Amadeus: System Allows Control Of Specific Inventories

<H1> Amadeus: System Allows Control Of Specific Inventories</H1>By Amon Cohen

Business travel agents are one step closer to buying blocks of inventory on scheduled airlines following the release of a new product from Amadeus-and they are beginning to call upon the airlines to make better use of the capability.

The European computer reservations system company has launched Negotiated Space, which allows carriers to create, maintain and control a specific blocked space-or allotment-for designated end-users. It also allows them to synchronize sales and cancellations with their inventory system.

As a result, Negotiated Space provides selected agents with an allotment of seats that are blocked within their own inventory but are sold from Amadeus. No other agent is entitled to view the number of available seats in their rival's allotment and sell against it. Furthermore, other users of the CRS do not even have a way of knowing about its existence.

Technically, this means that agents are in the position to bulk buy from airlines, presumably at a discounted rate that they could pass on to their clients. An example would be American Express buying 20 seats on every American Airlines departure from London to Chicago.

In the U.S. market, Worldspan rolled out a blocked-space program called WorldGroup in November 1994, with Delta, Northwest and TWA as participating airlines. But while that gave agents the technical capability of buying in bulk, the airlines have steadfastly resisted the concept.

Whether Negotiated Space will provide the breakthrough is not clear. Lufthansa and Air France both have the product but are currently using it to sell low-yield consolidated fares, as are two smaller airlines-Royal Air Maroc and French carrier AOM. Lauda-air of Austria is in the process of installing Negotiated Space, and Amadeus reports that yet another French airline, TAT, is interested, as are a number of U.S. carriers.

One of the most vociferous advocates of bulk buying has been Mike Platt, director of commercial affairs at Hogg Robinson BTI, the U.K.'s second largest travel management company. "We believe it is one of the future ways of doing business," said Platt. "It will reduce the cost of sale for airlines because they will be able to leave the job of selling to someone else. In a way, it is similar to the marketing deal that Virgin has done with Delta, where Virgin has bought a piece of the Delta inventory. This could have great benefit for our clients because if we were buying in bulk up-front, we would expect to get a good price which we would then be able to pass on."

So far, however, airlines have refused to act on the idea. Kyle Davis, Paris-based director of purchasing and air fare management for American Express, points out that it would represent a major change of strategy for carriers because for the first time they would be allowing third parties to manipulate their inventory.

"With consolidated fares, the agency never has possession of the inventory-information is taken from the airline and passes directly into the passenger name record," he said. "One thing of concern to airlines is that they would be losing control of their pricing, which could cannibalize some of the full-fare traffic they are carrying."

Despite such misgivings, both Davis and Platt have discussed the issue with airlines and report that there are some signs of progress. "Up until recently, they had shown no interest at all," said Platt, "and it is only in the last few months, when the laser beam has been focused on costs of distribution, that there has been any sign of change."

Such discussions also raise the intriguing possibility of corporate clients cutting out the middleman and simply making their own regular block bookings with airlines. Not surprisingly, this is something against which Platt cautions.

"This is something that corporates could do, but they would have a lot more to lose because they have a smaller base than agents with which to do business," he said. "A company like us would effectively broker into more outlets to distribute the seats."

Among those who need more convincing about selling block bookings to business travel agents is Lauda-air reservations control manager Roland Oth. "We are not aiming at this group initially with Negotiated Space but at the lower-yield end of the market," he said.

Oth said he had not yet been approached by business travel agents but that he would be happy to talk to them. However, he could not see what benefit block booking would bring to either party. "If the agency wanted to book the seats for a very busy time, then we could fill those seats in any case and would have no interest in doing a special deal with them," he said. "In theory, they could persuade clients to change their travel policies to ensure that travelers fly at less popular times for a discount-but in that case, they would be able to reserve seats in the normal way anyway."

Davis said he understood Oth's point of view. "There has to be incremental revenue somewhere, so it would have to be all about moving market share," he said. But, Davis said, "this would be possible on a route like Brussels-London Heathrow, where there are three carriers, all with very good schedules, fighting it out for market share."

Both Davis and Platt doubt that they will persuade the airlines to start block bookings this year. However, both think it will come eventually-although Platt is unsure whether the idea will be taken to its logical conclusion, which would be for agents to charter whole aircraft exclusively for their customers.

"We could fill at least two aircraft per day from London to Paris," said Platt, "but block bookings would be much easier than setting up another and applying for slots, which are almost impossible to get hold of at the right times.