2 airline distribution

102 Pages·2013·1.75 MB·English

by  Jiří Poláček

FACULTY OF INFORMATICS, MASARYK UNIVERSITY
Summarizing and comparative analyses of
on-line air ticket distribution channels
MASTER’S THESIS
Ondřej Cikánek
Brno, January 2012

Declaration
Thereby, I declare that this thesis is my original work, which I have created on my own. All sources
and literature used in writing this thesis, as well as any quoted materials, are properly cited,
including full references to their sources.
Advisor: Ing. Jaromír Skorkovský, CSc.
Acknowledgments
I would to thank several people for making it possible to complete this dissertation. Firstly, it would
be my advisor and mentor, Ing. Jaromír Skorkovský, Csc., for putting his trust in me. Secondly, big
thanks go to my colleagues from Amadeus, especially Marek Labuť and Florian Susperregui as well as
to all interviewees for their deep insights and extraordinarily collaborative approach. Last but not
least, I would like to thank Libor Pečinka, Jan Dosoudil, Lucia Koreňová, Kristýna Trnková, Martin
Cikánek, Michal Žemlička and my family for their relentless support.
Abstract in English
With the emergence of the Internet and rapid advancements of related technologies, end-consumers
are offered a number of ways to book flights on-line. The thesis provides summarizing and
comparison analyses of concurrent channels of airline distribution to end-consumers via the Internet.
The fundamental channels are On-line Travel Agencies (supported by Global Distribution Systems),
Meta-search engines, and Direct Distribution by airlines, so called Airline.com.
The summarizing analysis reveals high interdependence of the channels and other kinds of subjects
within the distribution supply chain. With respect to the increasing complexity of airline distribution
domain, the scope of work has been defined in a following way: out of the range of all travel services,
only air passenger travel on regular lines is considered (accommodation services, ground
transportation or charter flights are excluded). Another restriction is that the Master's dissertation
also targets only B2C travel, standing for leisure and non-managed business trips; B2B travel service
provision is therefore excluded. On-line distribution only is taken into account, omitting traditional
off-line – brick-and-mortar & over-the-phone – distribution.
Throughout the thesis, two main viewpoints are considered: technology-oriented and business-
oriented. The comparison analysis aims at technologies employed within particular phases of end-
user travel process. Further attention is paid to scalability and robustness of technical solutions as
well as to the usability analysis. From the business-oriented point of view, special focus is laid on
profitability analysis as commercial goals of each channel's representatives.
Finally, conclusions recapitulate outcomes of the analyses and suggest future evolution of the three
channels, as well as to future role of Global Distribution Systems.
The channels are analyzed in general, on a global scale. However, European and especially Czech
markets are taken particularly into consideration. Examples are chosen to increase tangibility and
comprehensiveness of the thesis; a special attention is paid to the Czech market.
Abstrakt česky
S příchodem internetu a překotným vývojem s ním souvisejících technologií má konečný zákazník k
dispozici vícero způsobů, jak rezervovat letenku on-line. Meritem práce je přehledová a srovnávací
analýza současných kanálů sloužících k distribuci letenek on-line, tedy přes Internet, ke konečnému
zákazníkovi. Základními kanály jsou on-line cestovní kanceláře (podporované globálními
distribučními systémy), meta-search nástroje a přímá distribuce letenek aerolinkami, jež se také
nazývá airline.com.
Přehledová analýza odkrývá vysokou vzájemnou závislost jednotlivých kanálů a subjektů do nich
náležících v rámci celého distribučního řetězce. S ohledem na vzrůstající komplexnost oblasti
distribuce letenek byl rozsah práce definován následovně: ze všech služeb cestovního ruchu je k
analýze zařazena pouze přeprava cestujících na pravidelných leteckých linkách (ubytovací služby,
pozemní doprava a charterové lety jsou vynechány). Diplomová práce také cílí na B2C kanál, tedy
volnočasovou a neřízenou služební přepravu; B2B služby jsou tedy také zanedbány. Pouze on-line
distribuce je vzata v potaz, čímž pádem se analýza nezabývá tradiční distribucí pomocí sítí
kamenných obchodů a přes telefon.
Napříč prací jsou brány v úvahu dva hlavní úhly pohledu: technologicky orientovaný a ekonomicky
orientovaný. Srovnávací analýza se zaměřuje na technologie použité v rámci jednotlivých fází
cestovního procesu konečného uživatele. Pozornost je také věnována škálovatelnosti a uživatelské
přívětivosti. Z ekonomického pohledu je analýza zaměřena především na analýzu ziskovosti a
obchodní cíle subjektů v rámci jednotlivých kanálů.
Na závěr práce jsou shrnuty výstupy přehledové a srovnávací analýzy a navrženy směry budoucího
vývoje jednotlivých kanálů, stejně jako budoucí role globálních distribučních systémů.
