an academic research on integration of gds in domestic air travel industry in nepal

[MBA -INFORMATION MANAGEMENT]

Integration of GDS in Domestic Air Travel

Industry in Nepal

A Dissertation Submitted for The degree of Master in Business Administration

by

Deepak Adhikari [June 2009]

University of Wales Lampeter

(College of Technology London)

UWL ID: 27002463

MBA (Information Management)

Deepak Adhikari MBA (Information Management) 2009

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“If you think you need to keep your Internet Initiative separate from your traditional

business think again. Many of the most innovative Internet players are integrating

their virtual and physical operations. The key to success, they have found, lies in how

you can carry out the integration.”

-Ranjay Gulati, 2000



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Declaration

I hereby declare that the dissertation has not been submitted in any form for another

degree or other award previously and is not being submitted concurrently in candidature

for any degree to other degree.

Signature.........deepak adhikari........................

25/06/2009

Statement 1

I hereby declare that the dissertation is the result of my own work and investigation,

expect where otherwise stated. Other sources are acknowledged by citations giving

references.

Signature.............deepak adhikari..................

Date: 25/06/2009

Statement 2

I herby give consent for my dissertation, if accepted, to be available for photocopying,

for inter-library loan, and for the title and summary to be made available to outside

organisations.

Signature..........deepak adhikari.....................

Date: 25/06/2009

University of Wales Lampeter

(College of Technology London)



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Abstract

Airlines were one of the earliest adopter of e-business in the world history. Many

pioneering e-business principles have been from this sector. Since the early sixties, use

of CRS in the industry has brought benefits to airline operators in terms of making

reservation automation and reducing distribution cost. Further the evolution of GDS

also helped in many successful business practices in the industry. In these many years

the structure of GDS has undergone numerous changes in terms of regulations and

competition. Today, global computer reservation system has reached a significantly

high economic and technological level.

While integration of such system was so much intense in other economies around the

world, even after these many years the domestic air travel sector in Nepal has hardly

embraced the need of this technology. Only a couple of domestic air operators have

their own CRS, developed recently, while rest of the airlines work on the traditional

brick and mortar culture. The diffusion of electronic commerce and the exploitation of

new channels offered by internet have not been yet capitalized by the industry to sell its

travel products. This dissertation aims at finding the reason behind the slow infusion of

e-business technologies in the domestic air travel industry and then develops e-business

integration strategy that can be followed considering the air travel industry and

distribution channel in the industry.

On the basis of findings and analysis of research various factors concerning to the

adoption CRS/ GDS in the industry are identified. According to these factors need and

possibility of integrating a GDS in Nepalese domestic aviation sector is accessed and

finally with reference to literatures available from various sources e-business integration

strategies have been developed that would provide the industry to slowly and

sequentially adopt GDS technology in the industry at the same time taking into

consideration activities of different distribution channels in the industry.

This dissertation further outlines the conclusion and provides recommendation for the

successful integration.



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Acknowledgements

First of all I would like to express my sincere gratitude to my supervisor, Dr. Stephen

Sommerville at College of Technology London, UK for his intelligent guidance and

helpful advice during the whole process of this dissertation

Similarly, I would like to acknowledge Mr. Shivjee Roy, Mr. Anuj Rajbhandari, Mr.

Sanjil Lama, Mr. Ribesh Pradhan, Ms. Anusha Joshi and Mr. Praswish Maharjan who

helped in establishing contacts with organizations in Nepal. Also I would like to thank

my sisters Ms. Khushbu Adhikari, Ms. Puja Adhikari and Ms. Namita Adhikari for

their valuable contribution in distributing the questionnaire and collecting the

information from scores of Travel agencies in Kathmandu. Also I would like to thank

Ms. Sophia Tamrakar for providing me with necessary documents and materials related

to subject matters of research from various sources. Without their help it was like

impossible to gather information and complete this research.

Especially I would like to thank those key individuals from airline whose information

helped in providing rational base to the research. I would like to thank them for their

great support and contribution during the research. . I am also thankful to all the travel

agents and their staffs who gave their valuable time to fill up the questionnaire with

keen interest.

Last but not the least; I also would like to thanks to all CTL, MBA faculty members for

their great contribution during my period of course. Finally, my special thanks to my

family for their blessings, support and encouragement throughout my life.

Deepak Adhikari

UWL-MBA-2009



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Table of contents

Chapter-1: Introduction

1.1 Background……………………………………………………………...... 9

1.2 Problem discussion……………………………………………………...... 10

1.3 Research questions……………………………………………………....... 11

1.4 Aims and objectives of the study…………………………………………. 11

1.5 Significance of the study………………………………………………….. 12

1.6 Organization of dissertation………………………………………………. 13

Chapter -2: Organizational Background

2.1 Market Sector Background……………………………………………….. 15

2.2 Airline Operator Portfolio………………………………………………… 17

Nepal Airlines………………………………………………………… 17

Buddha Air……………………………………………………………. 18

Yeti Airlines…………………………………………………………... 18

Agni Air………………………………………………………………. 19

Sita Air………………………………………………………………... 19

Gorkha Air……………………………………………………………. 20

Guna Airlines…………………………………………………………. 20

2.3 Travel Agencies Portfolio............................................................................ 20

Chapter-3: Literature Review

3.1 Ecommerce and GDS.................................................................................. 21

3.2 Structures of Electronic Distribution Channel............................................ 23

3.3 Disintermediation and Reintermediation in Travel Industry...................... 26

3.4 The ICDT Model......................................................................................... 27

3.5 SWOT Analysis.......................................................................................... 30

3.6 Levels of E-business Strategy Migration.................................................... 31

3.5 E-breakout Methodology............................................................................ 32

Stage I: Initiate...................................................................................... 33

Stage II: Diagnose................................................................................. 34

Stage III: Breakout............................................................................. ... 35

Stage IV: Transition.............................................................................. 37



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Chapter-4: Research Methodology

4.1 Introduction……………………………………………………………….. 38

4.2 Research approaches………………………………………………………. 39

4.3 Research strategy………………………………………………………….. 39

4.4 Data collection…………………………………………………………….. 40

4.5 Sample selection…………………………………………………………... 42

4.6 Data analysis………………………………………………………………. 43

4.7 Reliability and validity …………………………………………………… 43

4.8 Research ethics……………………………………………………………. 44

4.9 Limitation…………………………………………………………………. 44

Chapter -5: Finding, Analysis and Discussion

5.1 Findings

5.1.1 From Travel Agents…………………………………………………….. 45

Section I: Share of Airline Ticketing in Travel Agencies Business … 45.

Section II: Awareness about GDS technologies among Travel Agents.46

Section III: Customer Choice: Travel Agent or Airline......................... 47

Section IV: Domestic Airline Ticketing Issues and Practices............... 47

5.1.2 Summary of Findings from Travel Agencies…………………………... 50

5.1.3 Summary of Findings from Airline Operators......................................... 51

5.2 Analysis

5.2.1 Angehrn’s ICDT Model Analysis............................................................ 53

5.3 Discussion on Findings

5.3.1 E-Business Strategy Development........................................................ 59

Industry Assessment............................................................................ 59

Individual Firm Assessments................................................................ 62

Breakout: SWOT.................................................................................. 64

Strategic Transition Recommendations................................................ 68



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Chapter 6: Conclusion and Recommendations

6.1 Conclusion………………………………………………………………… 70

6.2 Recommendations………………………………………………………… 71

6.3 Implications ………………………………………………………………. 72

6.4 Limitations and scope of study…………………………………………… 72

References ………………………………………………………………………….73

Appendix I: Questionnaire for Travel Agents…………………………………….… 76

Appendix II: Questionnaire for Airline Operators………………………………...... 78



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List of Figures

Figure 1: Airports in Nepal

Figure 2: Summary of Forecast of Civil aviation Department

Figure 3: Service Chain for Reservation

Figure 4: Traditional industry structure of online air travel

Figure 5: Current Online Air Travel Industry Structure

Figure 6: The ICDT model

Figure 7: Strategic e-breakout Methodologies

Figure 8: Strategic e-breakout stage 1

Figure 9: Strategic e-breakout stage 2- Industry Assessment

Figure 10: Strategic e-Breakout (SWOT)

Figure 11: Share of airline ticketing in travel agency business

Figure 12: Share of Domestic Ticketing in Air Ticketing

Figure 13: Familiarity with GDS

Figure 14: Comfortability using GDS

Figure 15: Time Saving

Figure 16: Customer Preference for Buying Ticket

Figure 17: Why travel agent?

Figure 18: Time Taken To Sell a Ticket

Figure 19: No. Of Calls to Confirm a Ticket

Figure 20: Missed a deal?

Figure 21: Need of GDS for Domestic Ticketing



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Figure 22: Operational Cost Benefit

Figure 23: Cost Benefit to Customer

Figure 24: The strategic breakout model for e-business for Domestic Air travel

List of Tables

Table1: Customer e-touch points with Airline Website



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Abbreviations

B2B Business to Business

CRS Computer Reservation System

EC Electronic Commerce

EDI Electronic Data Interchange

EFT Electronic Fund Transfer

GDS Global Distribution System

GNE GDS New Entrance

ICT Information and Communication Technology

JICRS Joint Industry Computerized System

LCC Low Cost Carrier

MOTCA Ministry of Tourism and Civil Aviation

NAC Nepal Airline Corporation

NATTA Nepal Association of Tour and Travel Agents

NF No Frill

NTB Nepal Tourism Board

SME Small and Medium Scale Enterprise

VCS Virtual Communication Space

VDS Virtual Distribution Space

VIS Virtual Information Space

VPN Virtual Private Network

VTS Virtual Transaction Space



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Chapter-1: Introduction

1.1 Background

The internet and communication technology (ICT) has had profound effect in the way

how communication and distribution of information takes place among people and in

the way how transactions are conducted in and among businesses in different market

sectors. The tourism sector is largely run by small and medium size enterprises (SMEs)

and to compete in such a competitive environment these enterprises have to achieve

economies of scale and scope so as to increase its productivity, to reduce the transaction

cost and to gain market power (OECD, 2004).Not only the internet has been a potential

platform for tourism businesses but it also provides a tool for communication among the

tourism supplier, agents and the consumers in a cost-effective ways. According to

OECD (2000), the advent of internet –based e-commerce has offered opportunities for

SMTEs to expand their customer base and rationalise their business.

Travel industry was one of the earliest adopter e-business when Computer Reservation

Systems (CRS) were developed. This dates back to 1970s when American Airlines

developed the SABRE computer reservation system for efficient management of ticket

sale through travel agents. A Computer Reservation System for an airline is a system

that contains information about the airline and is used for tracking and coordination

seats, price and sales. A Global Distribution System (GDS) has evolved from CRS. It is

a computer reservation system that contains information about multiple airlines and is

used by travel agents and other travel professionals. It also contains information about

other types of travel products as hotel booking, car rental etc.

It is estimated that about 96% of travel agents in US use CRS/GDS to distribute travel

related products. The best known reservation and distribution system players are Sabre,

Galileo/Apollo, Amadeus, and WORLDSPAN. GDS has also supported airlines to

monitor, manage and control their capacity (yield management) and their clients

(frequent flyer programmes). By year 2000, these four GDSs controlled almost 98% of

all airline reservations market.



