Can a low-cost booking system cut ticket cost?

DUBAI - Cheaper ticketing has caught the interest of the airline industry, especially with IATA announcing its commitment to reduce ticketing costs.

By Shalini Seth

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Published: Thu 19 May 2005, 12:21 AM

Last updated: Thu 2 Apr 2015, 8:28 PM

A company called G2 Switchworks has started a web-based distribution network called Trueconnect that will rely on low-cost servers instead of the expensive mainframe computers used by traditional distributors.

Ellen Lee, Co-Founder/VP Business Development, of G2 Switchworks in an exclusive interview with Khaleej Times said. "Our take is that passengers pay the cost of distribution today in more than a few ways. One is the form of higher fares and restrictions from airlines that cover the cost of their GDS fees.

"Second is in the form of service fees customers pay to agencies to cover their costs to service. Third is the time they spend trying to find the best fare as with disparate costs of distribution in the travel sector (over the GDS or airline direct) airlines hold their content from certain channels. "So, what G2 would bring is a distribution platform to travel agencies that is near the internal cost for an airline. So they may get access to better fares, etc. from suppliers. What G2 also provides is a very automated technology to travel agents that should help lower their costs as well."

In the US, where the company is based, US Airways, American Airlines, the world's largest, America West Airlines, Continental Airlines, Delta Air Lines, Northwest Airlines, United Airlines have signed long-term commitments, G2 Switchworks, she said.

They have agreed to use the low-cost travel reservation system that will reduce fees paid to other reservation systems by about 80 per cent for the average round-trip reservation, according G2 Switchworks, the Chicago company that provides the new distribution network.

Earlier, the Wall Street Journal reported that G2 is expected to cost about $3 or less per booking, compared with a traditional cost of $12.50. The airlines' cost to issue about 410 million tickets by traditional reservation system operators worldwide runs to about $4.3 billion, the Journal said, so the new system could represent a substantial savings.

But with some travel agencies locked into contracts with Sabre, Amadeus or other traditional reservation systems, the question arises as to who will be on the booking end of the system.

Meanwhile, representatives from Sabre commented that G2 is not really a worry. "We did check with them about the level of functionality that their system can provide but we found that it cannot do many things that our system has developed over the years. Their costs will go up once these elements are added," said Anja Graulich, Head of marketing, EMEA, Sabre Travel Network.

The company is planning to go global by the end of the year. Regarding their expansion plans in the Middle East, Lee said, "G2 has not signed international airlines yet to G2 as our product is US point-of-sale at this time. As we expand over the next few months we will add to our carrier list in the international direction. G2 currently has no stated plans for distribution to the Middle East, but we will start a small global push later in 2005."

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