Sabre Marches Independently

By BTN / March 19, 2000

Sabre Marches Independently

BTN executive editor Cheryl Rosen caught up with The Sabre Group's new president and CEO William Hannigan on the Ides of March, the day Sabre officially spun off from AMR Corp., and spoke about where the GDS goes from here.

BTN: What can we expect Sabre to do differently now that you are independent of American Airlines and AMR?

Hannigan: You're not going to see anything out of the gate that's blockbuster stuff. There's a terrific strategy already in place: We're number one in the core CRS business and widening our lead over number two. We're number one in the direct side with Travelocity.com, and BTS was first out of the gate in corporate online. Virtually There is taking off like a rocket with 50,000 hits last Monday. In our IT solutions business, which includes Web hosting, we see opportunities relative to strategic partnerships that may not have been available previously. IT outsourcing is certainly important to the growth and strategy of Sabre, and we did not have the ability to grow that business as we would have liked with ownership by AMR. More often than not our largest prospects are AMR's largest competitors. It's like the Lucent model: Lucent was successful for decades as Western Electric, but it really took off when it was spun off from AT&T and no longer had a parent company that was a competitor of its customers.

BTN: Are there actual deals where potential corporate customers have said you need to be independent in order to win their contract?

Hannigan: There are a couple of large deals out to bid--British Airways and Qantas, for example. But there are 450 airlines out there, and 150 of them are customers of ours today. Among the alliances, look at Star. The expectation last year was that there would be a Star Alliance technology platform, but that didn't happen. United extended its contract, but there is no single technology direction in Star. A couple of Star members are terrific customers of ours, such as Air New Zealand. Potentially we can grow our business within the alliances and become the platform, because we are the only independent company with a CRS capability. Our CRS competitors don't have the midrange and application development capabilities we do. The airlines are getting a heck of a lot more serious about using technology to get beyond codeshare and impact the customer experience, and you really can't do that with disparate technology. Those are exactly the kind of discussions we're having with our airline customers and prospects right now. And more importantly, the airlines are having discussions with each other about how to take alliances to the next level. Who's to say that a technology provider couldn't be the platform for more than one alliance?

BTN: So that's your vision?

Hannigan: Yup.

BTN: By....2005?

Hannigan: That's not a bad target.

BTN: Who would you say are your competitors in the airline IT outsourcing space?

Hannigan: Amadeus, Galileo and Worldspan certainly bring a capability set around the mainframe TPF side and are formidable foes there, but in software development and the midrange we're uniquely positioned. IBM and EDS have mainframe and midrange capability as well. But from the application development side, when it comes to day-of-operations software, mission-critical software, we're uniquely positioned. If you want to go to one company to do all of the above, including being very involved in the software that helps you run your airline, we're the right guys.

BTN: How do you see the future of Sabre BTS and the corporate market in general?

Hannigan: Sabre BTS is hot. It's growing at 500 percent a year now, and a lot of that has to do with upgrading the feature functionality, hand-to-hand with our biggest customers. BTS started to ramp up like crazy about midyear 1999. When you take the first 24 months of Travelocity and overlay the first 24 months of BTS, you see how they track as far as initial adoption, upgrade of feature functionality, then a significant uptick, next level feature functionality upgrade, another significant uptick. We also were the first ones to roll out channel-specific pricing, where the airlines get a 30 percent to 35 percent discount on booking fees if they drive corporate customers to use our online tool. Our chief competitors in corporate online don't own the CRS, so they can't provide that kind of channel-specific discounting unless they eat it. And the 500 percent growth for BTS doesn't include the impact of that channel-specific pricing.

BTN: Can you share your projections for BTS in the next couple of years?

Hannigan: I'm comfortable in predicting several-hundred-percent growth through 2000, and then more of a 200 percent growth as the base gets bigger.

BTN: What new lines of business do you see?

Hannigan: Web hosting is our best-kept secret that we don't want to be a secret anymore. We looked up one day and saw we were hosting over 700 sites. We are going to grow that business and put more sales and marketing muscle behind it. Another development is the Sabre E-marketplace (a B2B purchasing site for the airline industry). We're talking about an eight-digit revenue stream within a year while we drive down costs for airlines and travel agencies.

BTN: Now that you're in the B2B marketplace, do you think the airlines are ready to sell their product to corporate buying consortia and e-marketplaces?

Hannigan: We'll support the corporation in driving usage through BTS and the airlines by giving them the opportunity to drive down costs.

BTN: There's a lot of talk in the travel industry about open systems and direct connections with suppliers. Can you see Sabre making a business of GDS bypass?

Hannigan: What you are talking about is sort of GDS bypass but it's also sort of BTS. It's the e-marketplace model. I think it's possible, and to some extent it's happening with Travelocity.com. When you think of Travelocity, you think of consumers, but 30 percent of that business--and a bigger percentage of the revenues--is actually business-to-business.

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