themselves, just as CRS contributes to distribution options but

does not constitute their fullest extent. Distribution control can be managed, and

dependence upon the systems and programs of others avoided, but only if appropriate

pro-active steps are taken before an unbreakable wall of agency dependence is built.




WORKS CITED

(1989, February 4). The Economist , p. 16.

(1989, February). Software Magazine , 9, p. 57.

Buckley, N. (1989). private communication. TWA .

Desmond, J. (1989, February). Max Hopper Knows Sabre's Guts. Software Magazine , p.

57.

Gilford, D., & Spector, A. (1984, July). The TWA Reservation System. CACM , 27.

Kumar, V. (1990, January). Current Trends in Transaction Processing Systems. Journal of

Systems Management , 41, p. 33.

Wardell, D. J. (1982, July 12). The Right Decision for the Right Reason. The Travel Agent ,

p. 70.

Airline Reservation Systems

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