Přestože jsou kanály analyzovány obecně, tedy na globální úrovni, pozornost se více soustředí na
evropský, a především český trh. Za účelem hmatatelnosti a srozumitelnosti práce jsou vybrány k
jednotlivým kanálům konkrétní příklady; zvláští pozornost je věnována situaci na českém trhu.
Key words in English
Airline distribution, direct distribution, travel agency, meta-search engine, global distribution system,
low cost carrier, full service carrier
Klíčová slova česky
Distribuce letenek, přímá distribuce, cestovní agentura, meta-search vyhledávač, globální distribuční
systém, nízkonákladová letecká společnost, klasická letecká společnost
CONTENTS
INTRODUCTION................................................................................................................10
THEORETICAL PART..........................................................................................................13
1 TRAVEL INDUSTRY AND AVIATION..................................................................................14
1.1 TRAVEL INDUSTRY.............................................................................................................14
1.2 AVIATION .......................................................................................................................14
1.2.1 Full-Service Carriers...............................................................................................................................15
1.2.2 Low Cost Carriers...................................................................................................................................15
1.2.3 International Air Transport Association.................................................................................................15
1.3 CZECH TRAVEL AND TOURISM MARKET..................................................................................16
2 AIRLINE DISTRIBUTION...................................................................................................18
2.1 AIRLINE DISTRIBUTION INTERMEDIARIES.................................................................................18
2.1.1 Central Reservation Systems...................................................................................................................18
2.1.2 Global Distribution Systems...................................................................................................................18
2.1.3 Travel agencies.......................................................................................................................................19
2.2 INFLUENCE OF IT ON AIRLINE DISTRIBUTION...........................................................................21
2.2.1 Direct Distribution, Disintermediation...................................................................................................21
2.2.2 Meta-search Engines...............................................................................................................................22
2.2.3 Travel Agency evolution.........................................................................................................................23
2.3 AIRLINE DISTRIBUTION – SELECTED CONCEPTS.........................................................................24
2.3.1 Airlines as GDS and CRS users................................................................................................................24
2.3.2 Airline content........................................................................................................................................24
2.3.3 Units of measurement.............................................................................................................................25
2.3.4 Travel cycle............................................................................................................................................26
2.3.5 Other concepts used in airline distribution............................................................................................28
2.3.6 Empowered consumer............................................................................................................................30
3 DESCRIPTION OF SELECTED TECHNOLOGICAL CONCEPTS.................................................31
3.1 XML, API AND WEB SERVICES..........................................................................................31
3.2 SCREEN SCRAPING.............................................................................................................31
3.3 DATA CACHING AND DATABASE............................................................................................32
3.4 SEARCH ENGINES AND WEBSITE OPTIMIZATION........................................................................32
3.5 USABILITY ENGINEERING.....................................................................................................33
4 METHODS........................................................................................................................34
PRACTICAL PART..............................................................................................................35
5 SUMMARIZING ANALYSIS................................................................................................37
5.1 LEVEL AND ENTITY (NODE) DESCRIPTION...............................................................................39
5.1.1 Level 1 = Content Generation = Airlines.............................................................................................39
5.1.2 Level 2 = Content Aggregation, Consolidation, Processing...................................................................40
5.1.3 Level 3 = Content Offering....................................................................................................................41
5.1.4 Level 4 = End-consumer........................................................................................................................41
5.2 RELATIONSHIPS (EDGES) DESCRIPTION...................................................................................41
5.2.1 A – Airline division to subtypes..............................................................................................................44
5.2.2 C – Content provision.............................................................................................................................44
5.2.3 I – IT services..........................................................................................................................................46
5.2.4 S – Search requests made by end-consumers..........................................................................................46
5.2.5 T – End-consumers traffic redistribution................................................................................................46
5.3 EXAMPLES OF END-USER RESERVATION FLOWS.........................................................................46
5.3.1 Example no. 1: OLTA, System user airline.............................................................................................47
5.3.2 Example no. 2: Meta-search, Non-system user airline (LCC)..................................................................50
5.3.3 Example no. 3: Direct Distribution, System user airline.........................................................................53
5.4 SUMMARIZING ANALYSIS – CONCLUSIONS...............................................................................55
6 COMPARISON ANALYSIS..................................................................................................57
6.1 CRITERIA DESCRIPTION.......................................................................................................57
6.2 CHOICE OF EXAMPLES FOR THE COMPARISON ANALYSIS.............................................................59
6.2.1 OLTAs.....................................................................................................................................................59
6.2.2 Meta-search............................................................................................................................................59
6.2.3 Direct Distribution = Airline.com..........................................................................................................59
6.3 COMPARISON ANALYSIS - TECHNOLOGY-ORIENTED PART............................................................59