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1.2 Problem Discussion

The aviation and travel industry around the world has witnessed integration of e-

business through the adoption of CRS since early 1970s; which now has evolved into

more advanced and sophisticated technology like GDS hence serving the whole of

travel industry form a single point. These technologies have served stakeholders in the

travel and aviation industry around the world in cost cutting and increasing performance

efficiency which has lead to successful adoption of these technologies in many other

countries.

Though the world travel and aviation industry has experienced a lot of variation and

changes in airline reservation systems technologies , the domestic aviation sector in

Nepal has not yet been able to effectively capitalize on the opportunities offered by

revolution of internet for the communication and distribution of tourism information

and sales. It’s not that the evolution of ICT technologies and CRS/GDS has not been

able to influence businesses in Nepalese travel economy. ICT technologies have been

embraced by many travel businesses. Famous GDS like Amadeus, and Galileo, are in

operations for many years now for international ticket booking and reservations. But the

problem is that most domestic airline ticket reservation is still done in the traditional

way by manual processing of calls from agents through sales outlets and while some

domestic airlines have implemented email based online reservation system where

request for reservation can be made through their websites 3-5 days prior to the date of

departure. And above all demand for air travel is continuously growing and many

airlines have added new fleets as well as increased the service level. Even new airline

companies are coming to the market.

According to Smith and Günter (2001) airline industry has pioneered many of the e-

business principles and is the first industry where B2B electronic information exchange

took place. The accessibility and reliability of low-cost communication channel

provided many opportunities as well as new challenges within the travel industry.

(Smith and Günter, 2001)

So the main research problems to examine are that if the world air travel industry has

taken advantage of ICT technologies and e-business opportunities why the airlines have



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been slow to integrate CRS/GDS for reservation and ticketing? What insight can be

found about integrating the CRS/GDS in the future for the benefit of the stake holders in

the industry?

1.3 Research questions

In order to address the research problem following research questions have been

formulated:

1. What are the factors and challenges involved in the integration of CRS/GDS in

domestic aviation sector of Nepal?

2. What level of e-business integration is necessary and to what degree and what

should be the e-business strategies to successfully integrate CRS/GDS in the sector?

3. Compared to other distribution channels in the air ticket reservation system around

the world which channels would be best fit for electronic sales and distribution and

sales of air ticket in domestic air sector of Nepal?

1.4 Aims and objectives of the study

The dissertation aim to:

1. Develop a clear understanding in about current airline information and ticket

reservation practices in domestic airline sector in Nepal.

2. Investigate key issues and challenges in implanting any a GDS for airline ticketing

in domestic air travel.

3. Investigate and analyze various factors that influence the adoption of GDS in the

sector.

4. Study and analyze industry stakeholder viewpoint in context of airline reservation

system and CRS/GDS implementation.

5. Investigate past and current technologies, systems and practices in context to air line



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reservation system.

The objective of this research is to:

1. Critically analyze different factors and distribution channels in support and in

opposition to implementation of GDS.

2. Review and analyze strength and weakness of different distribution channel in

context to airline reservation system.

3. Recommend feasible e-business and information strategies to achieve higher

performance in service and real-time processing of information related to air ticket

sales and distribution beneficial not only to a particular service provider but to all

stake holders in the domestic air travel sector both in terms of cost and performance

efficiency.

1.5 Significance of the study

CRS/GDS technologies around the world have evolved in a large scale and has a long

history of success associated with it. These technologies have benefited industry

stakeholders in reducing operating cost and increasing performance efficiency. Thus it

was embraced and used round the globe by various travel industry players.

Being so popular and one of the oldest technologies, it is not yet fully adopted in the

domestic aviation sector of Nepal. Recently some key airlines adapted this technology.

This study intends to find out the key factors that has been barrier for adoption or

integration of CRS/GDS in the industry.

The significance of this study is to exploit the potential of internet as a low-cost channel

of distribution and the possible e-business integration strategies in context to adoption

of CRS/ GDS technologies in the industry that would bring significant benefit to all

stake holders and players in the industry.



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1.6 Organization of dissertation

This dissertation organized in six chapters:

Chapter 1: Introduction

Chapter 2: Organizational background

Chapter 3: Literature review

Chapter 4: Research methodology

Chapter 5: Finding, Analysis and Discussion

Chapter 6: Conclusion and recommendation

Chapter One: This is the foundation chapter of this dissertation which consists of

research background, research problems, research questions, aims and objectives of the

research and significance of the research. These chapter aims to provide outline the

whole dissertation.

Chapter Two: This chapter is mainly grounded with the background about the country

and the domestic aviation market. The chapter also introduces background and

portfolios of organizations in the domestic aviation sector.

Chapter Three: This chapter is composed of literature review. This chapter looks at the

literature about CRS and GDS system and how they generate values to the businesses.

The chapter tries to investigate various literatures about the problem of research and

also outlines theories and literatures that would be used to analyze the findings of the

research.

Chapter Four: This chapter describes about the research methodology that is used to

complete this study. Also this chapter is composed of introduction of research

methodology, research approach, research strategy, data collection, sample selection,

data analysis, reliability and validity and finally limitation of the research. This chapter

so provide overview of the research framework for the study of this problem.



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Chapter Five: This chapter aims to investigate findings from the research. Findings are

further analyzed through chart and diagrams. This chapter depicts finding of the

research and also analysis and discussion of the research findings is done here.

Chapter Six: This chapter aims at drawing the conclusion from the research findings

and discussion done in chapter five. Further this chapter highlights the strategic

recommendation for the successful integration GDS in domestic aviation sector in

Nepal. Finally this chapter ends with the limitations of the research and scope for future

studies.



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Chapter-2: Background

2.1 Market Sector Background

Nepal is a landlocked country in the laps of Himalayas bounded by Tibet and India with

a total area of 147,181 sq. Km. Nearly 80% of land is covered by hills and mountains.

With an estimated population of about 23.2 million the society is predominantly rural.

With its time-worn temples, ancient culture, awe-inspiring panorama, and picturesque

magnificence Nepal has a romantic image and is world famous for tourism destination.

Tourism has been one of the major sectors to boost the economy of the country.

In this youngest republic and a land locked country, tourism is the one of the major

sector that has the potential to boost economy of the country. Considering this, the

government has taken tourism as the priority industry in the new budget for the fiscal

year 2008/2009 and had given central focus for development of infrastructure in this

sector.

Aviation in Nepal formally started in the year 1949. It was only in 1957 when

department of civil aviation was founded. Nepal Airlines (formally Royal Nepal

Airlines) started it first schedule service domestically and externally in the year 1958.

Though aviation industry in Nepal started so many years ago, the development work in

the sectors didn’t exhibit much progress until 1990s. The restoration of multi party

democracy in 1990 and the subsequent liberalization of the economy encouraged private

sectors to invest in public infrastructure and services. After the adoption of liberal

aviation policy in 1992, the air transport embraced radical emergence of private sector

airlines operating domestic flights in Nepal.



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Figure 1: Airports in Nepal

The geographically difficult mountainous terrain of Nepal has always been a long and

costly challenge for building roadways for transportation and in such case airline service

has played significant role in facilitating transportation service in many places in Nepal.

Aviation is an important sector for growth and development of this landlocked country

and the demand for air travel has been continually growing. It may be interesting to note

that there are airports in Nepal in such remote districts where the even roadways are not

good enough to be used by bicycles. As shown in the figure above there are forty-seven

active airports including one international airport and four regional airports. Four

airports are under construction and activities are underway for building another

international airport in Nepal to meet the growing demand of air travelers in Nepal.

According to civil aviation report 2006, total passenger movement in domestic air travel

was 882,717 and by 2013 it is expected to be 1,427,861 and in 2017 the figure is

projected to be around 1,634,425 passengers in numbers which is nearly twice the

current passenger movement statistics. In the same way the total aircraft movement

recorded in domestic sector in the year 2006 was 61,291 and the forecast for 2013 is

98,012 and by the year 2017 it is projected to be 113,368 flights. These figures clearly

show the growing demand for air travel in the industry.



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Figure 2: Summary of Forecast of Civil aviation Department

Currently there are nine airlines operating out of which seven fixed wing and three are

rotary wing. Out of the seven fixed wing airline operators one is government owned and

remaining are privately operated. The fixed wing airlines currently active in the industry

are:

2.2 Airline Operator Portfolio:

Nepal Airlines Corporation is the first airline service

provider in Nepal. Formally in the name of Royal Nepal

Airlines Corporation, the airline started its service in both

domestic and international sector in 1958. While most of

the private companies operate in major cities and places of tourism interest, this

company which is also the national flag carrier has been operating in majorly in

remotest areas of Nepal in the service of people with less or no profit margin at all. At

present they are operating with two Boeings 757 in the international sector and seven

nineteen-seated DHC-6 Twin Otter aircrafts. Currently it operates twenty-seven

different places in domestic sector in Nepalese sky.

The international airline service is liked with GDS for ticket reservation but there is no

any online computerized reservation system in practice till date by the airline for

domestic services.

Website URL: http://www.royalnepal-airlines.com

http://www.royalnepal-airlines.com/



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Buddha Air is one of the earliest airlines in private sector and

has been in operation since 1997. In twelve year of service it

has served over three million passengers and flown to nine

destinations with permanent runways in the country. The

operates with five 18 seat Beechcraft-1900 D, two 47 seat ATR-42 and one more on the

way, flying out to all the trunk routes with a minimum of 1200 m of permanent runway.

Buddha air maintains its own MIS that runs on eleven different modules to ensure

regular availability of information, continuous development and full utilization of

businesses for formulating strategies and policies and include: Finance and Budget

Control, Revenue Accounting, Local Reservation, Comparative Market Research,

Personal and Payroll, Human Resource, General Inventory, Operation and Crew

Planning, Engineering Inventory, Engineering Planning, and Royal Club Frequent Flier.

In terms of reservation practice online reservation is available but not in real time. The

request for reservation should be made there day prior to the flight date.

Website URL: http://www.buddhaair.com

Established in 1998, Yeti Airlines Domestic Pvt. Ltd.

started operations with two DHC-6/300 Series 'Twin

Otter' aircraft flying to remote areas with STOL (Short

Take Off and Landing) airports like Lukla, Phaplu,

Lamidanda, Rumjatar and Simikot. Within the last ten years, they have strengthened

and grown to become Nepal’s premier airline with over 29 destinations and have more

than 60% of the market share as of January 2007. Yeti Airlines has also received

permission for international operation in 2007.

They have the largest fleet of ten aircrafts with four deHavilland DHC-6/300 ‘Twin

Otter’ and six British Aerospace 'Jetstream-41' covering major districts and cities within

Nepal from the mountains and hills to the Terai region; they maintain and fly the largest

and most extensive destinations network in Nepal.The airline has served the isolated

population of Nepal living in far-flung mountain areas by providing the only means of

http://www.buddhaair.com/



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transportation and connection to the outside world.


request for reservation should be made five days prior to the flight date and the system

is email based.

Website URL: http://www.yetiairlines.com

Agni Air Ltd. commenced its operations in 2006 and till

September 2008 it has catered around 2.5 million

passengers including 1.5 million foreigners. They

operate with 3 Dornier 228 Aircrafts built in Germany and 1 Jet Stream-41 Aircraft

built in U.K. currently they serve fifteen destinations all over Nepal.

In terms of reservation practice no form of computerized reservation is available but

Agni air plans to implement online reservation system whereby customers would be

able to check flight availability and reserve seats online, thereby, saving their precious

time and effort. Significant implementation of IT Systems is one of their present

strategic plans.

