The Global Distribution System (GDS) has been a bulwark of airline operations for decades.
GDS is a worldwide computerized reservation network used as a single point of access
for reserving airline seats, hotel rooms, and rental cars by travel agents, online reservation
sites and large corporations. In 2005, about 90 percent of agents used GDS. However,
technologies like the World Wide Web and smartphones are allowing consumers to buy air
tickets directly from airlines. Does this mean an end to GDS, or will it reinvent itself and
continue to remain relevant?
GDS was a product of the efforts of airlines to keep track of flight schedules, availability, and
prices. American Airlines came up with Sabre, United with Galileo, and Air France, Iberia,
Lufthansa and SAS with Amadeus – the most used GDSes today.
But advances in internet and mobile technologies pose a huge threat to GDS. The number of
agents using GDS fell from 90 percent in 2005 to 75 percent in 2011. More and more people
are buying tickets directly from airline web sites, and smartphones have made it much easier
for consumers to do their buying on the go. Some observers forecast that there may not be any
GDS, at least in the way we know it, in a few years.
Airlines, especially the low-cost carriers, are looking to cut costs by connecting directly to
consumers and avoiding GDS fees. In June 2015, Lufthansa Group announced that it would
be imposing an additional 16-euro charge on bookings done through external GDS rather
than their own systems. Air France, KLM and Emirates may follow suit.
GDSes have hitherto enjoyed 'the tastiest margins in the travel business', says Economist
magazine. A GDS charges about USD 12 per round trip, passing some of that to the travel
agent. Take Travel Forward, an airline lobby group, estimates that the world's airlines pay
USD 7 Billion a year in GDS fees! In an industry, where margins are wafer thin, this is a
But the party may not be over yet for GDS. According to a 2014 Business Travel Survey by
Business Travel News, GDS still processes growing volumes of travel transactions. The report
says that GDSes are starting to accommodate sales of airline ancillary items and have been
securing more content from low-cost carriers.
For years, GDS has provided an invaluable service to airline because of its security, reliability,
speed and accuracy. According to an IATA study, what airlines will want in the future are more
flexible, robust commerce platforms built on contemporary software and architecture. They
also want commerce platforms that can support extensive fare and product transparency,
dynamic pricing, rich basic and ancillary product merchandising and retailing, and the
ability to reliably and securely process the massive volume of shopping sessions.
If GDS evolves to meet the changing needs of the airline industry, it will survive; else it will
cease to be relevant.