6.3.1 Travel cycle – Inspiration.......................................................................................................................60
6.3.2 Travel cycle – Search..............................................................................................................................61
6.3.3 Travel cycle – Book.................................................................................................................................63
6.3.4 Travel cycle – Payment...........................................................................................................................64
6.3.5 Travel cycle – Fulfillment.......................................................................................................................64
6.3.6 Travel cycle – En Route & Follow-up.....................................................................................................65
6.3.7 Travel cycle – Conclusion.......................................................................................................................65
6.3.8 Scalability/Robustness............................................................................................................................66
6.3.9 User Experience......................................................................................................................................67
6.4 COMPARISON ANALYSIS - BUSINESS-ORIENTED PART..................................................................68
6.4.1 Business models – Goals.........................................................................................................................68
6.4.2 Positioning towards the end-consumer & Value Proposition..................................................................68
6.4.3 Profitability – Revenues & Costs.............................................................................................................69
6.4.4 Profitability – Conclusions......................................................................................................................72
6.4.5 Sustainability of business models...........................................................................................................73
6.4.6 Conversion Ratio & Look-to-Book .........................................................................................................74
6.4.7 Personalization & Merchandising...........................................................................................................76
6.4.8 Branding & Loyalty building..................................................................................................................77
6.4.9 Position within supply chain..................................................................................................................77
7 COMPARISON AND SUMMARIZING ANALYSES – CONCLUSIONS.........................................79
7.1 SWOT ANALYSIS – TABLES...............................................................................................79
7.2 SWOT ANALYSIS – OUTCOMES..........................................................................................81
7.2.1 Commoditization and differentiation.....................................................................................................82
7.2.2 Empowered consumer............................................................................................................................83
7.2.3 Further sources of market distortions.....................................................................................................84
7.3 FUTURE ROLE OF GDSS.....................................................................................................84
7.3.1 Business model.......................................................................................................................................84
7.3.2 IT portfolio management........................................................................................................................86
7.3.3 Airline content distribution aspects........................................................................................................87
7.4 SPECIFICS OF CZECH MARKET..............................................................................................87
CONCLUSIONS...................................................................................................................89
REFERENCES.....................................................................................................................91
BOOKS & PUBLICATIONS.........................................................................................................91
RESEARCH STUDIES AVAILABLE ON-LINE......................................................................................91
WEBPAGES & ARTICLES..........................................................................................................92
OTHER SOURCES....................................................................................................................94
GLOSSARY AND ABBREVIATIONS.......................................................................................96
LIST OF CHARTS, SCHEMES, TABLES...................................................................................98
ATTACHMENTS..................................................................................................................99
ATTACHMENT 1: SAMPLE OF A QUESTIONNAIRE...........................................................................99
INTRODUCTION
In the 1970's a need towards more efficient way of distribution than call centres and brick-and-mortar
offices emerged among the airlines. This led to introduction of intermediaries to the distribution
process, most notably travel agencies as the main sales channel. Since then, travel agencies have been
supported by computer reservation systems that slowly developed themselves in Global Distribution
Systems (abbr. GDS) having strong position within distribution supply chain.
In the late 1980's Low-cost carriers (abbr. LCCs) distorted airline distribution market by their focus on
direct distribution to end-consumers; this has been going on ever since. The LCCs have reshaped the
market significantly and kept doing so till now. This made traditional airlines, so called Full-service
carriers (abbr. FSCs) rethink their business strategies and commercial models; his transformation still
has not settled yet though.
One of the ways how to fight against decreasing prices and low profit margins see the FSCs in direct
distribution. Using direct distribution channel they have been able to bypass the GDS & travel agency
services and avoid distribution fees charged by these intermediaries. This has been to a large extent
enabled by rapid technological advancements during last 20 years. An employment of technologies as
well as differences in business models are of high interest of this thesis.
The purpose of this thesis is to provide summarizing and comparison analyses of concurrent channels
of airline distribution on-line, that is by the means of the Internet, to the end-consumer. The
fundamental channels, established by the evolution described above, are On-line Travel Agencies,
supported by GDSs, Meta-search engines, and direct distribution by airlines, so called Airline.com.
Therefore the specific goals are articulated as follows:
• Provide an overview over the most common ways of on-line B2C airline distribution
channels including supply chains, with respect to end-user's perspective.
• Analyze the fundamental distribution channels with regards to both international and
Czech markets.
• Compare the analyzed channels and formulate conclusive outcomes of the analysis;
outline future evolution of each channel and position of GDS link.
The summarizing analysis defines the channels and their position within the distribution supply chain
as well as relationships among them. Several typical examples of end-consumer reservation flows are
mentioned in order to increase comprehensiveness.
Further on the aim is to analyse and compare the channels from technological and business
viewpoints using various comparison criteria. From the technological perspective, the travel cycle and
technologies employed within its individual phases are introduced and compared. From the business
point of view, special focus is laid on profitability analysis as business goals of each channel. Also,
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