Shay MitchellGeneral Manager

Galileo Netherlands

The Growth of Low-Cost Carriers‘MARKET CHAOS’ – WHERE DO WE GO FROM HERE?

23rd September 2003

Chaos

• Economic recession

• War

• SARS

Travel Market Changing

• Low Cost carriers

• Airline disintermediation

• Airline Direct Connect

• Commoditised GDS

• Profit margins shrinking

• Online vs. offline

Growth of Low Cost Carrier Concept

• Ever growing list of Low-Cost Carriers in Europe

• Full-service airlines adopting the LC model

• All carriers trying to sell more and more directly to the consumer

• Direct connect considered to be more cost effective, (true or false?)

Impact on the Travel Agent –Dramatic!

• Commission reductions (7% -5%-1%- Zero?)

• Service fees as a replacement revenue stream

• How many travel agents will survive?

• Those who do must embrace technology in order to be more productive

• Using Customer Relationship Management

• Finding niche markets

Impact on the GDS –Dramatic!

• Shrinking market due to channel shift

• New role of travel solution provider

• Forcing a change in the GDS/Travel Agent/Airline relationship

• Reducing revenues and lower margins

• FA arrangements not sustainable in the future

GDS Market Shrinking

• Holland down 18%

• UK down 12%

• Germany down 10%

• Italy up 6%

• Spain up 17%

Source: MIDT data

Where does the consumer stand and what are his/her needs in a so called Book Direct Market?

• Widest choice possible

• Price guarantee

• Ease of booking

• Dynamic packaging

• Servicing and sales support

• Can this be provided through a single supplier website?

Content – What we provide

• 35m fares

• Private Fares now 50%+

• 6220 formulae

• 47.000 travel agency locations

• 493 Airlines

• 52.000 hotel properties

• 292m bookings LY

Technology – Direct Connects

Multi carrier itineraries & pricing

Ground services

Integrate bookings

Mid & back office hand off

Itinerary changes

Partner access to bookings

Paper ticketing

BSP credits for E-tickets

BSP hand off functions

Private faresMarried segments

Corporate policy management

New preferred airline supplier

WHO PAYS?

Technology – Supplier Direct Connect

• Unsustainable burden on Web and airline reservation systems

• Loss of integration

• Limits consumer choice

• Economic model is flawed – Hidden costs of going direct

• Ask the expert - GDS

Areas of Focus

• Content

•Technology- (Increasing Productivity)

• New Business Model

“Content, Content, Content!”

Low Cost Carriers In Galileo

• Virgin Express

• Virgin Blue – Australia

• Westjet in Canada

• BMIBaby

• Kulula -South Africa

• SkyEurope - Bratislava

• FreshAer -Ireland

• Air Majic - UK

Galileo –Airline Supplier Initiatives

• Airline Content Retention in Galileo through;

• Basic Booking Product – Europe

• “Preferred Rates Programme” in USA (Full service airlines –web content)

• One-to-one discussions and agreements with Airline suppliers in EMEA focusing on web fare distribution at lower cost

Content – Low Cost, No Frills

• Basic Booking Product

• “Low cost” GDS booking product “Custom Fares”

• Integrated web fares

• Super PNR?

Cendant Divisional OverviewHospitality Travel

Distribution

Real

Estate Financial

Services

Vehicle

Services

Travel

Divisional Overview

Cendant’s Travel Assets for EMEA/AP

Vacation Rental Hotels Distribution Car Rental

•38000 Properties•17 EU Countries•4m Consumers

•600000 Rooms•6000 Properties•180m Room Nights•US, UK, Ireland

•#1 AP•#1 MEA•#2 Europe•Corporate Tools•Preferred Content

•#1 world-wide•Owned in AP•Owned in N.America•Licence in EMEA

Technology -Solutions

• Is about efficiency and cost reduction

• Fare Shopper• E-Tracker• Agency Private Fares• Airline Private Fares• Custom Fares• Corporate Booking Tools• Galileo Web Services

GDS – New Business Model

• Maximise the airline content -Full service & Low Cost Carriers

• Add wide range of new content

• Deliver new technical solutions to create efficiencies

• Greater value rather than FA?

Alternatives to FA • Improved Corporate/Leisure

Booking Tools

• Internal automation for cost take-out

• TDS not GDS

• Stronger partnership agreements with customers and suppliers

The Galileo Challenge

As part of the Cendant Travel Distribution Services Group, Galileo is re-inventing itself, in order to forge clearly defined new partnerships with its travel agency partners and suppliers for a prosperous future.

Come Join US