By: David J. Wardell

© 1985 By: David J. Wardell.  Reproduction or redistribution in any form without written permission is strictly prohibited.

The Neutral Industry Booking System (NIBS) is a project sponsored by a number of airlines to create an alternative to the closely held carrier-sponsored reservation systems used by most agents.

It is commonly held that carriers participating in such a project will benefit from the unaligned approach to agency automation.

The amount of interest generated around this issue would seem to say that the elimination of reservation system bias was not sufficient.

Airlines are usually acutely aware of the competitive disadvantage a lack of agency automation creates. Not only are vendor loyalties to a system supplier (the host) at issue, but booking fees create a strong financial incentive to modify the current structure.

Booking fees are charged each lime a travel agent books a carrier other than the host, and often come to nearly $2 per segment. An airline relying on a competitor for access to its primary distribution channel, the agency system — insofar as a reservation computer is the principal point of contact between an agency and the carrier’s product — operates in an environment, which may change radically in any number of unpleasant ways at any time.

The non-vendor carriers’ interest in a NIBS-type concept is understandable.

Other success factors are less clear, specifically: What would motivate an agency to sign on? Are the benefits on the user side equivalent to those available to the carriers?

The heart of the NIBS concept is a valid premise: Reservation systems ceased long ago to be simply booking tools.

The system vendors consistently (in terms of public perception and actions, if not on an actual policy level) look to agency automation as an extension of a carrier’s broader marketing outreach.

The most important aspect of agency automation currently may be the fact that computers are the principal medium used by some carriers to create close alignments with their agencies —in effect, de facto dealerships.

The computer is the visible representation of the carrier and agency affinity: An Apollo agency is perceived to be a United agency, for example. This thinking appears to be so consistent throughout most agency/carrier relationships that it has become a key to understanding how many airlines deal with the agency community. This being so, it is exceedingly difficult for the agency to separate itself from its automation link to a particular carrier. To do so amounts to significantly altering competitive alignment and often, the agency’s compensation structure.

The idea of a neutral system plays to an agent’s better motivations. After all, agencies are expected to be impartial and to represent the best interests of the clients.

In practice, however, I believe most agents will see a neutral system as having little or nothing to offer. Many agents long ago ceased to be completely objective in terms of carrier preference. This position is actively encouraged by many airline marketing programs.

Overrides (which often indirectly finance rebates), market support, local image and automation cost concessions all work to support a very close business relationship with an automation vendor, because computers create the link between agency and airline. This is what describes a dealership, and it has been going on for a long time.

In order to adopt a neutral reservation system, the agency must decide, in effect, to terminate its dealership and seek an unaligned position relating to the carriers as opposed to its previously close alignment with one carrier — and sacrifice the financial rewards inherent with that relationship.

It is notable that the five carrier automation vendors — American, Delta, Eastern, TWA, and United — provide some of the country’s largest and most diverse service networks, which carry the greatest potential for building agency alignments.

Most of the largest agencies, and from an airline’s perspective the best agencies, will perceive a distinct disadvantage in a neutral system, especially if adopting it means that the old carrier relationship would not be replaced by something else — a possibility the neutral concept excludes by its nature.

Based on speculation at this point, I would suggest that the overall response from agencies, which are able to significantly affect the distribution picture for almost any group of carriers, will be less than overwhelming.

In an undertaking of this type, conversions are the name of the game — new agencies are not at issue. The costs of neutralizing an agency’s existing vendor relationships, plus converting hardware to a new system, and the pain and suffering associated with these actions for the agency, should not be underestimated.

There are additional perceived problems as well, such as creating the minimal degree of front and backroom synergy most agencies regard as mandatory.

There is already a neutral reservation system, and several major carriers participate in it. Marsplus fits the description of a neutral product well:

• Open to all carriers on an equal basis.
• Not sponsored by any single airline, thus offered to agencies at what must approximate the real cost of providing the service.
• Operated by an independent third party, with strong ties to the computer and airline industries.

While the precise details are open to dispute, Marsplus is obviously not a phenomenal success. The reasons behind its limitations are found partly in the preceding discussions on carrier/agent relationships, but partly in technological issues.

While a respectable product in its own right, Marsplus has clearly been approached on a different level than the other five reservation systems.

This is in no small measure due to the commitment each vendor airline was willing to make to agency automation, based on the perceived level of benefit available to the vendors.

It is difficult to understand how airlines, as a group, would be willing to make like commitments in order to develop a new system, if the overall associated benefits I have described are not available.

Further, creating a system is probably not a practical option. A new reservation network will take many months to bring on line, and will remain technologically inferior to existing products for a long time.

This is why there has been so much interest in purchasing or gaining access to an already existing system by NIBS. TWA’s PARS has been mentioned frequently in this connection.

While the precise nature of what Carl Icahn intends for the new PARS service entity remains to be seen, one would find it exceedingly difficult to understand why any carrier among the vendors would relinquish its reservation network, certainly among the carrier’s most valuable possessions—as technology is difficult to duplicate — to any neutral entity.

A neutral industry system may continue to attract considerable attention, but I believe actual implementation of the concept, based on the facts of life in the travel industry, will disappoint its proponents.