Southwest Airlines And Amadeus IT Group Sign Contract To Implement A Single Reservation System For C

[700UW]

http://finance.yahoo.com/news/southwest-airlines-amadeus-group-sign-153000555.html
 

DALLAS and MADRID, May 5, 2014 /PRNewswire/ -- Southwest Airlines (LUV) and Amadeus IT Group (AMS:MC) announced today that they have entered into a joint contract for Amadeus' Altéa reservations solution that will support the carrier's domestic service.  Amadeus' Altéa reservations solution currently supports the Company's international service, and Southwest has long indicated a desire to operate just one reservation system, operating multiple systems following the acquisition of AirTran and the launch of international service on Southwest.  After months of due diligence, the airline selected Amadeus' Altéa solution based on a successful international launch and future capabilities.
 

 

 

[eolesen]

It's a great day to be at Amadeus... perhaps not such a great day for Sabre, but they had plenty of time to try and secure the business.

This opens the door for so much functionality and changes to the business model that WN wasn't able to do easily with their current system.

If they want to, they can now look at transaction specific ancillaries and implement full-blown codesharing without all the hoops and leaps they were having to do with separate PNR's and separate payments.

I could go on, but then I'd start sounding like an Amadeus cheerleader...

 

[jimntx]

E, your professional opinion, sir. Do you think Amadeus is that much better than Sabre, or that Sabre was never under consideration, or Sabre just assumed that they would get the business because they are SABRE?

 

[does this plane go to paris]

"I could go on, but then I'd start sounding like an Amadeus cheerleader..."
 
E,  There isn't anything wrong with being a cheerleader as long as there is moderation and a willingness to admit that Amadeus is not the end all, be all of the world.  Knowing what I know about LUV, I'm sure that they looked at all systems long and hard before arriving at this decision
 
Speaking of full blown codesharing,  I've always believed that other carriers would love to be able to get some of their Customers on Southwest flights.  I'm not sure that Emirates would be knocking on LUV's door to get one of their First Class Customers connecting on a LUV flight, but there is going to be a day, sooner rather than later where a LCC will have flights across the Atlantic.  There will be a scramble to make a new alliance system.  I cold imagine LUV having flights from BWI to London's STN connecting to easyjet's system and easyjet flying into BWI or MDW and connecting to LUV's system.

 

[WNMECH]

 Knowing what I know about LUV, I'm sure that they looked at all systems long and hard before arriving at this decision
 
 

 Really?
 
We have a history of making bad IT decisions on the maintenance side.
 
You heard of Sinex or Trax?

 

[eolesen]

E, your professional opinion, sir. Do you think Amadeus is that much better than Sabre, or that Sabre was never under consideration, or Sabre just assumed that they would get the business because they are SABRE?

My professional opinion is quite biased -- I was part of the team who responded to and presented the RFP at WN.

Amadeus is built on new generation technology, while Sabre is still largely stuck on the same 1960's mainframe architecture they've always had. As a result, Amadeus is more scaleable, and can offer things like geographically separated data centers for disaster recovery; Sabre can only have the Tulsa data center for the core. I could get into more of the architecture, but most here would glaze over as I start talking about service bus, open back end, presentation layers, and all the other stuff that clearly separates Amadeus from other providers.

I don't know that Sabre ever assumed they'd get the business, but it was clear they were willing to price their services at a loss to keep them. That's how they kept AA's business after Jetstream collapsed.

Sabre's downplaying this as only a 3% hit to their total revenue. I suspect it's a far larger percentage of their airline revenues. Southwest is worth 110M PB's per year, and will be Amadeus's largest customer. If I recall, they'll represent between 15 & 20% of the total passengers handled on Amadeus, and before this, Amadeus had ~40% of marketshare for airline IT.

 

[jimntx]

Thanks, E.

 

[WorldTraveler]

So what does this say about AA? Is AA Sabre really different enough to not be in the same situation or no?

 

[eolesen]

Last I checked, this was the WN forum...

The last client who asked me the differences between Sabre and Amadeus paid ~$300K for an answer.

Send me a cashier's check, and maybe we can continue the discussion where it belongs, which isn't here.

 

[WorldTraveler]

no they didn't send you a check

And we will assume that the same reasons why AA was looking to replace Sabre are the same reasons WN is jumping ship

At any rate WN will have the capabilities to play in the big leagues and while you want to say that mainframe based GDSs are old school AA and DL have handedly outperformed their peers in reliability even with dinosaur systems

 

[eolesen]

You also might want to try reading what other people write. I said you could send me a check for an answer.

