Flying High in Close Formation

By Outsourcing Center, Kathleen Goolsby, Senior Writer

Flying High in Close Formation

In the world of travel reservations bookings, no name is better known than Sabre. It processes 40% of all reservations made in the world and links travelers to travel suppliers through more than 210,000 computers at travel agencies, airports and businesses. Nearly every airline in the world relies on outsourcing solutions and services from Sabre.

Scott D. Nason, vice president of information technology services/CIO of American Airlines, recalls the pioneer years of Sabre. When he joined American Airlines in 1980, the Sabre reservations system had already been installed in travel agencies. American then had three departments whose functions were sometimes interrelated. Eventually they would be merged into a new company, but they were first separate internal departments of the airline. The Marketing Automation department ran the installation of the Sabre system in agencies. Data Processing and Communication Services performed data processing for American and for the Sabre system. The third business unit was a group known as Operations Research.

Nason says a turn in the pathway of creating Sabre as an individual company occurred when the Operations Research group began selling to outside customer the products it had created for American. “They decided there was a business they could pursue that would enable them to be a source of profits instead of costs to the airline. Shortly thereafter, the group started calling itself American Airlines Decision Technologies.”

Several Arms to Fly With

In the evolution of Sabre, the next step involved pricing. The data processing department had been charging American for its services, and the airline began budgeting its IT costs by charging them back to departmental users. The data processing department was run like an independent business, although it was still an internal department.

With a staff of several hundred through the late 1980s and early 1990s, Nason tells of the growth of American Airlines Decision Technologies. It became such a thriving business that they established another arm of the data processing department. The new business was called AMR Information Services and marketed its automated services to other transportation companies. In the early 1990s, they recognized that those companies were beginning to compete against each other.

The solution, says Nason, was to “put them together, restructuring them into one big group with the department we had already created (called Sabre). Sabre at this point became three departments. SPIN (the Sabre Travel Information Network) was the system used by travel agencies. We also had a piece called Sabre Computer Services, which was the data processing operations (including the network, data center, and voice services). The third departmental group was called Sabre Development Services (which was a merging of the American Airlines Decision Technologies group and the applications development arm of Sabre).”

With a legal structure that was still just a data processing company within the structure of American Airlines, Sabre at this time did have a president. It also had its own profit and loss, which started being reflected on American’s annual reports.

Sabre’s Debut as an Outsourcer

Although Sabre and American were still parts of the same corporation in 1995, the two decided to negotiate a contract governing Sabre’s provision of data processing services to American. Nason explains that, prior to that time, American had paid for services from Sabre but had never negotiated for price. That contract later led to another?a true outsourcing contract?between the parties, which took effect July 1, 1996. On that same day, Sabre was incorporated as Sabre Group Holdings.

Being incorporated meant also that there was stock in Sabre; but AMR owned all the Sabre stock. Ownership and management changed, however, in October 1996 when AMR sold 18% of the stock in Sabre in an IPO. “I think at the time that they thought the price would be in the low 20s, and it actually went public at $27 a share,” remembers Nason.

“From then on,” he explains, “Sabre was a majority-owned subsidiary of AMR but with minority shareholders that have legal rights and require American and Sabre to operate truly at arms-length for the benefit of each.” From a legal standpoint, he says, that was the last step.

Flying with Innovation

News stories at the time of the IPO hinted that Sabre had been under some pressure to innovate because of the Internet and electronic ticketing. In 1996, Sabre introduced (recently merged with Preview Travel), which is now the largest travel site on the web. Nason says that Sabre built the first ever interline e-ticketing product, for use by American and Canadian airlines. For its corporate customers, Sabre Business Travel Solutions was introduced, allowing travelers to make and change travel plans from their desktops and track travel and entertainment expenses for expense report purposes.

In April 1999, Sabre introduced Best Fare Finder. Later, Sabre again demonstrated its innovative capabilities, introducing Planet Sabre v2.0. The program displays flight duration and connection data, as well as information from other travel services (such as rental cars and hotel rooms). It also displays more airlines on the first page, improving the revenue opportunities for airlines previously listed on other pages.

Sabre now provides sourcing software and services to hundreds of airlines and established in 1998 major outsourcing agreements with Gulf Air, Aerolineas Argentinas, and Pakistan International Airlines. Sabre continues to have a broad client base, but American Airlines is still Sabre’s biggest customer.

About the Author: Ben Trowbridge is an accomplished Outsourcing Consultant with extensive experience in outsourcing and managed services. As a former EY Partner and CEO of Alsbridge, he built successful practices in Transformational Outsourcing, Managed services provider, strategic sourcing, BPO, Cybersecurity Managed Services, and IT Outsourcing. Throughout his career, Ben has advised a broad range of clients on outsourcing and global business services strategy and transactions. As the current CEO of the Outsourcing Center, he provides invaluable insights and guidance to buyers and managed services executives. Contact him at [email protected].


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