As Amadeus buys a self-service bag drop provider what is its strategy?

To those familiar with the airline global distribution system(s) (GDS), Amadeus is a well-known name. One of the leading GDS’ along with Sabre and Travelport’s Galileo and Worldspan systems, they have developed over decades to embrace not only air travel reservations by travel agents but also bookings for hotels, car rental companies and other services, using real-time inventories of the principals (they hold none themselves) on behalf of consumers. They can link services, rates and bookings; consolidating products and services across multiple travel sectors.


Summary:

  • Amadeus, one of the leading travel global distribution systems has, like its peers, expanded the scope of its operations well beyond the original concept;
  • Now it has bought into a travel automation company that specialises in bag-drop solution providers;
  • This horizontal integration strategy hints at the future for “seamless” travel.

GDSs have faced challenges from online booking facilities made available directly by airlines to consumers and by third parties acting on their behalf who consolidate such information, allying it to room, vehicle rental and other such inventories to provide a similar service to the GDSs directly to the public, by-passing the travel agent unless it offers a booking service to the public at a fee, a growing trend as the travel business grows more complex.

Nevertheless the GDS has survived the test of time in the crucial business travel segment owing to the advanced facilities it offers over public reservation facilities and the fact that they can all be linked into a wider travel management offer, including statistical travel data that is essential to global companies spending millions of dollars per annum, in setting budgets and cost/benefit targets.

Latterly the GDSs have faced a new challenge from proposed new systems promoted by IATA such as the New Distribution Capability (NDC), the XML-based data transmission standard which has proved to be both expansive and ponderous in its implementation with contributors and providers still talking about reaching ‘scalable levels’. As of the beginning of 2019 they were already on version 17.2 of the NDC standard. By all accounts the GDSs have been prompted to revisit whether or not they should have looked at (or might still) an overhaul of the existing supply chain instead.

It is perhaps partly for this reason that a horizontal integration business strategy has been adopted by the GDSs to complement the vertical one. For example Amadeus has diversified into solutions in segments that include tour operators, rail operators, cruise lines, destination management companies and ground handlers.

And this diversification is exemplified by Amadeus’ acquisition of ICM Group Holding Limited, the parent of ICM Airport Technics (ICM), which claims to be a global leader in passenger automation and self-service bag drop solutions for airports and airlines and which is based in Sydney (Australia). It is intended to complement Amadeus’ offering for airport operations as Amadeus is now able to design, configure, implement, operate and support all airport systems needed to manage passengers and their baggage from end-to-end.

The addition of ICM’s portfolio of solutions “strengthens Amadeus’ ability to ‘re-imagine’ check-in, boarding and security in ways that significantly enhance traveller experience, improve efficiency of operations and reduce costs.”

ICM, which provides airports and airlines with either retro-fitted or replacement type Auto Bag Drop (ABD) units, serves a range of airports and airlines, principally in Asia Pacific and Europe. Since 2009, the group has processed more than 75 million bags worldwide.

Amadeus’ rationale is that airports are investing in open self-service solutions to challenge capacity crunches and take the “friction” out of the airport experience for passengers. By combining Amadeus’ and ICM’s software and hardware capabilities, and by using “the power of biometrics”, the objective is “to deliver better journeys for passengers in the future.” Amadeus regards such combined technology expertise as a “trampoline for growth for Amadeus and ICM in the coming years ahead.”

One senses that a number of separate strands of technological development are starting to come together in the aviation and travel businesses, in search of the ultimate goal of the seamless trip, probably organised through Blockchain technology, in which the entire journey from home to destination and back again is controlled through biometric technology. And with it the jostling for position to be the master of this ‘Internet of things’ technology is getting serious.

Investing in something as seemingly mundane as bag-drop technology may not make news headlines, for Amadeus or any other company, but it is an important step along the way to achieving that position.

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