Niklas Andreen
The Transnationalspoke with Travelport managing director for Eastern Europe Niklas Andreen about the global distribution system market in Russia after Travelport this month announced a "strategic partnership" with Russian GDS Sirena-Travel and the creation of Sirena-Travel International. The partnership by fall will offer Sirena's 16,000 agency terminals in 7,000 locations "booking capabilities, including interlining, electronic ticketing, reporting and payment" for international travel content from Travelport, according to a press statement. Two unnamed international airlines have agreed to participate, and Travelport is working on more air deals. The agreement does not include an equity investment--though officials had considered a joint venture or acquisition--"but we found the best way to accomplish what we wanted was to turn it into a legally governed, strategic partnership," Andreen said. Additional comments follow.
What can you tell us about the Russian GDS market?
Historically, Russia has been very similar to China. When it opened up, there were three domestic GDSs, then the international ones entered. Today, the Russian market is about 40 million segments--roughly the size of Germany--but it's growing by about 20 percent year on year. Out of that, 30 million are still being distributed through the local GDSs. So despite over 10 years of trying to get into this market, international GDSs have made about 25 percent headway into the market. Sirena-Travel has about 65 percent market share of the remaining 30 million, or about 16 million segments. They have about 16,000 terminals spread across Russia that today cannot book international travel because the international airlines were not keen on participating in yet another GDS. So, Russia and China are the two remaining markets that have not adopted the global model of GDS business.
To what extent are the global travel management companies present in Russia to handle domestic operations of their multinational clients?
All the big TMCs are present in Russia either via direct ownership or franchises. They have usually come in with international GDSs because most traffic they have aimed at servicing has been the traffic out of Russia, where of course they needed international GDSs. But that has left them with an issue when it comes to servicing customers with a big domestic piece, so that's why a lot of them have used Sirena-Travel as a complement.
Is multinational corporate a big part of the market you're trying to address?
The big corporations that fly a lot of international would be served by the big TMCs. That's really the 25 percent of the market we talked about. Sirena-Travel International mainly helps to service the leisure part of the market, the midsize part of the corporate market and then to the extent that the big corporations have production facilities across Russia. But my guess is most of them would stay on the international GDS and then have Sirena-Travel as a complement. One of the things we're looking at is reversing it so that Travelport's Galileo terminals in Russia and abroad would get access to Sirena-Travel content, but we have started with servicing the 16,000 terminals in Russia with international content and said, "Let's start there and make sure we get this right" before moving forward on those additional opportunities.
Why have TMCs in Russia traditionally used multiple GDSs?
They have taken [the idea of] dual-automation GDSs to a whole new level; every user works in two, three or four GDSs because that's the only way they can bring the content together. Almost everyone has Sirena-Travel today because they need it to cover domestic Russian traffic. And then you have one, two or three of the international competitors, because we don't all have the same coverage of airlines in the Russian portfolio. From a travel agency perspective, this allows Russian travel agencies to come on par with what we see in Western Europe. Now, domestic agencies will be able to book [international content] in their Sirena-Travel terminal in the Russian language in one application, as opposed to having to switch between multiple applications.
Is there a functionality agreement in addition to a content agreement?
It's both. We started with the content for [Sirena-Travel's] agency network because that's where there was a glaring need--which was also [evident] when we talked to international carriers, like British Airways, which said they can't hook up to another GDS but would like the ability to distribute to these agencies. So there was a simple match between their agencies wanting to sell international content and international carriers wanting to sell them that content. That was the starting point. They have also taken our airline information technology services e-ticket hub. And then we're talking about additional needs.