Shay MitchellGeneral ManagerGalileo Netherlands The Growth of Low-Cost Carriers ‘MARKET CHAOS’ – WHERE DO WE GO FROM HERE? 23rd September 2003
Chaos • Economic recession • War • SARS
Travel Market Changing • Low Cost carriers • Airline disintermediation • Airline Direct Connect • Commoditised GDS • Profit margins shrinking • Online vs. offline
Growth of Low Cost Carrier Concept • Ever growing list of Low-Cost Carriers in Europe • Full-service airlines adopting the LC model • All carriers trying to sell more and more directly to the consumer • Direct connect considered to be more cost effective, (true or false?)
Impact on the Travel Agent –Dramatic! • Commission reductions (7% -5%-1%- Zero?) • Service fees as a replacement revenue stream • How many travel agents will survive? • Those who do must embrace technology in order to be more productive • Using Customer Relationship Management • Finding niche markets
Impact on the GDS –Dramatic! • Shrinking market due to channel shift • New role of travel solution provider • Forcing a change in the GDS/Travel Agent/Airline relationship • Reducing revenues and lower margins • FA arrangements not sustainable in the future
GDS Market Shrinking • Holland down 18% • UK down 12% • Germany down 10% • Italy up 6% • Spain up 17% Source: MIDT data
Where does the consumer stand and what are his/her needs in a so called Book Direct Market? • Widest choice possible • Price guarantee • Ease of booking • Dynamic packaging • Servicing and sales support • Can this be provided through a single supplier website?
Content – What we provide • 35m fares • Private Fares now 50%+ • 6220 formulae • 47.000 travel agency locations • 493 Airlines • 52.000 hotel properties • 292m bookings LY
Technology – Direct Connects Paper ticketing Integrate bookings Multi carrier itineraries & pricing BSP credits for E-tickets BSP hand off functions WHO PAYS? Ground services New preferred airline supplier Mid & back office hand off Corporate policy management Partner access to bookings Itinerary changes Private fares Married segments
Technology – Supplier Direct Connect • Unsustainable burden on Web and airline reservation systems • Loss of integration • Limits consumer choice • Economic model is flawed – Hidden costs of going direct • Ask the expert - GDS
Areas of Focus • Content • Technology- (Increasing Productivity) • New Business Model
Low Cost Carriers In Galileo • Virgin Express • Virgin Blue – Australia • Westjet in Canada • BMIBaby • Kulula -South Africa • SkyEurope - Bratislava • FreshAer -Ireland • Air Majic - UK
Galileo –Airline Supplier Initiatives • Airline Content Retention in Galileo through; • Basic Booking Product – Europe • “Preferred Rates Programme” in USA (Full service airlines –web content) • One-to-one discussions and agreements with Airline suppliers in EMEA focusing on web fare distribution at lower cost
Content – Low Cost, No Frills • Basic Booking Product • “Low cost” GDS booking product “Custom Fares” • Integrated web fares • Super PNR?
Real Estate Financial Services Hospitality Travel Distribution Vehicle Services Divisional Overview Travel Cendant Divisional Overview
Cendant’s Travel Assets for EMEA/AP • Vacation Rental • Hotels Distribution Car Rental • 38000 Properties • 17 EU Countries • 4m Consumers • 600000 Rooms • 6000 Properties • 180m Room Nights • US, UK, Ireland • #1 AP • #1 MEA • #2 Europe • Corporate Tools • Preferred Content • #1 world-wide • Owned in AP • Owned in N.America • Licence in EMEA
Technology -Solutions • Is about efficiency and cost reduction • Fare Shopper • E-Tracker • Agency Private Fares • Airline Private Fares • Custom Fares • Corporate Booking Tools • Galileo Web Services
GDS – New Business Model • Maximise the airline content -Full service & Low Cost Carriers • Add wide range of new content • Deliver new technical solutions to create efficiencies • Greater value rather than FA?
Alternatives to FA • Improved Corporate/Leisure Booking Tools • Internal automation for cost take-out • TDS not GDS • Stronger partnership agreements with customers and suppliers
The Galileo Challenge As part of the Cendant Travel Distribution Services Group, Galileo is re-inventing itself, in order to forge clearly defined new partnerships with its travel agency partners and suppliers for a prosperous future. Come Join US