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- <text id=89TT1270>
- <title>
- May 15, 1989: Big Eagles And Sitting Ducks
- </title>
- <history>
- TIME--The Weekly Newsmagazine--1989
- May 15, 1989 Waiting For Washington
- </history>
- <article>
- <source>Time Magazine</source>
- <hdr>
- BUSINESS, Page 54
- Big Eagles and Sitting Ducks
- </hdr><body>
- <p> Of all the competitive weapons in the major airlines'
- arsenals, perhaps the most powerful is one that never leaves the
- ground: the computerized reservation system. More potent than
- frequent-flyer programs or discount fares, these systems have
- become vital to an airline's ability to compete and survive.
- Says Julius Maldutis, who follows the industry for the Salomon
- Brothers investment firm: "Automated reservation systems are
- dividing the industry into the haves and have-nots. Those with
- them are becoming the big eagles. Those without, sitting ducks."
- </p>
- <p> Automated reservation systems are vast computer networks
- that the major carriers, notably American and United, use to
- dish out the most up-to-date flight information to travel
- agents. When linked to the systems, agents can check schedules,
- compare fares and book tickets. They can also make hotel and
- rental-car reservations as well as order tickets for Broadway
- shows or charter a private jet.
- </p>
- <p> What makes a network so vital to the airlines is its
- ability to arrange a dizzying permutation of planes, routes and
- available seats in the most profitable configuration possible.
- Each day, 600,000 fares change in the airline industry, which
- high-speed computers can constantly update to help an airline
- allocate seats. Without the computer systems, for example,
- airline managers might fill planes with passengers flying free
- on frequent-flyer coupons when at least some seats could be sold
- to business travelers at full fare.
- </p>
- <p> The travel-agency business has grown heavily dependent on
- reservation systems and the airlines that own them, often at
- the expense of carriers without their own computers. Nearly 87%
- of all flights are now booked through the carriers with
- computerized networks, compared with 61% in 1983. The most
- dominant system is American's SABRE (an acronym for
- Semi-Automated Business Research Environment), used by 14,000
- agencies to keep up with some 45 million different fares at 281
- airlines. United's Apollo, the second largest, is used by 10,000
- agencies. Last year the SABRE system brought American profits
- of $134 million, mainly in user fees collected from such
- airlines as Pan Am and Southwest, which "lack systems of their
- own.
- </p>
- <p> The have-nots are leery, and with reason. In recent years
- the Government has charged both American and United with
- violating antitrust laws by using the systems to put their
- competitors at a disadvantage. The Department of Transportation
- pressured American and United to reprogram their computers to
- eliminate so-called display bias. The agency accused the two
- airlines of rigging their systems so that their flight
- information received more display-screen prominence than
- competitors' flights. Richard Murray, who heads Texas Air's
- reservation network, has been urging the Government to force the
- major carriers to spin off their reservation systems. Says he:
- "The only answer is divestiture, because they will always find
- ways to use the systems as weapons to ground competition."
- </p>
- <p> Since divestiture is unlikely, smaller carriers fighting to
- end American's dominance will settle for preventing SABRE from
- growing larger. They are lining up to ask the Government to
- stop a plan by American and Delta to merge their reservation
- systems. Combined, the two would command a 45% share of the
- market. Foes of the American-Delta deal say it would hurt
- competition by reducing the number of players. That step, they
- warn, would further widen the gap between the big eagles and the
- sitting ducks.
- </p>
-
- </body></article>
- </text>
-
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