Website URL: http://www.agniair.com

Sita air started its operation in 2003 with a leased Dornier

228-202 aircraft. Having served Nepalese sky for five

years now they own and operate four Dorni-228 aircraft

with schedule, chartered and cargo operation in seventeen destinations all over Nepal.


request for reservation should be made at least two days prior to the flight date and the

system is email based.

Website URL: http://www.sitaair.com.np

http://www.yetiairlines.com/

http://www.agniair.com/

http://www.sitaair.com.np/



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Gorkha Airlines started its service in 1996 with two

helicopters. Now, Gorkha Airlines with a fleet of two

German made Dornier Aircrafts and MI-l7 Helicopter is

serving fifteen destinations all over Nepal.


request for reservation should be made five days prior to the flight date and the system

is email based.

Website URL: http://www.gorkhaairlines.com

Guna airlines has recently been launched in April 2009

with two nineteen seating capacity Beech 1900 aircrafts

to three major destinations in Nepal. It is now in operation

since 17th

may 2009.


request for reservation can be made online and the system is email based.

Website URL: http://www.gunaairlines.com

2.3 Travel Agencies Portfolio:

There are around 1200 travel agencies in Nepal providing tourism services in various

sectors. Apart from regular travel and tour related product and service sales and air

ticketing does play significant role in the revenue generation for these agencies. Most of

the tourist destinations and places of interests in Nepal are accessed via air services. A

travel and tour operator here forms a short of industry backbone for generating business

for many service providers such as hotels, land travels and transport companies and of

course the air travel industry which is continuously proliferating.

In terms of information technology inclusion many travel and tour agencies have set up

their own website to keep their presence online in the World Wide Web. Most of the

websites are static pages providing information about tourism product and services they

offer and hardly any e-business or e-commerce activities takes place through these

websites.

http://www.gorkhaairlines.com/

http://www.gunaairlines.com/



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Chapter 3 - Literature Review:

3.1 E-Business and GDS

Morden day information society has made tourism industry very much information

sensitive. ICT has provided tools that have facilitated business transactions in the

industry with trading partners by enabling new sources of distribution channels.

Consumers are also using the internet technology to gather information and plan and

purchase their interested travel product online.

IBM defines e-business as “a secure, flexible and integrated approach to delivering

differentiated business value by combining systems and processes that run core business

operations with simplicity and reach made possible by internet technology.”

Electronic Commerce (EC) networks permit buyers and suppliers to directly interact

electronically; requiring firms to adapt their businesses processes to a new paradigm

where buyers and suppliers actively seek each other out (sales) and consummate the

business transaction (post-sales) entirely by electronic means” (Hackbarth and Kettinger

,2000).

A Computer Reservation System for an airline is a system that contains information

about the airline and is used for tracking and coordination seats, price and sales. A

Global Distribution System (GDS) is computer reservation system that contains

information about multiple airlines and is used by travel agents and other travel

professionals. It also contains information about other types of travel products as hotel

booking, car rental etc.

“Due to the costly manual processing and with the coming of computers; IBM with

American airlines created the famous CRS SABRE during 1953‐64. Later other CRS

systems were developed. The Global distribution System (GDS) started with the Joint

Industry Computerized System (JICRS) in 1974. In 1986, GDS split off from airline

industry, which really forced many airlines to merge. Many GDSs came to existence

afterwards” (Abu-Taieh, 2004).

Basic and better knowledge of the reservation process is very essential to understand the

problem in implementation CRS/GDS. In a very basic reservation system involving



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GDS following players play major roles. They are the GDS, Airline Company, the

travel agent and the customer.

The GDS:

The GDS acts a as the repository of information about airline such as scheduled flight

and all necessary details relating to flight such as type of aircraft, the prices and fares,

discount etc.

The Airline Company:

They are the original service provider. The airline company based upon the agreement

with the GDS provides data pertaining to its flights and tickets attributes to the GDS.

The Travel Agent:

To reserve a seat or book any ticket for an airline, the travel agent has to have an access

to the GDS. The GDS provides required information about the flight to the destination

through a computer terminal with the GDS software installed on it.GDS companies

offer discounts to the travel agents for encouraging travels agents to use their GDS

compared to others in the market. In this process the travel agents and GDS are

cooperating to generate business to the airline and airline pays commission to them for

generating the business.

The Customer:

The customer is the original service seeker, who pays to the travel agent for their service

by paying for the airline ticket.

Therefore in general each player is providing a service to the other in return for money

in the value chain. This can be pictured as below:



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Figure 3: Service Chain for Reservation (adopted from Abu-Taieh, 2004)

3.2 Structures of Electronic Distribution Channel

The figure below exhibits the traditional model the distribution channel is mostly

dominated by travel agents and the GDS which acts as intermediaries.

Figure 4: Traditional industry structure of online air travel (adapted from Klein, 2002)

But with the proliferation of internet and use of it as one of the cost-effective means of

distribution channel gave rise to numbers of info-mediaries between the airline and the

customers and total content of single GDS is no longer assured (Klein, 2002;

Ma,Buhalis & Song, 2003). “The entrance into the online air travel market is fuelled by

the emergent of GDS New Entrance (GNE) who promises to provide lower cost

alternatives to the legacy Global Distribution Systems (GDS) by finding new ways to

aggregate disparate contents through direct marketing for airlines, travel portal, search



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engines and travel agents”(Chea, n.d.). The figure below presents the different players

in the airline travel industry at present date.

Figure 5: Current Online Air Travel Industry Structure (adapted from Chea, n.d.)

“The players as shown in the figure are: Scheduled Airlines with their own CRS, NO-

Frill(NF) Airlines, GDS, Travel agents, Travel Supermarket ,Air Alliance Travel Portal,

Online travel Discounters, Portal, Travel search Engines and Online Auction.

Scheduled Airlines with their own CRS like United Airlines, American Airlines which

were previously connected to GDS but now their own direct channels are becoming

stronger to connect to the client so eliminating the needs of any GDS in the future.

No-Frill Airlines also known as the low cost carrier (LCC) or budget airlines have

made extensive use of the internet as the distribution channel to sell direct to the

customer for cost advantages. Examples of such airlines are JetBlue, SouthWest airlines

etc. These airlines have brought massive competition in the market in terms of cost

leadership.



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Global Distribution Systems have the power to influence service providers in the

industry to join them because of network effect stemming from the volume and the

varieties of products available in their databases. This scenario is now changing as a

result of emergence of players like GDS new entrance and the change in GDS

regulation. Four major GDS in operations are SABRE, Amadeus, WORLDSPAN, and

Galileo.

Travel Agents have been one of the larger intermediaries and the interface of the

industry with the customers. They are slow in going online and trying to preserve their

status quo by improving their online presence.

Travel Supermarket like Expedia.com and Travelocity.com are created by GDS

owners to offer one stop travel services to customers and because of their network effect

to influence airlines to sell their services in bulk for discounted price.

Airline Alliance Travel Portal like Orbitz in the US, Opodo in Europe and Zuji in

Asia are created by scheduled airlines to negate the power effect of GDS-backed travel

supermarket. It acts as intermediaries for airlines to compete with travel supermarket

Online Travel Discounters (Hotwire.com, cheapticket.com...) are also operated by

scheduled airlines to target low end of online travel market to sell their unsold seats at

last minutes.

Portal which provides front end interface of travel supermarket for air ticket booking

service as part of their many online services and are paid in with advertisement

fee.Yahoo.com travel site is backed by Travelocity.com while MSN.com travel site is

backed by Expedia.com.

Travel Search Engines are true info-mediaries that allows customer to search and book

directly from the suppliers’ CRSs and is not involve in booking but gears customers to

other sites by comparing the offers. Examples of such sites are Sidestep.com,

kayak.com etc.



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Online Auction is targeted towards capturing the niche market of overstocked or hard

to- sell products (Klein, 2000) .An example of such player is Priceline.com” (Chea,

n.d.).

3.3 Disintermediation and Reintermediation in Travel Industry

The relationship among the producer, consumer and the intermediaries can change over

time due to three types of events that changes the nature of transaction process as well

in the industry. These transaction processes are:

Intermediation refers to the process when a new firm interjects itself between the

suppliers and the producers.

Disintermediation refers to the removal or replacement of any existing intermediary by

directly establishing the contact between the parties formerly serviced by the

intermediary.

Re-intermediation is reactivation or reestablishment of once disinter mediated player in

the traditional market place because of business transformation enabled by it-based

innovation.

“One of the effects of the Internet and related technologies in the overall business

landscape is that it changes the bargaining power of the intermediaries” (Porter, 2001).

The development of internet as the cost-effective medium for distribution changed the

relationship structure between airline and customers through the intermediaries like the

travel agents. It allowed airlines to bypass traditional channel of travel agencies and

communicate directly with customer and target specialized market and niche markets.

Benjamin et al, (1995) identified following benefits of bypassing each element of the

industry value chain:

Lower overall distribution costs as cost of delivery would reduce when

information will be transmitted through electronic channel.

The cost of coordinating to players within the value chain will be less, as

electronically linked suppliers and retailers would be able to coordinate and



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transact directly with the consumers thus reducing unnecessary cost of

coordination through intermediaries

Because of free market access to all information about products, consumers will

have advantage of maximum choice at the lowest price.

Faced with increasing competition and price pressure during the economic downturn in

the early 1990s, airlines started to bypass traditional GDS’s by setting up booking

facilities on their own websites. Most airlines then set up Web sites through which they

pursued direct sales strategies. The growth of internet as distribution channel impacted

the relationship between traditional travel agents and airlines as the role player of

intermediaries. Because of this the physical importance of travel agencies is began to

diminished and direct-to-customer business models based on the internet came into

existence thus bypassing travel agents. This gave rise to disintermediation of travel

agent from distribution channel of airline industry.

To fight against this development and gain its position in the competitive market, travel

agencies extend their services by online booking portals and act again as an

intermediary between the final producer and the tourist. Some of the travel agencies

have changed their business model dramatically and completely shifting their focus

exclusively on the internet, e.g. Travel24.com that helps in saving cost of distribution of

information and sales on the internet without the need to run sales offices. This again

gave rise to other type of process called reintermediation where previously disinter

mediated players re-established it through online channels.

3.4 The ICDT Model

The evolution of internet along with it has developed a virtual market place known as

the internet ‘market space’. Many businesses have migrated from their traditional “brick

and mortar” model to “click and mortar” and are constantly re-engineering their

products and services to fully exploit the new opportunities of the medium. But for any

business to make its online presence strong and viable, a basis of identifying their

existing product and services and its extendibility through product redesign in the

virtual internet market space is of vital importance. The ICDT model (Angehrn, 1997)



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that has been developed by Albert Angehrn at INSEAD provides framework for a

systematic approach to analyse and classify internet related business strategies.

The ICDT model segments the virtual market space created by internet into four virtual

spaces. The four virtual spaces are:

1) Virtual Information Space (VIS)

2) Virtual Communication Space (VCS)

3) Virtual Distribution Space (VDS)

4) Virtual Transaction Space (VTS)

Figure 6: The ICDT Model

According to Leong (1998) any firm’s activities in some or all of the virtual

marketspaces should be aimed towards profitability either by increasing revenues or

decreasing costs. Increasing revenues can be achieved by reaching new customer

segments or geographies, by increasing product selection and new service offerings and

by making repurchasing rewarding and convenient. Similarly, lower cost can be

achieved by reducing new service development cost, effective promotional spending

and inventory replenishment and business reengineering.