Our clients typically pay us via the IATA clearinghouse, but I'm assuming you're not a member.

Apparently, you also don't know the difference between a GDS and a PSS. While the PSS & RMS certainly interact closely with each other, the PSS's functionality (or lack of) isn't what ultimately drives DL's or AA's positive results with regard to revenue generation or operational reliability.

 

[eolesen]

Terry Maxon has a little more color around the announcement.

http://aviationblog.dallasnews.com/2014/05/southwest-airlines-to-replace-its-reservations-system-finally.html/

Tnooz has less detail, but includes an interesting statement from Sabre on the timing:
 

“Sabre remains under contract to be compensated through December 31, 2016 for continuing to provide reservations services for all domestic flights.”

http://www.tnooz.com/article/travel-systems-roundup-may-2014/

The full Sabre statement is available here:

http://online.wsj.com/article/PR-CO-20140505-904401.html

 

[WorldTraveler]

You also might want to try reading what other people write. I said you could send me a check for an answer.

Our clients typically pay us via the IATA clearinghouse, but I'm assuming you're not a member.

Apparently, you also don't know the difference between a GDS and a PSS. While the PSS & RMS certainly interact closely with each other, the PSS's functionality (or lack of) isn't what ultimately drives DL's or AA's positive results with regard to revenue generation or operational reliability.

all you need to say is that they pay Amadeus, not you.

absent a viable answer from you about what AA is left with and why WN's choice is right alongside of AA's, then you can just leave your response as "Amadeus gets paid."

this is an open discussion board. If you want to be paid for your opinions, then do so in a paid consultancy.

I'd be a very rich man if I charged you for all the corrections I had to make about AA's financial situation. Not only do I not charge, but I am also able to find published reports that validate what I say

BTW, we don't expect you to say anything good about a competitor but the simple reality is that Sabre succeeds at what it does for its airlines and the cost for them to change everything over and start from scratch is prohibitive.

The reason why the process is a lot less costly for WN is because they had so little of the legacy carrier functionality or systems in the first place.

 

[eolesen]

Oh, I've said lots of good things about Sabre over the years. I have many friends there, and have said repeatedly that Sabre has been quite successful in winning new business and retaining customers. But that doesn't change the fact they're the #2 provider in the marketplace by quite a wide margin.

15 years ago, Amadeus took a huge risk, and made a deliberate choice to re-invest a good chunk of their revenue into R&D and new infrastructure. Their pricing has long reflected that approach, and their customers understand they ultimately benefit from that ongoing re-investment, and have used that in part of the business case decision to select Amadeus even though it may not be as cheap of a solution as Sabre, SHARES, or Navitaire.

During that same timeframe, Sabre made a similarly deliberate choice not to re-invest as much into R&D or a new infrastructure. They've always priced their product a notch or two lower than Amadeus, and have signed (and renewed) a few customers on that basis alone. By doing so, it's my opinion they've boxed themselves into a situation where they'll have a much harder time generating the margins necessary to make the investment required get off of TPF. I don't see their institutional investors agreeing to that.

It's a classic case of risk/reward. Amadeus took the risks, and now they're seeing the reward.

Similarly, for many years, WN chose to build around the edges of the SAAS core to make up for its shortcomings (the same decision AC, CO, DL and AA made). By 2010, WN had hit too many walls, and took a step back to look at all their options. They could have made the same decision AA did, and go with the lowest bidder, but ultimately decided that the lowest bidder wasn't necessarily in their long term best interests.

WN certainly has some risks in going this route, but I'm fairly confident they'll see the upside faster than AA will from deciding to keep the same platform they've had for ~50 years.

 

[WorldTraveler]

that's a much better response and one that is in keeping with the expertise I know you have in your area and which I am glad to see you share here.

thank you for taking the time to help those of us who aren't near as familiar with your business as you are.

that type of sharing from expertise is what makes the board strong.

I happen to agree with your last sentence... many times, companies that are farthest behind in technology make the biggest jumps to the front because they are so far behind and there are more risks in being left behind.

I think WN made the right decision. The bigger question is the risk that AA and DL have and how much the IT component will play into it given that from a financial standpoint, AA and DL have a lot more upside on the network ad competitive side.