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No 2000/7 - Wednesday, November 15, 2000

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  Online airline ticket sales are expected to soar in 2000  

Whether the actors are producers or distributors, the result is still the same: 2000 is expected to be a record year as far as online airline ticket sales are concerned.

Among the producers, let's congratulate for its great online performance, the site just announced that its online ticket sales alone would surpass $1 billion.

And what's even more striking is the fact that added that half of the $1 billion in sales was transacted during the last eight months only.

Judging from those figures, the airline company expects its total online sales to exceed $2 billion during 2001.

If managed to reach such target, it would rank among the top world eTourism sites. has sold approximately two million tickets to date in 2000, which represents one ticket sold every 15 seconds.

You might also like to know that welcomes an average of 110.000 unique visitors per day.

Last but not least, as far as customization is concerned, repeat visitors usually engage in six online sessions a month.

The situation is looking rosy for Southwest Airlines too since the company's net income increased by 45.1 percent during third quarter 2000 in comparison with third quarter 1999, even though there was a 27 percent increase in jet fuel prices.

The Southwest "Low Fare formula" also proved profitable since operating revenues increased by 19.7 percent compared to the previous year, and its net income more than doubled to reach $184.3 million, which represents $1.478 billion for third quarter 2000.

Two factors explain such good results: an online sales increase linked to a decrease in the commission rate perceived by travel agents. Indeed, for a 20% online sales increase, the corresponding increase for the commissions payable to the travel agents was no more than 5.8%…

But the first rate Low Cost champion today appears to be Ryanair since its direct online bookings represent 90% of its sale. Please bear in mind that only eight months only, nearly 60% of its turnover was made through travel agents!


But please remember that Ryanair includes all the sales that were made online but also the ones that only transited through its web site in these 90%. In other words, these 90% include at the same time the transactions that were made directly online but also the ones that ended through the phone. The site did not communicate the proportion between the phone transactions and the ones that were made purely online.

This online growth also enabled the company to reduce commissions payable to the travel agents from 7.5 percent to five percent.

The result of this online strategy is clear for Ryanair: a 45% rise in pre-tax profits in the six months to 30 September, to reach 63.4 euros.

None knows its competitor's results just yet but it is rumored that Easyjet's online results would represent 70% of its total sales.

Easyjet is already considering moving to an Internet-only-booking strategy, which would no longer allow customers to make a booking via their call center so that the staff could concentrate entirely on customer service.

Easyjet confirmed only a few days ago that it still was in the midst of its flotation in which it is seeking to raise $271 million in an initial public offering of new shares.

But let's not forget that at the same time the British Airways subsidiary "Low cost" was announcing a loss of £21.8 million for a total net income worth £100.6 million.


But if the sun is shining for producers, the situation is just as rosy for the online carriers since the Low Cost formula also seem to work for them. just announced a 66% net profit increase for the last quarter of 2000, compared to the same period in 1999.

For the first nine months of 2000, Cheaptickets' revenues went up to $350 million when they were only $273 million for the same period last year. Net income for the first nine months was $11.5 million compared with $6.8 million for the same period in 1999.

Internet airline ticket bookings increased dramatically once more since Cheaptickets revealed a 58% increase for its Internet bookings over a year. Such figure should be compared to the total growth rate (online and offline) for the bookings made by Cheaptickets that was no more than 20% for the same period of time.

Internet bookings for Cheaptickets were $71.2 million for the third quarter of 2000.

And finally, let's not forget which was the last to become part of the Low Cost actors, whose site is already launched and who intends on disturbing a little the other actors.

For the time being, only offers flights departing or entering the States but some sites such as and are already starting to be worried when they see the prices that are offered on the site. makes it clear that it aims at competing with those two sites since it does not hesitate to communicate the differences that exist between the prices proposed on its site for some itineraries and the ones offered by Travelocity and Expedia.



That's how indicates that a fare for a New-York (LGA)/Chicago(ORD) flight between Oct 20 to Oct 23, 2000, was sold $223 on, $405 on and $1.288 on… There was even the case of a Dallas/New York flight sold $258 on and $1.406 on

It goes without saying that those prices cannot be compared since it only concern the unsold tickets and not the usual public prices.

Nevertheless, represents a real threat for and other Bargain Huntering sites.

In my opinion, has got three major assets that might make it successful:

  • Unlike other auction sites, the customer is not asked to communicate his credit card number.

  • deals directly with its airline partners.

  • The airline companies are allowed to remain anonymous during the pricing process, which makes it possible for them to discount more aggressively than they can in their traditional channels.

We'll soon see the effects these different Internet strategies will have in the coming months in the airline eTourism sector but there is no doubt that the airline battle will take place online.

Even though in Europe, companies such as Air France that are not just yet engaged in a cut-throat Internet competition, keep on favoring traditional distribution channels, they should be careful since such situation will not last long and it is high time that the traditional European airline actors realize take the web distribution channel a bit more seriously.

Fast success such as the one achieved by Ryanair and Easyjet may seem ridiculous to big entities such as Air France and yet the constant growth of their turnover and their benefits should prompt those big companies to imitate the online dynamism shown by their American airline cousin companies before it is too late.

We are faced here with the attitude of producers who are convinced that they can keep on controlling their distribution channels as they have always done, with or without Internet.

And yet, the fact that more and more customers are becoming customized on sites that are not those of the traditional airline companies represents a major risk of de-customization that should not be minimized too much…

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