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The four virtual spaces are treated separately since each of them corresponds to

different strategic objectives and hence require different types of investment, and

organizational adjustments.

1) Virtual Information Space (VIS)

The presence of economic agent (i.e., a company or a person) in the VIS

signifies its intension to exploit the richer and right channel for the exchange of

information about itself, its product and services and its activities with other

economic agents thus extending market visibility. The key objectives of exploiting

the information space is to make global reach and provide rich and context specific

information about the company and its offerings to its stake holders and its existing

and prospective customers to build up confidence in the company and enhance its

credibility.

2) Virtual Communication Space (VCS)

The VCS is primary concerned with interaction and relationship building

by economic agents through exchange of information with its various

stakeholders in the business. Bypassing traditional physical and geographical

boundaries the internet has allowed fast and low cost medium for information

exchange. The company can reach to its stake holders by use of emails,

discussion groups, chartrooms or creating virtual online communities

3) Virtual Distribution Space (VDS)

The Virtual Distribution Space (VDS) is primarily concerned about

service delivery through electronic channel. The economic agents utilising this

channel should be able to strategically exploit the internet for distribution of

products and services that can be wholly or partly digitized.

4) Virtual Transaction Space (VTS)

The Virtual Transaction Space (VTS) is concerned with virtual trading

through the internet. The presence of economic agent in VTS should enable to

exploit the channel to capture the demand and carry out B2B or B2C



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transactions with other stake holders as orders, invoices and transfer of

payments.

3.5 SWOT Analysis:

A SWOT analysis helps find the best match between environmental trends

(opportunities and threats) and internal capabilities.

Strength is a resource or capacity the organisation can use effectively to achieve

its objectives.

A weakness is a limitation, fault, or defect in the organisation that will keep it

from achieving its objectives.

An opportunity is any favourable situation in the organisation's environment. It

is usually a trend or change of some kind or an overlooked need that increases

demand for a product or service and permits the firm to enhance its position by

supplying it.

A threat is any unfavourable situation in the organisation's environment that is

potentially damaging to its strategy. The threat may be a barrier, a constraint, or

anything external that might cause problems, damage or injury.

In general, an effective strategy is one that takes advantage of the organisation's

opportunities by employing its strengths and wards off threats by avoiding them or by

correcting or compensating for weaknesses (Rowe et al., 1997).

Johnson and Scholes (1999) define strategy as the direction and scope of an

organisation over the long term: which achieves advantage for the organisation through

its configuration of resources within the changing environment to meet the needs of the

markets and to fulfil stakeholder expectations.



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3.6 Levels of E-business Strategy Migration

To assist organisations in their move from traditional way of doing business to

electronic means of doing business i.e., the e-business, Hackbarth and Kettinger (2000)

devised "a planning method that would help organisation to capitalise on information

asymmetries, leverage customer and partner relationships and tailors the right fit of "co-

opetition" in their business model."

According to Hackbarth and Kettinger (2000), any organisation follows a basic three

levels of e-business strategy development during their evolution from initial level of

experimentation to final level of transformation of their business totally into e-business.

The three level of e-busniess strategy migration are:

Level 1 - Experimentation

Level 2 - Integration

Level 3 - Transformation

In level 1 - the experimentation level, individual departments of organisation have

adopted technologies to perform different departmental function. At this level e-

business strategy is not linked with the corporate strategy of the organisation.

When organisations move to level 2-the integration level, organisations adopt e-

business to actively support their current business processes. In this level individual

departments are linked together to support process efficiency and effectiveness of

overall business. Also the e-business strategy supports corporate strategy. They are

driven by the promise of cost reduction, revenue enhancement, business support and

enhancement of existing business practices using technologies like VPN (Virtual private

Network). Electronic data interchange (EDI) and Electronic fund transfer (EFT).

In level 3, the e-business strategy is the driver of the corporate strategy and involve

cross enterprise process linkage with customers, suppliers and partners to create

seamless networks. Payoffs can be seen in terms of customer service and new business

lines. The major role of information here is to create business opportunities. The major

focus of level three organisations is to exploit intellectual capital and leverage



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Major Stages Initiate Diagnose

Assess Current Environment

Breakout

Establish Strategic

Target

Transition

Industry Company

Outline project

scope

Identify project

stakeholders

Determine

project schedule

Industry

Competitive

Assessment

Benchmark E-

business

technology

Assess industry

business

partnerships

Identify current

business

strategies

Assess customer

relationships

Assess supplier

relationships

Assess e-

business

technology

Assess business

partnerships

Match current

business

strategies with

SWOT;

Evaluate

alternative E-

business breakout

strategies

Analyse difference

between breakout

and current

strategy;

Assess change mgt.

& cost/benefit/risk

analysis;

Consider industry

responses

Plot out milestones

for strategy

Outputs Project Work Plan Opportunities and

Threats

Strengths and

Weaknesses

E-business breakout

strategy

E-business transition

strategy

cooperative relationship with competitors with a win-win approach to build stronger

customer ties.

3.7 E-Breakout Methodology

Developing an e-business strategy model does require a suitable combination

(integration) of traditional and existing strategic approaches to business, marketing,

supply chain management and information system strategy development.

Many literatures on strategic modelling of e-business activities are available on how e-

business strategies should be approached and developed so that management teams can

apply those models to their e-business context.

Hackbarth and Kettinger (2000) proposed a four stage methodologies know as the

“Strategic e-breakout methodologies” to help managers who want to transform their

business to e-business. This methodology uses of SWOT analysis and help managers in

detailing the e-business strategy development activities by analysing the firm’s

capabilities with respect to the customers, suppliers, business partnerships and

technologies.

Figure 7: Strategic e-breakout Methodologies



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The four stages of strategic e-break out methodology are Initiate, diagnose, breakout

and transition and consists of activities and (A) and outputs (O).

STAGE I: INITIATE

This is the first stage of the e-breakout methodology. This stage is concerned with the

definition of project objectives and scope and formulation of e-business vision,

identification of stakeholders and setting up project schedule and plan. The primary

activities in this stage are:

A1: Outlining Project Scope

This activity is concerned with defining objectives and the developing e-business

vision. Documents and information relevant to the business context are gathered that

will help in setting goals.

A2: Identification of Stakeholders

This activity is concerned with the

identification of key people, business unit and

stakeholders who are crucial for the success

of e-business project. Stakeholders are those

people who are most likely to be affected by

the e-business strategy.

A3: Determining Project Schedule

This purpose of this activity is to identify

critical success factors and its measures with

respect to goals and expectations of e-

business vision.

O1: Project Work Plan

After the objectives and goals defined and

stake holders identified, the project plan is

published for the development of e-business breakout strategy.

Figure 8: Strategic e-breakout stage 1



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STAGE II: DIAGNOSE

The second stage of e-breakout methodology is ‘diagnose’. The breakout stage helps in

formulating e-business strategies with the objective of using e-business technology to

transform processes and people of the firm to better compete in a dynamic global

marketplace. The very basic purpose of this stage is to analyse both the business and the

industry sector in which the business house operates. The assessment is done on two

levels: one at the industry level in which the firm operates and the other at the company

level itself by using SWOT analysis.

Figure 9: Strategic e-breakout stage 2- Industry Assessment



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The industry assessment is basically concerned in identifying the competitive

environment, indentifying who are the major market leaders and who are the major

customers in the industry and identifying major supply channels and their best practices

for delivery of product and services. The assessment is also done on the current use

elements of e-business and its technologies and practices in the industry. Also in this

stage diagnoses is done on different business partnerships in industry and competitive

threats and opportunities are determined, highlighted and prioritised.

At the company level, analysis is done in two parts: first business strategy assessment of

the company is done in terms of current business and e-business activities and these

strategies are reviewed and prioritised. Secondly, the firm assessment is done in terms

of its capabilities in relation to its customers and suppliers. The analysis is done in

terms of processes, people, information flow and technology support. The assessment of

any business partnerships is also done where evaluation of business partners as

customers or suppliers is carried out and significant strength and weaknesses are

observed, determined and ranked. This analysis gives the overall competence level of

company in the industry in terms of its strength and weaknesses.

The ‘diagnose’ stage thus aids in direct comparison of strategies with industry

benchmarks and company capabilities. The SWOT assessment and rankings of business

and e-business strategies, company strengths and weaknesses, industry opportunities

and threats are used in the next stage to find out e-business breakout strategy.

STAGE III: BREAKOUT

Breakout is third stage of e-breakout methodologies. The main objective of this stage is

to devise a new e-breakout strategy that uses best practises in terms of processes and

existing and future technologies to establish an ambitious but achievable strategic

target.

At this stage, the swot dimensions obtained from ‘diagnose’ stage is systematically

evaluated. The current business strategies are matched with the industry opportunities

and threats and company strengths and weaknesses. This evaluation helps to figure out

to what level are the business strategies are aligned with the prioritised SWOT

dimensions. After determining the strategic gaps in business and industry,



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brainstorming is done in order to devise an adaptable e-breakout strategy. To satisfy the

SWOT deficiencies, one of the following options are likely to be taken:

1) Infusion of e-commerce into the existing business strategies

2) Integration of new e-commerce- centric business strategies to company overall

strategy or,

3) Reorder, reprioritise or delete old business strategies in conjunction with the first

two options.

Figure 10: Strategic e-Breakout (SWOT)



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STAGE IV: TRANSITION

The fourth and the final stage of the e-breakout methodology is the transition stage. In

this stage the gap between the breakout strategy and the current strategic situation is

analysed which helps in devising e-business transition strategy. Apart from that

following two analyses are also done at this stage in order to indentify the factors that

may be influencing the selection of transitional strategy. They are:

Change Readiness Analysis:

Any form of radical change is not easily embraced or adopted by people or

workgroup in the business. The expertise level and willingness to the specific

change by the workforce is also of immense importance to be analysed. In this

analysis, factors like management commitment to change, IT infrastructure and

resources availability, in-house expertise availability, company culture and

business process activities are analysed on a broad level which are vital for

successful execution of e-breakout strategy and transitional strategy.

Cost/Benefit Risk Analysis:

The cost benefit risk analysis is widely used technique for deciding whether to

make a change. The analysis is done on the available technologies and

acquisition of resources needed to implement the strategy. This will help in

understanding any implications that may result of implementation of breakout

strategy.

Once the transitional path has been visualised, specific e-business transitional strategy

mile stone are identified and set and the transitional strategy should be focused on

achieving the successive milestones.

The more extensive and innovative the business process changes foreseen by the break-

out strategy, the more critical it is for managers to complete a business audit of their IT

infra-structure as these capabilities influence the speed and nature of the business

process change desired within the company (Broadbent et al., 1999).

“Properly conceived, a breakout strategy can leapfrog the status quo, propel a company

ahead of competitors, and influence the direction of an industry” (Hackbarth and

Kettinger, 2000).



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Chapter-4: Research Methodology

4.1 Introduction

Research design is a framework or blueprint for conducting the research project that

specifies the procedures necessary to obtain the information needed to structure and or

solve the research problem. (Malhotra N.K, 2002)

According to Yin (1994), a research design is used to represent a logical set of

statements, and the quality of the given design can be judged according to certain logic

tests. Four tests, namely construct validity, internal validity, external validity, and

reliability have been commonly used to establish the quality of any empirical social

research (Yin, 1994).

Research design can be classified into two:

Exploratory Research:

The primary objective of this type of research design is to provide insights into and

comprehend the problem situation. According to Wallen (1996) exploratory research is

generally used when researcher is uncertain which theories are relevant and when

important characteristics and relation are difficult to determine.

