Six major airline companies announced plans Thursday to form an Internet marketplace to handle transactions estimated at $32 billion (US$) per year in goods and services.
The founding airlines — American, Continental, Delta, United, British Airways and Air France — will invest a total of $50 million to start the venture, which will facilitate the purchase and sale of such items as fuel and fuel services, airframe, avionics, engine components and maintenance services. The venture will not be involved in air transportation services or purchases of aircraft.
“We think we’re going to recognize significant cost savings and harness the buying power of many airlines to reduce our costs,” said United Airlines spokesman Kurt Ebenhock.
The venture, which is the first B2B alliance among major airlines to focus on procurement, will have its own management team and ally itself with a to-be-named technology partner. It is set to be operational within 60 days.
The marketplace will operate as a business independent from its members, and will allow other airline companies to join as users. Whether other airline companies will be allowed to take an equity stake in the venture is still undecided.
For its part, British Airways sees cost savings as primary to its decision to participate. Upon announcing its intention to join the alliance, British Airways said it plans to reduce the number of its suppliers from 14,000 to 2,000 and to significantly cut individual transaction costs.
The company also said it wants to increase UK orders transacted online from 25 percent to 80 percent by 2002.
Airlines Adapt to E-Commerce
The airline industry has been quick to embrace electronic commerce, particularly in the business-to-consumer sector.
The much-talked about “T2” site, combining the resources of 27 major airlines internationally, is set to debut early this summer. The operation will sell airline tickets directly to consumers and virtually eliminate the need for travel agencies.
Additionally, a number of airline companies have already formed their own Web ventures. Southwest Airlines has indicated that it intends to sell 75 percent of its tickets online by 2004.
Boeing’s High Wire Act
In related news, aerospace giant Boeing Co. revealed plans Thursday to provide airline passengers access to the Internet via a high-speed, satellite-based communications network.
Boeing will partner with CNN, CNBC, Mitsubishi Electric Corp. and Loral Skynet to establish the new service, called Connexion. The service will initially cost consumers roughly the same amount as a cellular telephone call.
Installations will begin early next year, with the service being offered first to North American airline customers. By late 2003, Boeing will extend the service to Europe, over the Atlantic and Pacific Oceans, and eventually in Asia.
Tentative plans call for every seat on some planes to include a data port. Passengers will be able to access the Internet via their own laptop computers.