Role of E-Commerce in the Airline Industry

E-commerce is ubiquitous today--it's impossible to sit in front of a computer without seeing advertisements and links to sites of all descriptions that would like to separate the user from some of her money. Some people may not realize that airlines were among the earliest users of this new sales channel. Let's examine the role of e-commerce in the airline industry.

Foundation

Airlines have been heavily invested in technology for years. The introduction of the computerized reservations system in 1962 allowed the airlines to have real-time data on the number of seats available on any given flight. American Airline's SABRE was first, with full implementation by 1964; competitors released their systems over the next few years. The company also was able to better track revenue, because the computerized system also stored fare information.

Pre E-Commerce

With airline deregulation in 1978, airlines were able to offer a multitude of fares. As the reservation systems matured, airlines became very adept at manipulating how many seats were available at what fare in an attempt to maximize the revenue generated by each flight. The thinking was that a businessman going to a Monday meeting would be willing to pay more than a family going on vacation. This was a precursor to the practice we know today as data mining.

Problems

There were three major automated reservations systems in the 1980s: American's SABRE, Delta's Deltamatic and United's Apollo. When a travel agent searched for a flight, the flights of the company owning the system that the agent was using were given priority--whether they were the best fit for the customer or not. Regulations were enacted in 1984 to make the display of information fairer, giving travel agents and customers more choices.

Online Sales

Airlines were quick to employ online sales channels in the 1990s. They already had the infrastructure of mainframes and the knowledge of data collection, so the transition to online was a natural one. No longer would flight information and pricing be available only in a travel agent's office or via the airline's ticket counter or phone line. Growth in online sales has been substantial at many airlines. For example, Delta Air Lines began online ticket sales in 1996, achieving less than one percent of sales; online sales had reached more than eight percent of all tickets sold by 2001.

Continued Growth

E-commerce is no longer in its infancy. Airlines are actively trying to move people to their online sales channels. Some promise that their lowest fares are only available online; some even charge a fee for ticketing by phone--for years the standard in customer-airline contact. Other changes to the online sites are positive. A customer can check in online and print boarding passes; airlines are able to send notifications by text message or email if flights are canceled or delayed. As technology develops, more changes are sure to follow. Consumers may not like them all, but e-commerce in the airline industry is here to stay.

References

• Web Services Summit
• Econlib.org
• Highbeam research

Resources

• USA Today - Airline fees