American and Delta May Blend Reservation Systems
American Airlines and Delta Airlines said Friday that they are involved in discussions to merge their computer reservation systems. The airlines said that if a transaction were concluded, they would establish an independent company to operate the system.
American’s computerized system, called Sabre, is already the largest of five U.S. computerized systems with more than 8,000 locations. Delta’s system, called DATASII, is the smallest, with about 2,000 locations.
Airline observers maintain that a computerized reservation system is one of the essential ingredients needed to survive in the deregulated airline environment.
Because of the great disparity in size between American’s and Delta’s systems, “if money changes hands, it will flow from Delta to American,” said Edmund S. Greenslet, publisher of the Airline Monitor, a monthly review of airline financial trends. “American is putting more into the pot than is Delta.”
He said a variety of studies have concluded that it was undesirable to have so much market power in the hands of just a few companies. The smaller airlines, as well as hotels and car rental companies, pay reservation fees ranging from $1 to $1.50 to the computer reservation systems. Both American and Delta charge $1.50 per transaction, according to a 1988 study by the Transportation Department.
In terse, identically worded announcements both airlines said it is contemplated that the combined system initially would be owned 50% by American and 50% by Delta. The combined system would operate as an “autonomous” company, the airlines said. The airlines said they “contemplate” offering interests in the new system to others, including domestic and international carriers.
Travel Weekly, a travel industry newspaper, reported on Friday that Lufthansa, the West Germany carrier, and Japan Air Lines, would invest in the new company. But a spokeswoman for Lufthansa said Friday that “we have not heard from Germany about that, so we cannot comment.” A JAL spokesman said there was nothing to the reports.
American said it had, in the past, spoken to others concerning joint computer reservation activities but that none of these discussions had resulted in an agreement. “Therefore, there can be no assurance that the proposed transaction can be accomplished on mutually agreeable terms.” Both carriers said there would be no further word until there is an agreement or the discussions are broken off.
The computer systems were started in the 1960s by airlines. Thereafter, attempts were made to launch some independent systems, but the government denied immunity from antitrust laws to allow discussions, and such efforts were dropped and the airlines’ systems became giants.
There is great value in the reservation systems. Two years ago, United Airlines sold half of Covia, the company that owns Apollo, to a group including some European carriers and USAir, for $500,000.
