05 February 2009

The Breakup of the Holistic Airline Model

For many years people have balked at the prospect of fragmentation - that fear has kept the "Air Transportation System" - well - as a integral holistic service, at least in some people's minds. Much of this stemmed from the good old days when domestic US airlines didn't fight with each other and took each others' tickets in a very gentlemanly fashion. For International travel the only players on effective international routes all swapped tickets because - well International bilateral agreements superseded all other rules.

Fast forward about 30 years and the impact of de-regulation across the spectrum, the growth of ad hoc and even permenant alliances and the pervasiveness of web based technologies and those nice old holistic legislated or commercially constrained systems look decidedly long in the tooth. There really is no such thing as airline neutrality and a holistic system where we live in Utopian cooperation. It is everyone for himself.

Despite this reality some components of these "systems" are still living in the world of yesterday. On the other hand some progressive airlines have decided to blow right through those arcane models and form strong commercial bonds that go outside that nice old holistic model. For example LH buying into JetBlue and then integrating some of their operations. The Volaris/Southwest/WestJet relationship. The new United/Aer Lingus partnership and the announcement today of WestJet and AF/KL tie up. I can cite many more instances but you get my drift here.

It is interesting that on the very day that Westjet/AF+KL announcement is made that you have a senior GDS official getting up and saying that (and I am synthesizng out of context aggressively here to make my point) "...fragmentation ......fundamentally different from our (GDS's) philosophy on content..."

My point is that there is an inevitability now that fragmentation (as The Professor has oft opined) is not a new fleeting thing - it is here to stay and anyone who gets in the way of the unbundled and the fragmentation processes will in my humble opinion become road kill.

I liken this to the break up of Ma Bell (aka the old AT&T). People bemoan the loss of guaranteed dial tone. However they love the development of technology and the lowering of price and the plethora of options. Well so too the airline system model and the IT systems that constrained it that way. Before calm was restored in the telephony market there was a lot of disruption. I think there will be that occurring for a while in distribution.

You have been warned... that noise you hear is not just the wind...

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