Descriptive /Conclusive Research

A conclusive research is designed to assist the decision maker in determining,

evaluating and selecting the best course of action in a given situation. According to

Wallen (1996) descriptive research is appropriate when the problem is clearly structured

and the intensions are not to establish connections between cause and symptoms.

Though there are theories about e-business strategies in context to travel industry and

adoption of CRS, however there are some doubts about which theory will be more in

context with the study of integration of e-business in this market sector. Hence an

exploratory research is done on to understand the business processes and trends in the

industry and business sector and then the discovered patterns of exploratory study is



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described thus leading to a descriptive research as well. Therefore the research design

of this study is both exploratory and descriptive.

4.2 Research Approaches

Yin (1994) suggests two main approaches when conducting a research: quantitative or

qualitative methods. Quantitative research produces results that are mostly suitable for

statistical analysis. The main techniques used in this type of method are survey,

observation and experimentation. The strength of a qualitative research is that it focuses

on actual practice and looks at how social interactions are routinely performed.

(Silverman, 2001) According to Patel and Tebelius (1994) qualitative research focus on

having better understanding of the subject matter and helps to investigate, interpret and

understand the problem phenomenon by means of an inside perspective.

According to (Yin, 1994) the approach best suited depends on the specific research

problem and accompanying research questions. The research aims to gain the better

understanding of business activities about air ticketing in the specific market and further

tries to generalize the views and interest of stakeholders to the adoption of centralize

GDS in the industry through some quantitative analysis as well. Hence both qualitative

and quantitative approaches to research have been used in the research.

4.3 Research Strategy

Research strategy is concerned with a plan on how a research will be carried out

answering the research questions. According to (Saunders et al., 2006) a research

strategy clearly specify how data are going to be collected and considers any constraints

that may be inevitable such as access to data, time, location , money and ethical issues.

According to Yin (1994) there are five different strategies that can be used while

collecting and analyzing empirical evidence. Depending upon the characteristics of the

research questions one or more of the following alternatives can be used: an experiment,

a survey, history, archival analysis and a case study.

The research intends to use a survey strategy as it is found to be more appropriate to

gain insight and understanding of the research topic. This strategy also allows collecting



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data from a sizable population in a highly cost effective way. Questionnaires, structured

observation and structured interviews falls into this strategy (Saunders et al. 2006).

4.4 Data Collection

Data collection is a fundamental step in any research. Data are available from all

different type of sources. The data for the research can be categorized in two types:

Primary data and secondary data.

Primary data:

Primary data are data collected by the researcher specifically to address the

research problem in hand.

Secondary data:

Secondary data are generally the data collected for some purpose other than

problem in hand.

The research is exploratory in design and will mostly make use of qualitative research

methods and in few cases the quantitative methods for data collection and analysis,

from primary and secondary sources of data.

The most common data collection methods in a qualitative research are documentation,

archival records, interviews, direct observations, participant observation and physical

artifacts (Yin, 1994).

Qualitative research aims to achieve an in-depth understanding of a situation’’ (Cooper,

R. D. and Schindler, S. P., 2007, page 196).In orders to conduct qualitative studies,

interviews are the most important way of collecting data (Yin, 1994).

The questionnaire used in this research is semi-standardized. Sarantakos S. (2005)

describes semi-standardized questionnaire as the mix of moderate degree of

structuralism and standardization and can be combination of open and rigid nature. Such

questionnaire can be used both in qualitative and quantitative research methodologies.



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Saunders M. et.al. (2007), identifies two types of questionnaire -one type is self-

structured and the other type is interview administered, on the basis of how it is being

administered. The self-administered questionnaires are designed for this research. Self

administered are usually completed by the respondents. This questionnaire is used to

gather information from various travel agencies. The interview administered

questionnaire is used to collect information with personnel from the airline company

over telephonic interview.

The questionnaires were emailed to data collector in Kathmandu, Nepal which was

further distributed to various travel agencies and later collected.

According to level of formality and structure Saunders et. al., (2006) classify interview

into three types. They are structured interviews, semi-structured interviews and

unstructured interviews.

Structured interview uses questionnaire based on a predetermined and standardized or

identical set of questions. In such interview, the interviewers read the question as

written and then record the response on a standardized schedule usually with pre-coded

answers. Structured interviews are used for collection of quantifiable data and are also

referred to as quantitative research interview.

A semi-structured interview is a non-standardized interview in which the researcher will

generally have list of themes and question to be covered. The order of question may

depend upon the context and flow of the conversations. Because of this nature of

interview the data will be generally recorded using audio-recording or by note taking.

Unstructured or in-depth interviews are informal non standardized interview where

researchers gets to explore in depth about the subject matter of study and there is no pre

determined list of questions to work through in this situation.

In this study, the method of data collection would be as follows:

1. Documents and reports from various sources such as Nepal Tourism Board

(NTB), Ministry of Tourism and Civil Aviation (MOTCA), Nepal Association

of Tour and Travel Agents (NATTA), and Airlines Operators Association of

Nepal and from their respective websites and airline websites.

2. Primary data from questionnaire survey of travel agents.



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3. Primary data by conducting semi-structured and personal interview with

operators of airlines and travel agencies.

4. The secondary source of data would be from various books, articles, and

websites as well as documents I have received documents from companies.

4.5 Sample Selection

Population is the set of all subjects on whom the study is conducted. Sample is a

representative subset of the population.

According to McDaniel and Gates (1999) the basic issue defining the population of

interest is to specify the characteristics of those individuals from whom information is

needed. The selection of sampling method mostly depends upon the nature of the

research, availability of the financial resources, the nature of the problem under

investigation and of course the time limitations.

In general there are two types of sampling method. They are probabilistic sampling

method and non-probabilistic sampling methods.

Probabilistic sampling method makes use of random selection and for random selection

method. This method allows a researcher to make inferences about the target population

from which the sample was drawn (Saunders et. al., 2006).

Non- probabilistic sampling does not involve any random selection of the population.

Though non-probabilistic samples may yield good estimates of the population

characteristics but objective of precision of sample cannot be evaluated (Malhotra and

Birks, 2003).

The research uses probabilistic sampling as the probability of each case selected from

the population is known.



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4.6 Data Analysis

Data analysis is the process of examining, categorising and tabulating the collected data.

According to Miles and Huberman (1994), qualitative data analysis process consists of

following three activities of data reduction, data display and conclusion.

Data reduction is the process of selection, abstraction and transformation of data so as to

organise the data so that conclusion can be drawn. Data display is the process that

makes use of reduced data in an organised and compressed way to picture out the

conclusion more easily. Conclusion is the process of finding the meaning and the data

taking into account or noting various patterns, flows and propositions of the data.

For data obtained from primary research qualitative as well quantitative data analysis is

done by data reduction, data display and conclusion drawing.

4.7 Reliability and Validity

“Reliability refers to the extent to which data collection techniques and analysis process

will yield consistent findings where as validity is concerned with if the findings are

really about what they appear to be about” Saunders M. et.al.(2007).

A threat to external validity:

Such threat occurs because of improper generalisation of findings from the research. To

minimise such threat and maximise the accuracy of the result, sincere use and analysis

of data has been done so that the conclusion and results can be highly correlated to the

findings.

A threat to internal validity:

Generally this type of threat comes into existence due to inconsistency of data collection

and to overcome such problem data were collected from multiple sources.



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4.8 Research Ethics

Ethical issues were taken into consideration throughout the study of this research.

“Ethical considerations relate to the proper conduct of research process and are critical

to any research.” (Davis & Cosenza, 1988) One of the primary ethical considerations of

researcher is to protect the right of confidentiality of participants of research (Zikmund

1997) and to protect organisations and individuals who participated in the research from

any possible adverse consequences that may arise from the research (Emory & Cooper

1991).

4.9 Limitations

One of the major limitations of the research was the number of samples which might not

represent views of all the travel agents. Also the research was conducted in only one

city, Kathmandu. The research is not able to cover the view and opinions of travel

agents from other part of the country because of geographical distance and availability

of access. Also from the part of airlines only two airlines participated in this research.

Views of other airline operators could have given strong rational base and direction to

research objectives.



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Figure: 11

Figure: 12

Chapter 5: Finding, Analysis and Discussion

5.1 Findings:

5.1.1 From Travel Agents:

The questionnaires were distributed to 110 travel agencies in Kathmandu and 78

completed questionnaires out of 110 were finally collected. The response rate is thus

71%.

Section I: Share of Airline Ticketing in Travel Agencies Business

This section tries to find out how much affect did airline ticketing have in the income

generation of travel agencies.

Share of airline ticketing in the core business of travel agency

According to the response it was

found that for majority of travel

agencies, airline ticketing was one

of the major businesses. Out of 78

travel agencies that responded,

56% of them replied that airline

ticketing accounted for more than

50% of their business while for 26% of respondent, airline ticketing was

between 30% - 50% of their business and for 18 % of respondent air ticketing

was less than 30% of their core business.

Share of domestic sector ticketing in air ticketing business of travel agency:

According to the findings, out of

the 78 travel agencies, 49%

responded that domestic air

ticketing consisted of less than

50% their air ticketing business

while remaining 51 % responded



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Figure: 13

Figure: 14

Figure: 15

that domestic air ticketing accounted to less than 50% of their air ticketing

business. Domestic air ticketing has significant contribution to their air ticketing

business.

Section II: Awareness about GDS technologies among Travel Agents

This section intends to find out the travel agents’ awareness about GDS technologies in

terms of familiarity, operational ability and performance efficiency.

Familiarity with GDS:

In terms of familiarity with any

GDS technologies among travel

agents, respondent were asked if

they have ever operated any GDS

of any kind and it was found that

90% of them have operated one of the GDS while 10% said they

have not operated any.

Comfort level in operating a GDS:

In terms of ease of use, 90 % of the

respondent said that they find GDS

were easy to use and has helped in

easing the process of ticket selling

whereas remaining 10% did not find it easy to operate.

Performance efficiency brought

by use of GDS.

In terms of time saving in ticket

reservation process, 87% of the

respondent said that GDS

technology has helped them to

reduce ticket selling time while 13% said responded that it has



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Figure: 16

Figure: 17

not.

Section III: Customer Choice: Travel Agent or Airline?

This section intends to find out factor concerning customer preference to Travel agent

and the airline.

Customer preference in buying airline tickets:

According to the response it was

found that about 90% of the

respondent said that the customer

prefer to buy airline tickets from

travel agents and other 6% said

customer approach direct to the

airline for tickets while 4% did not

give any response.

Major factor for customer opting for travel agencies:

For the question why customer

prefer travel agents rather than

airline, 41% of respondent said

because of cheap ticket fares but

59 % of the respondent said it was

because of the good customer

contact.

Section IV: Domestic Airline Ticketing Issues and Practices

This section intends to find out various issues pertaining to current practice of ticket

reservation system and possibility of any GDS to be used in this sector in future.



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Figure: 18

Figure: 19

Figure: 20

Time duration taken by travel agent to confirm a deal:

When asked about time taken to sell

a ticket, 72% responded that they sell

it in less than four hours while

around 12% of respondent said that it

takes more than 4 hours and 10 %

said it took even more than a day to

confirm a ticket.

