Sabre Holdings - The Quest for New Business Models

The evolution of Sabre from a simple reservation system into a distribution channel for travel products & services occurred mainly because of the new opportunities in the US aviation industry after deregulation in 1978. Civil aviation in the US had been under the regulation of the Civil Aeronautics Board (CAB) between 1938 and 1978. The CAB regulated market entry, decided airline routes and set airfares for these routes. This system of regulation kept airfares high, and thus demand was not stimulated. Airlines were still profitable as the CAB restricted competition. However, the economic recession in the early 1970s led to heavy losses for the airlines. There was now increasing demand for affordable air travel and this, together with declining airline profitability, forced the US government to deregulate the airline industry in 1978...

Commenting on the agent commissions, Richard Anderson, CEO of Northwest Airlines said, "CRS fees have the wrong sort of incentives. The agency (travel agency) pushes a button and never sees the bill. We get the bill and that really doesn't work."Airlines began to realize the need to put a cap on the expenditure incurred on commissions.

They understood that cutting out intermediaries would go a long way in reducing distribution costs. The Internet revolution in the 1990s presented airlines with an opportunity to cut out intermediaries and get to the customer directly. Low-cost airlines started offering flight information and reservations through their websites...