LCC Growth Roils Asian Distribution

The growth of low-cost carriers in Asia and their need to cut operating costs has caused global distribution systems to reconsider their business models, as low-cost carriers in many cases do not list full content in GDSs. Several, including Asian GDS firm Abacus Distribution Systems, are expanding to reach the travel agent community.

Via a general sales agent model, Abacus has a physical presence in 10 cities across India, with the rest covered by GSA partners, said managing director Viveck Verma. Last year, Abacus launched WebConnect, its online booking engine for travel agents, helping it get a share of the online market in India with Makemytrip.com, Indiatimes, Yatra and Travelguru.com among its customers.

"We are working very hard to enhance airline content on Abacus," Verma said. "One of the key achievements was getting Kingfisher Airlines content on Abacus, which has helped our travel agents benefit immensely. It will be difficult for the low-cost carriers to ignore this distribution channel. The clear benefit that airlines gain as a core function of the global distribution system is distribution following efficient management of inventory."

Abacus distributes inventory of major Asian budget carriers, including Jetstar Asia, Jetstar, Valuair, Adam Air, Cebu Pacific, Lion Air and PT Batavia. Verma said this trend would enter India very soon.

The impact of low-cost carriers on the Asian market was making travel distribution firm Travelport "anticipate trends and develop solutions that arm the industry with innovative technology and products that help make change easier to manage," said Brad Holman, managing director of airline services for Asia/Pacific for Galileo, Travelport's global distribution system division, at last month's Wired Travel Asia 2006 conference in Singapore.

Nowhere is the rise of LCCs more apparent than in India, where six startup carriers have debuted in the past three years and already account for 37 percent marketshare. With around 10 more waiting in line for licenses to start operations, the country is expected to be the world's largest low-cost carrier market by 2010, with a predicted marketshare of 70 percent.

However, even though GDS alternatives are not a visible factor in Asia, traditional GDSs are aware they will need to reduce transaction costs per ticket.

In India, the online market is split between bookings done directly through suppliers and those through online travel agencies, a breed gathering momentum.

"Increasing e-commerce brings a challenge—making information available readily, online booking faster and more user-friendly. We see online travel agencies as our partners and another distribution channel for us," explains Raj Halve, chief commercial officer of budget GoAir.

With the growth of Internet penetration and rising disposable income, more OTAs will enter the market before consolidation starts to take place. At a recent Eyefortravel.com travel distribution conference, it was apparent Indian travel online is on an upward drive. This was exemplified by the spate of well-funded online ventures launched this year.

Ashwin Damera, founder and CEO of one-year-old Travelguru.com, said the company already was looking at increasing its staff from 250 to 350 by March 2007 and opening 20 retail outlets in five to seven cities, especially Delhi and Mumbai, by the end of next year. "We are about to invest $10 million in the expansion plan, which would be through venture funding." The company is expecting revenues of $40 to $45 million by the end of this year.

Deep Kalra, founder and CEO of Makemytrip.com, India's market leader in the online travel agency segment, estimated the online market in travel and aviation was US$300 million in 2005, and will cross $750 million in 2006. By 2008, Kalra said, it will exceed $2 billion. So apparent is the new equation that Makemytrip.com became the largest issuer of domestic air tickets in India within one year of launch.

Kalra added that the 30 million credit card users and 40 million Internet users in the country were providing a boost to the business.