Average number of calls made in the process of selling a ticket

As most of the travel agents are booking over telephone lines. It was necessary

to find out how many calls do they make in average to book and confirm a

ticket. 42% of travel agencies

responded that they make over 20

phone calls in average to book and

confirm a ticket where as 21%

responded that they make in

average of 10 to 20 calls to book

and confirm the ticket. However 36

% responded that they do the same

job in less than 10 calls.

Frequency of missing a deal because of lack of real time information:

For the question about how often

do they miss a deal with customer

because of lack of information at

the moment, 64% of the

respondent less than 20% where as

28% said that they miss more than

20% of the deal while 8%

responded that they even miss



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Figure: 21

Figure: 22

Figure: 23

more than 50% of the deal .

Need of a GDS system for domestic airline ticket reservation.

According to findings, it was

found that around 87% of the

respondent said they would like

to have a GDS for domestic ticket

booking while 10% responded no

to it. 3% didn’t give any response

to this query.

Operational cost benefit to the travel agents:

In terms of reduction of operational

cost of selling in domestic air

ticketing, 69% of respondent said

that a similar system will definitely

help to reduce the cost whereas

13% respondent that it won’t, while

18% did not respond to this.

Cost benefit to end consumers:

In terms of cost benefit to the end customer because of GDS operation in

domestic airline service, 27% of

respondent said that it will cost to

the end customer would be reduced

whereas 12% responded that it

won’t bring cost benefit to the end

customer. While large number

about 61% of respondent said that

may be it would bring cost benefit to the end customer as well.



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Summary of Findings from Travel Agencies

Section I: Share of Airline Ticketing in Travel Agencies Business

Air ticketing played a vital role in overall business of travel agencies. Also domestic

airline ticketing had nearly 50% contribution to the overall air ticketing business of

travel agencies.

Section II: Awareness about GDS technologies among Travel Agents

From the response it was found that most of the travel agents are aware of the GDS

technologies and have operated at least one of the GDS like Amadeus, Abacus, and

Galileo available in the business. It is also found that agents have sufficient skills and

experience to operate software like this and did find it easy to use and also such

technologies has brought performance efficiency at work in terms of time saving.

Section III: Customer Choice: Travel Agent or Airline?

Mostly customer prefer to buy their tickets from travel agents rather than airlines itself

and the major factor for that was that travel agents had better customer reach or contacts

than the airlines.

Section IV: Domestic Airline Ticketing Issues and Practices

Responses show that significant amount of time, money and business are lost during

ticket selling process in domestic sector because of lack of sufficient and quality

information and about flight in real time. It was also found that there is a need of CRS

or GDS in domestic air ticketing sector as well and travel agents are optimistic that such

system would bring down their operational cost of selling. Further it was also noted that

implementation of any GDS would bring cost benefit to the travel agencies while

chances of end customer getting tickets at reduced fare price was still doubtful.



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5.2 Summary of Findings from Airline Operators

Questionnaires were sent to the mangers of two different airlines NAC and Yeti Airlines

who agreed to share information on the research topic. A short telephonic interview was

also done with a duty officer of NAC to get an in-depth understanding of the present

scenario of online ticket reservation system. Out of the two airlines Yeti Airline is a

leading private airline in the domestic sector and NAC is the only public sector airline

operating in the industry since last five decades. The findings are summarised as

follows:

It was found that the major channels for ticket sales in domestic airline ticketing were

through travel agents and through airline own sales outlets. While Yeti Airlines had

online reservation on their web site but it was not an effective channel for direct sales.

Most of the ticket sales in private sector were done through travel agents who accounted

for about 70% of their sales volume where as only 30 % of the sales were achieved from

their sales counter. While the scenario was quite different to that of NAC in domestic

service, for them it was about 98% through their own sales outlets and only 2% through

travel agents. According to the duty officer of NAC, the main reason for this was that

they operated mostly in remote areas of country in service where the private company

didn’t operate much.

It terms of sales outlet, all airlines had their sales outlets in all cities where they

operated but not in areas where they didn’t operate and the customer in those areas have

to contact their local travel agents to purchase any ticket while online reservation is

available through websites of airline companies who offers one.

In terms of ticket reservation process it was found that most of the reservation practices

were done manually through telephone calls in NAC whereas a Yeti Airlines has its

own computerised online reservation system in place that is distributed to their central

reservation office, sales outlets and travel agents to provide back support in booking

process and keeping track of seats available and sold. The agents or officer had to login

to their central reservation system to check the status of any reservation or booking to

be made.



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In terms of computer based ticket reservation system, it was found that the managers did

have positive views towards it adoption. It was also found that a couple of airlines have

implemented it for online reservation that provided backend support to agents who are

booking tickets for the reservation while airline which don’t have one like NAC are in

process of implementing one in the near future.

According to findings, Yeti Airlines which has implemented computer based

reservation system, almost about 80% of the reservations is thought to be done through

it and it is expected to grow in near future provided that internet facilities to outstations

becomes available. It was found that after the implementation of CRS, telephone calls

from out stations have gone down dramatically thus reducing processing time and cost.

The system has helped to materialise confirm tickets and reduce no shows. While NAC

which uses GDS for its international booking process had 75% of international booking

done through the computer systems and expected it to grow but they have not used any

such system for domestic purpose.

In terms of payment system, it was found that most of the payment was done in cash on

delivery or collection of tickets. With regards to online payment system, it was found

that none of the respondent has implemented any sort of online payment system.

However, the airline which has already installed CRS is thinking to implement one in

the near future for online users.

With reference to a centralize CRS \GDS for domestic airline ticket reservation system,

it was found that at one time airline operators in Nepal were seriously looking for one of

its kind and all of the respondents believe that such centralize system is more preferable

in Nepalese market context. According to the respondents, it was also know that such

system will definitely and significantly drop down operational cost and increase the

performance of air ticket booking. However, it was also perceived that though the

system would improve performance level of reservation ion system and reduces cost,

this system wouldn’t have any significant effect in gaining more customers.

Further going down the line when asked about the airlines opinion on a centralised

system of reservation it was found that the respondent Yeti Airlines who has

significantly implemented their own CRS are not ready for such change. According to

the respondents one of the major factors becoming reluctant to such change was the fear



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that secrecy of the business may be jeopardise because of common platform and also

that they didn’t want other airlines to take benefit of their reputation. Other reasons

included lack of technological expertise for such system and infrastructure management

and chances of unproductive booking practices that may arise.

It was also found that the airline like NAC is planning to have a centralised reservation

system in near future where they will try to encourage other to join them to work

together.

5.2 Analysis:

5.2.1 Angehrn’s ICDT Model Analysis

The ICDT model provides a base for identifying current position of an organisation in

different segments of the virtual market place and helps exploit any opportunities

offered by virtual market place by suitably reengineering its product and services and

processes according to business need.

In this section, the current state of domestic airline industry in terms of their activities in

different segments of Virtual Market Place is accessed and analyzed.

Virtual Information Space:

In terms of virtual information space, all of the airline companies have their own

specific websites. These websites have sufficient information about their respective

company’s profile, their fleets and aircrafts information, flight schedules and product

and services catalogue. These websites also features destinations information of the

places they are serving and online reservation facilities are available from their websites

but the reservation system is email based and request for reservation can be made only

before two to five days before the flight scheduled date.

In terms of payment system only one airline, Buddha Air has made available the card

payment facilities but the mode of payment is offline.

Out of all the airlines it was found that three airlines namely Buddha Air, yeti Airlines

and Agni Air have good web interface design for customers to interact with.

Information is clearly visible and accessible through the web interface. While rest of the

airlines have websites but a lot of work is needed to be done in terms of interface design



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and frequency of updates of information on their web pages to attract more customers to

their sites. Airlines like Yeti Airlines and Buddha Air have their banners advertised in

many other different websites and Nepalese travel websites thus making use of web for

promotion and marketing purposes of their respective airline brands. All websites are in

English and multi-language presentation is not available.

With respect to web availability of travel agencies, majority of travel agencies have set

up their own websites. Most of these websites are static pages giving information about

the places of interests, their travel products, newsletters and travel guides for their

customers. However some travel agencies websites have email based online booking

facilities available for different travel product and services. Some of these websites even

have secured online card payment facilities available from their websites.

These inferences shows that both airline and travel and tours industry have embraced

the potential benefits of internet and to the best of their effort have managed to place

themselves in cyber market space.

Virtual communication Space:

In terms of communication in virtual space, airlines have basic web presence as

discussed above and customer can visit these websites and make request for reservation

as facilitated by web page. However in terms of providing support to the customer, not

many services are available online. Those airlines who have maintained their own CRS

have given login access to the agents for this service to facilitate online reservation. E-

mail seems to be the basic way of contacting the airlines apart from hotline telephone

numbers. Only two airlines seem to have online feedback facilities available through

their websites and only one airline, NAC have FAQs section in their website for their

customers. And none of them have integrated any kind of online forum /discussion

board for customers. On-line support facilities seem to be inadequate. The table below

shows the various points of contacts in virtual space for customers.



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Table1: Customers e-touch points with Airline Website

Online forum set-up by the company can be helpful for setting up discussion about

quality of product and services, sharing experiences of customers and giving response to

customer queries can further help companies to enhance the quality of service and

increase brand reputation and loyalty among customers.

In terms of travel and tour operators’ websites most of the travel agencies websites are

nothing more than a static webpage providing information about themselves and the

services they offer. However there are websites of travel agents that are more functional

and provides customer to do online reservation about their services. In some websites,

customers can post feedback and suggestions for the travel agents. Most of the

interaction is done through the email services.

In terms of virtual communication space, above inferences shows that this space in not

sufficiently been exploited by the industry players. However some of the major travel

agencies have made better use of internet as communication channel for their customers

but airline operators need to establish some more e-touch points to interact with their

customers.

Virtual Distribution Space:

E-distribution offers new possibilities to the companies and has become key factor for

selling products online and tourism is one of the most exploited industries worldwide in

terms of using internet for distribution of their services. The products and services that

can be represented in a digitized form can be distributed over the internet. E-distribution

Customer point of contact

Buddha Air

Yeti Airlines

Agni air

Sita Air

Gorkha Airlines NAC

Guna Airlines

e-mail YES YES YES YES YES YES YES

Online Feedback NO NO YES YES NO NO NO

Online forum /Discussion board NO NO NO NO NO NO NO

FAQs NO NO NO NO NO YES NO



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helps to cut costs, improve the quality of service or introduce new products or services

by distributing them via the Internet and web channels.

In terms of utilisation of distribution space, airlines have setup email based online

reservation system for customers from where they can request for reservation of seats

for future dates. Airlines send confirmation email to the customers for the reservation

confirmed. A couple of airlines have their own online computer reservation system to

aid their agents to conduct reservation and booking in real-time. This system has

significantly helped in cost reduction and time saving in sales of their available seats.

Few travel agencies have used email based reservation system for various product and

services like travel itineraries, holiday packages etc.

These inferences show that virtual distribution space has not been utilised to the extent

it could be for the distribution of their products. Only few major players in the industry

have capitalized on distribution facilities offered by the internet technologies. All

airlines should take advantage of this channel to reduce delivery time to the customers

directly or through their travel agents.

Virtual Transaction Space:

The transaction space facilitates to engage in business-to-business or business-to-

customer transactions such as ordering, invoicing and payment over the internet.

“Business-to-business transactions have benefited considerably from this channel. It

allows companies to trigger automatic ordering, to invoice and make payments easily.

This has been facilitated by EDI platforms which provide a high level of security to the

transactions. In fact, many businesses are insisting that potential suppliers install EDI if

they want to be considered” (Angehrn, 1997).

