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June 29, 1987

EUROPEAN AIRLINES “MAY BUY INTO UNITED’s APOLLO NETWORK”

By CBR Staff Writer

The reason the four major European airlines that currently use 1100-based reservation systems have banded together to build a new – IBM-based – Amadeus reservation system (CI No 709) is that they fear that they will lose a large part of their business to the two giants of the reservation systems world, United Airlines with its Apollo system, and American with Sabre. Both the US systems are eagerly muscling in on the European market and seeking to get their terminals onto travel agents’ counters, the attraction being that the networks provide access to a wide range of other reservation services for car hire, hotel bookings and so forth, and these ancillary transactions garner substantial additional revenue for the airlines that own the reservation systems. But now embattled Allegis Corp, owner of United Airlines, is talking of selling as much as a 50% stake in the Apollo system, and some European airlines see buying a holding in Apollo as an attractive way of neutralising the transatlantic threat. The current state of play is that Air France, Scandinavian Airlines System, Lufthansa and Iberia have agreed in principle to invest $300m, about half of it with IBM, to build the Amadeus system – and, having no IBM experience, are negotiating with the lusty upstart of the US airline world, Texas Air Corp, whose SystemOne Corp is bidding to become a third force in the US reservations business, for software. A rival group is coalescing around the present major IBM users, British Airways, KLM and Swissair, which already pool their IBM software expertise. Alitalia, also a big IBM user, says it has made up its mind but not yet declared which of the two groupings it has chosen, and Austrian Airlines is interested in joining the British Airways grouping. The Wall Street Journal reports that some of the smaller carriers, Aer Lingus, Finnair, TAP Air Portugal and Olympic Airways, have agreed to stick together to ensure the best deal possible from whichever group they decide to join. The outcome of the various machinations and negotiations has enormous implications for computer hardware manufacturers: whatever the outcome, Unisys Corp already looks set to come out the biggest loser, but the developments may not be all good news for IBM: the fact that British Airways is the leader of the second group is good news for plug-compatible manufacturers, because although British Airways adheres to the IBM standard, very little of its hardware actually comes from IBM. Telex Corp is the biggest supplier of IBM-compatible terminals to airlines, and may well be a winner, while Ericsson, which dominates the European market for reservation terminals, has had an edge because its Alfaskops have both Sperry and IBM communications built in. That edge will diminish in what threatens to be a virtual eclipse of 1100s among European airlines.

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