In the 1960s air travel first became available for ordinary people, and travel agents provided a required service. A travel agent would find a convenient flight in the printed schedules, which were published by individual airlines, and call the airline reservation agent to make a booking. At a later time, the airline reservation agent would call back to confirm the booking, or to propose an alternative flight, if no seats were available. The airline paid the agent a fixed amount of commission for the booking. The airline business in the US was in a turbulent situation in the late 1970s due to fierce competition and deregulation. Most of the airlines that operated on the same routes used the same aircraft and the same terminals. Since the services were so similar it seemed that the only scope for differentiation was in terms of cost. That time American Airlines had no hubs, its routes were regulated, and it was mainly a long-haul carrier. This meant that American Airlines would have lost market share in a subjective reservations system controlled by a competitor. In keeping with the systems thinking of the time American Airlines developed a computerized reservation system with the intention of cutting costs through the reduction of clerical staff. Initially, the system was meant to be used by American Airlines reservation staff only. The system automated the main clerical tasks including finding out flight information, booking a seat on a flight, issuing tickets and invoices, etc. This information system was expensive to develop and, when it came online, competitors filed lawsuits claiming that it gave American Airlines an unfair advantage (mainly because American Airlines flights were listed first by the system). Other air companies aspired to implement their own reservation systems, for example, Delta Airlines created DATAS, United Airlines developed the Apollo system and TWA created PARS (TWA is now owned by American Airlines). But that early computer reservation system, created by Texas-based American Airlines and New York-based IBM Corp. in the 1950s, was largely adopted – or copied – by the rest of the airline industry and eventually spun off into a separate company. When a travel agent telephoned American Airlines to make a booking on behalf of a passenger, a clerk or telephonist sitting at a computer terminal entered the customer/flight details onto the system and relayed the details back to the travel agent. The rest of the process (booking the seat and issuing the paperwork) was automatic reducing the number of clerks. It became the largest commercial real-time data-processing system in the world and saved American Airlines about 30% on labor costs. This system had achieved its objectives, but the next step in the quest for cost reduction caused something of a revolution. The plan was to install terminal on the travel agents' desks, and therefore to achieve further savings by having the travel agents carry out the data entry work. The unexpected benefits of the new system occurred because it changed the way in which American Airlines conducted its business. The easier access to more flight information (and perhaps the “novelty value” of on-line booking) was appreciated by both travel agents and passengers, and as a result American Airlines' market share increased. Passengers preferred to use travel agents, which shared the American Airlines system, which was by now called Semi-Automatic Business Research Environment (SABRE). SABRE gave American Airlines another significant business advantage besides differentiation. Having up-to-the-minute information about bookings allowed American Airlines management to operate differential seat pricing, offering discount seats when booking factors were low and charging a premium when aircraft were fully booked. Rivals lacking this type of information had to offer all seats at the lower price - resulting in lower profits. As the “first mover” in the IT-based booking system field...
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