“Business-to-consumer transactions do not yet benefit from the same kind of security or

reliability as offered by the EDI system. Currently, the huge potential for wide-reaching

commercial activity with consumers is stifled by legal, security and reliability concerns”

(Angehrn, 1997).

In terms of transaction space utilisation for carrying out business activities online such

as ordering, payment and invoicing, very less practices of such kind can been seen in

the industry . Till date only one airline, Buddha Air have incorporated card payment



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system on their website but that also works if offline mode. However, few travel

agencies have utilised different form of online payment system from where ordering,

payment and invoicing can be done like bank transfers and card payment system.

One of the reason for not fully being able to implement online payment system is that e-

commerce has not gained much trust and confidence of security in the mindsets of

customers in Nepalese economy. However the perception of card payment system and

online payment system has recently changed because of high diffusion of card payment

system and ATM facilities in banking and commerce sector of Nepal since last couple

of years. Once the security concerns can be guaranteed, transaction space can been used

for making online payments for services sold via internet.

5.3 Discussion on Findings

From the findings of the research it was clearly seen that both players i.e., travel

agencies and airline operators have identified the extensive need of computer based

reservation system in domestic flight service. Travel agents are aware of the CRS/ GDS

technologies and benefits that come with it and are ready to adopt one of its kinds for

domestic air ticketing services also. Professionals working in the business have

sufficient operational skills and experiences with such systems.

On the part of airlines, a couple of airlines, who are also major players in the sector and

have significant volume of market share, have significantly invested in developing their

own CRS to facilitate reservation processes efficiently and quickly while some like

NAC are in the process of integrating one very soon. Whereas, others have not yet

implemented any of its kind because, the cost of installing and maintaining such

systems are quite expensive for them. After successful integration of its own CRS, NAC

is thinking of convincing others to use their system in future.

But looking at the history and trends of the CRS/GDS practices worldwide, it seems to

be quite difficult choice for other airline to join any other airline CRS as potential of

unfair reservation practices and biasness in listing of airlines in CRS display terminals

can easily rise. But the cost of developing and maintaining own system by the airlines



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and the need of such technologies to cut down their cost of operations can and has in

some way forced them to join other airlines’ CRS.

From the point of view of travel agencies, it can be seen that if each airline have their

own CRS, then travel agencies have to pay to all these airlines for subscribing to use

their CRS separately which can bring their cost up. Unlike global travel business,

airlines here cannot bypass travel agents as they bring up more sales to the airlines than

their own sales outlet and have better customer contacts. In these conditions, travel

agencies seem to have higher bargaining power than the airlines and they would like to

have as less number of CRS systems to subscribe to; or may be a single GDS.

Also looking at the domestic industry trends and practices as found from ICDT

analysis, in terms of e-business and e-commerce, the likelihood of directly reaching the

customers through online channels is quite low. There has been increase in internet

users because of cheaper and affordable internet availability and level of penetration of

technology around the country. Though commercial activities over internet to take place

in broader sense will take some time and that depends on the awareness and security

perception of online payment system in the mindset of consumers. But adoption of e-

business activities in basic activities and operation of companies is in demand and will

continue to be in future and companies have to adapt to or adopt respective e-business

technologies to sustain in the competitive environment.

These inferences show that the level of e-business integration in the industry is very less

or is primitive where only little number of players has been able to adopt it. And

looking at the growing volume and demand in domestic air travel industry in Nepal, an

industry wise integration of technologies, supporting the business processes and

activities, is the necessity of the moment. But to what degree and level, integration is

required, depends upon the interest, investments and commitments of the stakeholders.

According to Kettinger and Hackbarth (2000) as companies start integrating e-business

activities into their business, they evolve through three distinct levels of E-business

strategy development and competence. The three level of e-business are Level 1 –

experimentation, Level 2- integration and Level-3 transformation. The overall industry

sector seems to be more or less in level -1 that is the experimentation stage where

companies have adapted technologies to support internal activities of the organisations



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itself. While airlines like Yeti Airlines and Buddha Air have moved towards level-2 of

integration in order to reduce cost and increase support for business processes.

Hence there is a need to develop an e-breakout strategy to integrate e-business activities

in terms computer based reservation for air ticketing and in future integrating other form

of services into it as seen in the global GDS industry. The purpose of this e-business

strategy would be to generate revenue by reducing cost of operation and by aligning the

e-business strategy with core business activities that would bring value and benefits to

all concerned stake holders.

5.3.1 E-Business Strategy Development

The e-business strategy development will follow the e-breakout methodology proposed

by Hackbarth and Kettinger (2000) which has been discussed in literatures above. The

strategy development followed the stages as:

Industry Assessment:

First the major stake holders in the industry are identified as the airline operators, the

travel agents and the customers.

In this section parallel assessment is done of domestic aviation sector practices and the

global trends and practices. At the same time the domestic industry is compared with

the global in order to acknowledge the gaps in practices and channel structures.

The Industry: Travel and Airline

Competitive Boundary: Domestic Air Service Sector in Nepal

Product and Service: CRS/Air ticket /Passenger Transport and Cargo Service

Major Customers: Travel Agents, Tourists, Business Travellers and General Citizens

Current Principle Channel of Distributions:

The major channel of distribution of airline service is through Travel Agents and

airlines’ own sales outlets.

Almost all airlines have email based reservation system in place but the use of system is

significantly less compared to the other channel.



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CRS have been adopted by Yeti Airlines and Buddha Air to facilitate reservation

process.

While in global market, the exploitation of internet has generated many channels like

players like online travel sites, travel supermarkets, portal and airline own websites

Best Practices in the Business in terms of Product Distribution:

Computer based reservation system developed by airlines to be used by travel agents

and sales outlet staffs to book the reservation.

Barriers to entry into this industry:

Entry barrier for any new air operator is very low; currently there is high demand for air

transport and demands exceeds the supply.

In terms of travel intermediaries any third party with decent technology adoption can

easily be a major stake holder or market player in the sector in distribution of travel

related products not only airlines tickets but integrating other services as hotel bookings,

travel and tour products in one system. Like global GDS, they can be highly influential

to the industry players.

Industry leaders: Yeti Airlines and Buddha Air are currently the industry leaders in

domestic aviation.

General Business Strategies of These Leading Firms are:

The very basic strategies of airlines are to achieve majority of market share by

extending services to new sectors of operation and maintaining the lead.

Substitute Product and Service:

The only substitute to air travel is by roadways such as bus services and taxis. However

remote areas don’t have better roadways for easy travel and most of the places on hills

and mountains are only connected with air routes. Railways service has not come in

service.

Value Creation to Product and Services:



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In terms of value creation to their product and services flight club memberships and

Mileage points are given to the regular and corporate customers.

Benchmarking e-business Technologies in Practice:

The e-business technologies used in the industry currently are:

E-mail based reservation facilities and Computer Reservation Systems developed by

some airlines.

While in the global market, there are individual CRS of airlines and GDS that support

the distribution process. Other online channels like travel supermarket, portal, online

travel sites and cyber intermediaries make extensive use of web technologies to sell the

services. Such online scenario is not active yet.

But technologies like CRS or GDS has become more an industrial need rather than

airlines individual need.

Business Partnership:

Chances of business partnership to fulfil common needs and because of insufficient

fund and infrastructures to solely move ahead by laagers in the industry is quite high.

As NAC also mentioned that they look forward to other airline to use their system,

intensions for business partnerships can be seen. However big players like Yeti Airlines

don’t seem to be opting for any partnership with any business as they are the industry

leader and also have sufficient technology and fund to keep themselves ahead in the

market. They wouldn’t like to lose their competitive advantage at the moment.

At the moment the threat to leaders in the sector is low however if practices like code-

sharing comes into existence airlines will be able to capitalise on much of the business

in the market. But at the moment, one airline ticket is not honoured by the other airlines

so threat for partnership is quite less.



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Individual Firm Assessments:

The firm assessment is done for NAC and Yeti Airlines and at the same time other firms

are also accessed in general and common terms.

Business and Strategy Assessment:

Yeti Airlines:

For Yeti Airlines their current business strategy is to extend their business service to

other areas where they are not operating. In that process recently they have added three

new places to their list of destinations.

In terms of e-business strategy, they are trying to make online reservation more

facilitative and reaching direct to customers through their websites and implement

online payment system as well.

In terms of business performance, the company is doing well and is showing

continuously growth in service and supplementing the demands of the aviation sector.

NAC:

With a different approach than private sector airlines, this government owned NAC has

more been service-oriented rather than profit-oriented. It serves major population of

remotest areas of Nepal and is the only airline in domestic sector which is operating at

no profit. Their only strategic objective would be revenue generation by reducing

operating cost as much as possible.

From inferences and findings it can be seen that in terms of their e-business strategy,

having a CRS is more important to facilitate service and reduce cost of operation.

The performance of the airline in overall business in not that well and is operating with

less profit or no profit at all.

Other firms in the sector:



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Other airlines in the sectors are also looking for service extension to different sectors

and increasing the number of flights in the route of operations.

In terms of e-business strategy, airlines are planning to incorporate and integrate

sufficient IT infrastructure to support their business for example, for Agni air

implementation of IT System has been their strategic plan.

Firm capabilities in relation to the customers/suppliers

The major customers for airline sector are tourists, business travellers and local citizens

who acquire the tickets from the travel agents or airline own physical sales outlets.

Customers specify their requirements to the travel agents. The travel agents or sales

outlet staffs acknowledge customer needs makes phone calls to the central reservation

office of the airlines requesting for tickets for particular fights, if not available they need

to call other airline for the available tickets. For those travel agencies that have access to

one of the airlines’ CRS, use their terminal to login to the system from where they get

the flight information and booking details.

Upon confirmations of available seats tickets are issued to the customers. The customer

then pays to the travel agents for the ticket purchased. Technology support for

reservation has been made available by a couple of airlines to the agents but for

majority of airlines, the process is still manual and largely depends upon the phone calls

other than any computerised technologies, which sometimes takes a lot of time to

confirm a ticket as shown in the findings. Apart from that, customer can request for

reservation via airlines’ websites 2-5 days prior to the flight schedule date.

In this context of study, airline firms themselves are the original service provider

(supplier) of the product that is the air ticket.

In terms of capabilities of e-business usage, firms have used IT as support tool for back

office work. Industry leaders are making potential use of technologies to cut cost and

reduce time, and their IT infrastructure has been one of the strength in satisfying

customer needs in short time. This has certainly helped travel agents also in reducing

their search time and cost. Low players in the industry are struggling to have their own

CRS because of high cost in investing in technology for that scale and further

maintenance will equally require similar attention in terms of price and expertise. This



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can be one of the weaknesses of the low players in the industry. However each firm

have shown their web presence. The other weakness of the firms in the industry would

be that of not working in partnership with each other and sharing resources in order to

optimize their business performance and reduce cost and effort and supply time lag. The

alliances can help companies to outsource unprofitable services and to gain capabilities

lacking within the company.

Breakout: The SWOT

Industry opportunities:

From the analysis, it is seen that suitable technology adoption by airlines have helped

them to reduce cost and increase performance plus provide service to the customer in

short cycle time. Therefore opportunities lie for other airlines as well to exploit similar

technologies in the industry and integrate them to their specific business need. E

Chances of technology infusion is very high any firm with suitable technology aligned

to the business need will soon visualise performance enhancement and growth.

The industry also provides opportunities for business partnerships to share technologies

to support unprofitable services and capabilities of each company.

