3 Airlines May Join on Reservation System
Delta Air Lines, Trans World Airlines and Northwest Airlines said Monday that they are discussing the formation of a combined computer reservations system.
If the merger takes place, the resulting reservations system would become the nation’s third largest--after those owned by American Airlines and United Airlines.
The announcement by the three carriers said such a transaction would join the PARS system, which has been jointly owned by TWA and Northwest since 1986, and Delta’s DATAS II. However, they said their talks are only in a “preliminary” stage.
The airlines said the new entity, if it is created, would be independently operated as an autonomous company with its own management. The action would eliminate one of the five computer reservations systems in the country.
The CRS operations--especially the largest ones--are very profitable for the airlines that own them. Travel agents use the systems to make airline reservations for clients, to make hotel and tour reservations and to order rental cars. The agents can also do much of their own accounting on the computer terminals that the reservations system companies install in their offices.
Most travel agents use only one of the systems, paying a fee--which is negotiable--to have the equipment installed. The CRS companies make their money from fees collected from the airlines, rental car companies and hotels, etc., for which the tickets are sold. The typical fee is $1.85 per transaction.
The U.S. Department of Transportation has calculated that 15% of American Airlines’ 1986 revenue and 10% of Delta’s resulted from the built-in advantages of owning their own systems.
Merger Hit Snag
Nevertheless, Delta, one of the most profitable U.S. airlines, is at a big disadvantage because its DATAS II is the nation’s smallest computer reservations system.
“The reason we are pursuing this merger,” said Delta spokesman Jim Lundi, “is to increase the subscriber base for our system, to make the system worthwhile, to make it competitive. It is important to reach a critical mass.”
Besides American’s Sabre system, United Airlines’ Apollo system, DATAS II and PARS, Texas Air Corp., parent of Eastern Airlines and Continental Airlines, owns and operates System One. There are also six other systems in Asia, Canada and Europe.
Delta had hoped to merge its CRS system into American’s in a deal valued at $2 billion announced in February. Delta was to have paid American $650 million to form the partnership. The two carriers would each have owned 25% of the new company and the remaining shares would have been sold to other airlines.
But the Justice Department said in June that it planned to block the merger as anti-competitive and in violation of the antitrust laws. As a result, the two carriers abandoned their plans.
In August, American said it was talking to two smaller U.S. airlines--Southwest Airlines and Alaska Air Lines--and to a European airline consortium about selling them shares in its Sabre system.
The American reservations system has about 38% of total CRS revenue in this country. Apollo has about 30% and System One has about 11%. If the PARS and DATAS II systems are merged, it would have the rest of the U.S. market--about 21%.
Apollo actually is owned by a company named Covia, half of which is owned by UAL Corp., United’s parent. The other half is owned by USAir and a number of European carriers.
