Airlines still love us, says Abacus

SINGAPORE – Industry pundits are casting their eyes on Abacus International as it nears the end of its 10-year agreement with Sabre Holdings which saw the latter take a 35 percent stake in Abacus for US$139 million back in February 1998.

Not surprisingly, questions about Abacus’ future and how its relationship with Sabre will evolve beyond the current agreement are beginning to surface.

Within Abacus, some of these questions are already being answered. It recently brought in a new director of corporate planning who hails from Sabre.

Eric Hallerberg has been charged with “developing Abacus’ business model, strategy and annual business plans with the aim of protecting existing revenues and creating new revenue opportunities”.

Hallerberg joins Abacus from Sabre where he was head research scientist specialising in product development with focus on enterprise data strategy and hotel and air information solutions.

As Abacus, along with all other global distribution systems, work out new value propositions – both to the suppliers and the travel agents – it continues to compete intensely with each other in its traditional businesses.

Understanding well the road ahead, Hallerberg said, “my mission is to create a strong corporate vision that incorporates everything from short term operational issues to longer term visions. Business as usual is important, but so is improving and having an increased focus on the future.”

Reiterated Abacus’ president and CEO Don Birch, “We continue to see steady growth and new opportunities – as well as challenges that will require GDSs to change and adapt to the new landscape.”

Birch said in the next five years, Abacus would continue looking at ways to help travel agents who were being challenged by price wars and new entrants to the market, to “survive and thrive in what by then will be the Travel 3.0 landscape”.

No doubt Hallerberg will be bringing in some ideas that have worked at Sabre. “I come from the non-air side of the business, and therefore have a soft spot for it. That is also the first place to look at for non-traditional sources of revenues.

“I also have background in the data business, an area that could have some opportunities to develop here,” said Hallerberg.

New ideas will be essential to prove to the travel industry that there is indeed still value in GDSs, cost notwithstanding.

“The economics of GDSs is all about benefits and costs. I feel suppliers may only be focusing on costs and not the overall picture. GDSs, perhaps, have not done a good enough job promoting its value.

“We bring higher yields and broader distribution reach. You can drive distribution costs down by going direct, but by doing so, will you be also driving your revenues down by limiting your distribution reach?” said Hallerberg.

Said Birch, “An increasing number of low-cost carriers work with GDSs because they offer a vital link for airlines into marginal markets and hard-to-reach travel agency locations.”

Recently, Southwest Airlines, notorious for keeping its distribution costs low and mostly going direct to the traveller, signed a 10-year full content agreement with Galileo, saying that “today’s GDS environment has evolved to the point where it has become a cost effective distribution which will increase the reach of Southwest Airlines to new business customers, including those that rely upon corporate travel managers”.

And on the travel agency side, Birch adds it will be “vital for GDSs such as Abacus to push ahead with assisting travel agent partners to compete in the online space”.

He said agents “need a partner that can help them understand the opportunity represented by online, develop a strategy appropriate for their business, and finally offer the appropriate technology”.

Then there is the question of ownership. Abacus today is the only remaining GDS that is predominantly owned by airlines.

While its stakeholder Sabre and others negotiate through new airline contracts amid accusations of not being helpful in lowering the airlines’ distribution costs, and airlines try to sell direct to the consumers (and bypassing GDSs), Abacus’ownership by 11 airlines and Sabre is unlikely to change.

In response to a question about whether being airline-owned is a benefit or barrier to Abacus’ future moving ahead, Birch said, “Leading regional airlines brought Abacus into existence to meet a particular market need, which Abacus is still meeting today.

“Despite the purported growth of airlines going direct to their customers, we believe that the outlook for the GDS-airline relationship remains bright as travel agencies will continue to be the key intermediary for leisure and corporate air travel in Asia.”

And what are Abacus’ ambitions? “To continue delivering value for our airline partners, suppliers and travel agency partners; extending the marketing reach of travel suppliers and lending our expertise to travel agents as they adapt to the challenges of the Travel 2.0 world.”