Sabre Locks Up US Airways Fares For Five Years

In the latest sign that airlines are flexing their muscle as they seek more favorable terms with the companies that help them sell tickets, US Airways this week said it's reached a five-year agreement with Sabre Travel Network to provide its entire airfare inventory to Sabre's distribution network. The airline also signed a concurrent agreement with Sabre's Travelocity site, which will supply US Airways' site with hotel inventory the airline can offer as part of travel packages.

The deal with Sabre Travel Network marks the first time that the former America West Airlines, which took the US Airways name after acquiring its larger competitor last year, has signed a long-term agreement with any of the four companies that run the so-called "global distribution systems" that travel agencies and corporate travel departments use to book travel reservations. Those companies, Amadeus IT Group, Cendant Corp.'s Galileo International, Sabre, and Worldspan, signed numerous airlines to such contracts a few years ago in order to secure full inventories in exchange for slightly discounted distribution fees. But as the rise of cheaper, alternative technologies has forced Sabre and the others to adjust their pricing further, airlines have become bolder in their approach to negotiations.

In America West's case, it launched a corporate booking portal in 2004 with the stated intent of trying to get corporate travelers to book directly with the airline. But Scott Kirby, executive VP of sales and marketing for the new US Airways, says the airline will cease investing in further development of that site, and he acknowledges that the corporate portal served primarily to test the airline's resolve. "We had to experiment with it, and we had to convince the [global distribution systems] that, if necessary, we were prepared to go it on our own," says Kirby.

Corporate customers have clearly indicated that they're not willing to shop across airline sites looking for the best fares, Kirby says, but rather, they want continued access to a booking engine that lets them shop for fares through a single interface. That, combined with the fact that Sabre reaches the largest number of travel agent desktops, led the airline to agree to the recent contract, he says.

Travel industry observers have targeted 2006 as a key year for the airline industry because the long-term agreements with the Sabres and Galileos were set to expire, opening up an opportunity for upstarts like ITA Software and G2 Switchworks to intercept some of that business with their lower-cost, standards-based technology. But if their more established competitors start inking more deals, ITA and G2 could find that securing a bigger piece of the airfare distribution business will take a bit longer than expected. "Deals like the ones we just cut with Sabre reduce their advantage," says Kirby.

Financial terms of US Airways' contract with Sabre were not divulged.