Amadeus Structure Industry

Topics: Computer reservations system, Travel agency, Airline Pages: 7 (2422 words) Published: April 29, 2012
Industry of Global distribution services
Amadeus is a company which offer services to the travel industry . They provide IT solutions and distribution systems to companies of the travel industry. Today, this kind of company are essential on this market. Indeed, most of the travel agencies, car rental , train and aerial companies use a global distribution system ( GDS). In order to define this indsutry and to analye the envrionnmenent , the porter five forces have been identifiate, then the evolution of the environment is analysed through time.


Market analysis -Porter five forces

 Threat of new entrants
Until the 1970s Airline distribution has only been realized through central reservation systems. But later, a new distribution system called Global distrubtion Systems (GDSs) have revolutionned the area of Information and communication Technologies, providing real time connectivity between thousands of suppliers of travel inventory ( airlines, car rental, hotels, cruise lines, …) and thousands of retail sellers of travel products. Soon four major systems have taken the leadership on the market, namely Amdeus, Sabre, Galileo, and Wordspan. The main reason is that all of them have great databases of informations of travel data (number of places available on a flight, hotel, etc.). The new oligopolistic market was reinforced by the growing importance of the initial investment the new entrants need to obtain the basic information of travels. For instance,, Amadeus owns the second biggest database of the world after the NASA)

The replacement of central reservation systems by GDS has increased the efficiency of agencies, but also provided a distribution network of thousands of selling points with the possibility to customize their prices and offers, so that they can fit perfectly the demand. Today, the three major GDS combined would regroup 1.4 million of the travel transactions per year. But after decades of leadership, GDS firms are facing a new danger that threats their margins and business. These changes are radically transforming the dynamics of airline distribution and the rules of the game.

Akin Oghuzan, Regis Mattia and Sandrine Kouao

In general, the discontent of the airlines about the distribution prices and the oligopolistic situation could be conducive to an opening to new market entrants. Moreover, the technological advances lowers the entry barriers for new entrants, and makes it easier and cheaper to build and maintain distribution systems

 Substitutes
Travel agencies used to be the interface between companies and customers. Companies could also develop their own system of reservation through their agencies or via internet. But as we said before, customers requirements are higher nowadays. A performant system has to be built in order to create a powerful and comprehensive interface between the customers and the company. It implies a big investement ( of time and money) and knowledge. Most of the companies don’t choose this option because this is expensive and hard to create such a performant system. We can say there is not so much substitues which could influence the market.

 Bargaining power of customers
GDSs firms were initially created for airline companies by themselves or subcontractors. For example Sabre was created by IBM for American Airlines and Amadeus was created by Air France, Iberia, Lufthansa and SAS. Such major GDSs companies act as the intermediate between travel providers and the travel agencies but also provide IT solutions to the travel providers. The principal customers of the GDSs industry are therefore the travel providers and the travel distributors, mainly the travel agencies.

Figure 1 : GDSs firms twofold source of buyers

In order to asses the power of the aforementioned buyers, one must take a closer look at the GDS industry. The latter counts 11 different firms worldwide but since we are focusing on the American market, in the USA it can be...
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