Speeding Tickets: Internet Distribution And The Travel Industry
2003 | Case No. EC34
With reductions in the cost of processing power, new algorithms for database searches and the advent of the World Wide Web, competitors to the established global distribution system (GDS) companies emerged. By 2002, traditional GDS operators competed with each other as well as with airline websites, some Web-based travel agencies and a new entrant called Orbitz, an online travel agency owned by a group of airlines. In 1996, less than one percent of airline tickets were sold online. By 2001, 20 percent of airline flights in the United States were booked online, and the percentage was expected to grow to 25 percent by 2004. Seemingly overnight, forty years of comparative stasis in the business models governing airline reservation and ticket distribution turned into a dogfight as airlines, brick and mortar travel agents, online travel agents and GDS operators clashed over the approximately $180 billion market for airline travel. With ticket distribution costs comprising the third largest expense at some airlines, the battle promised to be fierce.
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