Simplification of the European Code of Conduct for Computer Reservation Systems (CRS)

Abstract

No matter how good your product or service is, if you either lack the means of informing the public of its availability, or if you fail to have an efficient distribution system, your goods will remain on the shelf . . . unsold. Success will largely depend, first, on your ability to bring what you have to offer to the attention of a buyer and, second, to make it readily available for easy purchase. Air transport does not escape this basic principle of commerce. There is very little which is more vital to an airline than its ability to keep potential passengers informed of what is on offer and to facilitate the intended purchase. Airlines sell a service that may not be stored and is perishable in nature. Airline capacity has an exceptionally short shelf life; once an aircraft takes off, any empty seat is lost forever. Take this together with the high proportion of fixed and operational costs and it means that the loss or gain of only a few seats can often determine whether or not a flight will be profitable. Seat inventory constantly needs to be matched by demand before the seats perish. By matching passenger demand, airlines manipulate the number of seats for which discounts are offered and will adjust fares accordingly. The result is that fares on surplus seats change constantly. In an environment that is increasingly defined in terms of alliances and code sharing, Computer Reservation Systems (CRSs) are probably the most well-adapted technological medium to satisfy the vending of tickets under such market requirements. A CRS consists of a database that holds information on schedules, seat availability, and fares of all its participating airlines. This database may be accessed by travel agencies having entered into a subscriber agreement with a CRS. Because of their high-speed processing and real-time links to most airlines, CRSs are capable of continually updating any fare for any given segment. CRSs hence became the prime marketing tools used to distribute the airline’s seat availability and its fares to the public. Ancillary products, such as hotel reservations, car rentals, and other modes of transport, were subsequently added to the CRS content. Since their inception in the 1980s, CRSs enjoyed a privileged marketing position for nearly two decades. It should, however, also be recognized that CRSs were the constant focus of investment by which they remained at the cutting edge of new technology. During the last decade, the steady position of the CRSs has started to show signs of weakness. Airlines, having set up the CRSs as an instrument to ensure effective distribution of their services, progressively abandoned their creation and actively looked for other, cheaper ways of distributing their services and products. At the onset of the airlines’ technological efforts to bypass or replace the CRSs, the airlines neglected to continually upgrade the technology of the CRSs. The technology did improve, however, largely because airlines started to integrate the existing CRS technology with other sales vehicles. This allowed the airlines to gain sales power offset the monopolistic trend of the CRSs. This trend, taken together with the disinvestment of airline ownership in the CRSs, spurred legislators to abandon or to relax the implementation of legal requirements when operating a CRS.