Industry Threat:

The threat in the industry from alternative services is very low. However as the barrier

to entry is also low any new entrant, with significant investments and level of

technological infusion can easily exploit the sector and distribution channel, to establish

themselves as a powerful stakeholder. The threat of disintermediation in the industry is

also very low compared to world travel agencies scenario as online channel for

intermediation would involve significantly large number of customers to purchase

product online but that practice is not visible at the ground level.

Firms Strengths and weaknesses:

The demand for air travel is high and firms are operating to their full capacity to meet

these demands increasing .These firms’ ability to operate and provide service has been

their strengths which is helping them to grow significantly every year. However for

those who have integrated e-business technologies in their business are ahead in terms



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of maximising profit and reducing cost and market growth rate. For other airline the

high cost of integrating technology in business has been their weakness to enhance

distribution channel performance and reducing cycle time in supply of their services.

Failing to work strategically in partnership to capitalise each other inefficiencies and

capacity can also be one of the weakness for minor players in the industry.

From the analysis it following inferences can be made:

There is the need of computer based reservation system in the industry. The need of

such technology rather than being an individual need of the particular airline has

become industrial need that would benefit all stake holders of the industry.

Only two players in the industry currently have their own CRS and rest are working on

traditional manual system through telephone calls. Those firms who have invested in

their own CRS are reluctant to work in any partnership with other firms as it is

providing them with a competitive advantage in the industry in satisfying customer

needs faster and cheaper way. Setting up individual

CRS is expensive because of high investment cost required to invest in technological

infrastructure and later significant amount of cost is also required to maintain the

system. Chances of partnership or strategic alliances between other airline operators to

share technology can be a matter of need rather than choice for airlines because of

significant cost involved. And also the lifecycle of technologies are very short

worldwide and thus cost of maintaining keeping up-to-date would also be high

considering the capabilities of individual firms. Apart from joining other airlines CRS

will enable biasness and unfair practices in reservation as can be seen from the history

of CRS worldwide.

Travel agencies who are the major distributor or retailer of airline services are also in

need of CRS system but the lesser the number of CRS the better for them as they don’t

have to subscribe to all of them and still make up their business.

As Hackbarth and Kettinger (2000) has said that “to achieve success radically through

e-business, company must rethink corporate strategy in a way that capitalizes on

information asymmetries, leverages customer and partner relationships, and tailors the

right fit of “co-opetition” in its business model”. Co-opetition can be defined as a



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appropriate mixture or blend of cooperation and competition. According to

(Brandenburger, Nalebuff 1996), it is characterised by the situation where businesses

cooperate with their supplier, customers and firms producing related product that can

lead to the expansion of market and formation of new form of business relationships

that may even lead to formation of a new enterprise. This e-business enterprise will

have the capabilities to exchange value (goods, services, money, and knowledge)

digitally through electronic channels.

Companies that find the right match taking a joint venture to market ,managing the

relationship in the long run can walk away winners” (Cross, 2000). So comparing all the

options a win-win strategy for all players would be a better option. Therefore it would

be recommended that a common CRS or GDS platform for reservation would be more

beneficial to majority of the industry stakeholders who are looking for one in future.

The ownership of system however should not be to particular airline which would

subject to biasness in listing of airlines in system terminals. Rather it should be a

governed and regulated by all the players of the system to keep the system in healthy

competition and at the same time enhance profitability and performance. The main

advantages of such system would be as follows

1. The investment cost to each firm would be far less than setting up their own

CRS.

2. Jointly firms would be able to adopt significantly advance level of technology

and necessary infrastructure for GDS system than they would have done it

alone.

3. Different technological services and applications and functionalities that would

be costly to implement would be now feasible and all players can benefit from

it.

4. Maintenance and keeping up-to-date with technology upgrades would be more

frequent and system will be in continuously evolving through changes in the

industry thus extending the life of the system to maximum possible time.



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The successful implementation of this e-business break out strategy would require

certain gaps in the industry to be filled. Two basic factors are necessary to address for

this are change readiness and cost benefits and risk analysis.

Change Readiness:

Familiarity and comfort level of workforce to use such system:

According to the findings it is known that more than 90% of agents were aware

of such technologies and had skills and experiences operating it and also they were

comfortable using it. This implies that the adoption of system by the work force would

not be a greater challenge. The intensity level of training to be given to work force

would be less except for some cases. Another change readiness factor to be considered

is the management willingness to change and influence workforce. From the study of

the subject and interview with managers it was found that airlines are ready for such

change but few players who own their own system would not be a part of such system

as they already have their own.

Chances of organisational restructuring may be required in some firms to align their

business with the new e-business activities.

Cost Benefit and Risk factors:

The cost of implementation of such system is high at the beginning. The cost of

implementation would be equally shared by the operators who will be using the system

or be part of the system. Similarly the benefits are also shared. The risk factor to be

considered in terms of transition and integration of such system would be level of

security and privacy protection of business processes and business secrets of each of the

operators in the common system. These factors should be addressed by the stakeholders

before implementing the system during the process of policy formulations and

specification of terms of use. The system should be designed in accordance to the

specifications given by general consensus of stake holders and then finally go in phase

of implementation.



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Strategic Transition Recommendations:

The transition should be in an incremental manner. Drastic implementation of

technology and high investment can some time bring lots of overhead in the future.

Initially the basic functionality of the system should be to provide real-time reservation

information to the booking agents about the available seats in a flight to particular

destinations so that agents can get the work done instantly.

After successful infusion of such this GDS, the reservation system of a particular airline

should be made available through airlines’ own websites. This will replace the current

email based reservation practice of the firm whereby customer visiting the websites can

directly get the required reservation information online and then subsequently book the

seats available with offline payment methods.

Depending upon the rate of growth of online transaction, the system should integrate

online payment functionalities for making instant payment available online. The airline

should be able to use this system module in their websites to facilitate online payments

to their customers. Thus, transforming the all the activities and transactions of sales

process electronically.

In future depending upon the growth of other online channels as in the global industry,

the reservation system can be linked to other travel websites and portals which is also

the current worldwide trends.



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The figure below shows a typical scenario of information flow for the implemented

system.

Figure 24: The strategic breakout model for e-business for Domestic Air travel



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Chapter -6: Conclusion and Recommendations

6.1 Conclusion:

After all the research of this study as well as from findings and discussion it was figured

out that there is a serious need of computer based online reservation system in domestic

aviation sector of Nepal and this need is perceived by all major stakeholders in the

industry. But the infusion of such technology is taking time because of the lack of

sufficient investment fund in such technology by individual airlines. Another factor for

being late in integrating such system is that airline companies hardly gave much interest

in working together with each other and sharing technological infrastructure that would

meet their business needs. This was partly because of the fear that their business secrets

would be leaked and other will take advantage of their brand reputation. This perception

of loss in airline owners has laid them back in visualising the benefits of working

together and sharing the technological infrastructure for reservation and booking

activities through electronic channels.

By integrating the above e-business strategy there will be improvement in distribution

process and cost and performance efficiencies. the centralise GDS that will have

consolidated information from many airlines would allow travel agents, business and

individuals to shop in a single electronic market place as supported by a industry

standard technological infrastructure for e-business. The idea of co-opetition and win-

win strategy for all airlines will help achieve operational benefits for them and at the

same time would save them from investing high on technology at individual levels. This

strategy for e-business technology integration will not only help individual stake holders

but will benefit the overall industry in terms of process efficiencies and ability to adopt

to new technologies of the future and being up-to-date with technological advancement

and practices.



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6.2 Recommendation:

To achieve the benefits that would result from the implementation of this strategy of

centralise reservation system following recommendation is highlighted:

1. Rather than perceiving the CRS/GDS technology as an individual need, the

airlines companies should take it as the very basic infrastructure need of the

aviation sector for reservation process that would serve overall industry and in

turn generate benefit for individual stake holders.

2. Further participating airlines should jointly work together to for making plans

and policies for the implementation of the system. These policies should help

effective monitoring and management of system after implementation and avoid

any type of power dominance and biasness in operation of system from any

stakeholder. This is going to be critical factor for the success of the strategy in

long term.

3. The investor of the systems should not be overhyped by the benefits of the

technology and invest highly on advanced version of the system. They should be

aware that technological adoption or adaption is a gradual and incremental

process and should invest according to need of the moment and perceived need

of the future thus successively integrating various modules with demand in time

and avoid high initial investment cost.



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6.3 Implications:

This research has several implications that might be beneficial for industry stake holders.

1. It provides the strategic guidelines for the integration of GDS in the developing airline

industry.

2. It also provides an example of framework for how firms can work together in

partnership to infuse higher level technology into the sector without incurring much cost

to each other and yet fairly compete on the common platform to bring out business

benefit.

3. Apart from airline industry, this research can also provide strategic guidelines to other

tourism or business sectors in the country for integrating e-business technologies for

their business activities.

6.4 Limitation and Further Scope of the Study

Although the e-business strategies developed form this research would be beneficial for

the integration of GDS in domestic sector of aviation in Nepal but keeping in mind that

the research was conducted on two airlines companies only further in-depth study of

rest of the airlines is necessary to fully rationalise and visualise the results of the

research.

Apart from that the research only took into account the travel agents and the airline

operators’ point of view whereas the views and opinion of consumers were not

collected. One of the important factors i.e., consumers’ attitude towards online

purchasing should be assessed to implement e-commerce activities.

The analysis has been done on the basis of small sample within a small region of

country, which might or might not generalise the whole industry. Opinions of travel

agents from remote places and level of internet access and awareness of GDS in those

places should be studied. So opinion and views from people at different part of the

country should also be assessed.



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References:

1. Abu-Taieh, E. (2004). Information Resources Management Association

International Conference, New Orleans, Louisiana, USA, May 23-26, 2004.

2. Angehrn, A.A. "Designing mature Internet Strategies: The ICDT Model,"

European Management Journal, August, 1997.

3. Benjamin, Robert, Wigand, Rolf (1995): Electronic Markets and Virtual Value

Chains on the Information Superhighway, Sloan Management Review, Winter

1995.

4. Broadbent, M., Weill, P., and St. Clair, D., The Implications of Information

Technology Infrastructure for Business Process Redesign, MIS Quarterly (23:2),

1999, pp. 159–182

5. Branderburger, A,M and Nalebuff, B,J (1996) "Co-opetition ", New York,

Doublehy.

6. Chea, S (n.d.) “The supply chain structure of online air travel industry: a

multiactor multi-distribution channel view” [Online]

Accessed From:

http://sophea.info/portal/LinkClick.aspx?fileticket=LFrWRf91OYE%3D&tabid=54&mid=

377.

[Accessed On: 1/06/2009]

7. Cooper R. Donald and Schindler S. Pamela, (2007), Business Research

Methods, ninth edition, Tata McGraw- Hill publishing company limited, India.

8. Cross, K., “The Ultimate Enablers: Business Partners,” Business 2.0, Feb. 2000,

pp. 139–140.

9. Davis, D. and Cosenza R.M. (1988), “Business Research for Decision Making”,

PWS-Kent Pub Co

http://sophea.info/portal/LinkClick.aspx?fileticket=LFrWRf91OYE%3D&tabid=54&mid=377

http://sophea.info/portal/LinkClick.aspx?fileticket=LFrWRf91OYE%3D&tabid=54&mid=377



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10. Hackbarth, G., and Kettinger, W. (2000), Building an e-business strategy.

Information Systems Management, summer, 78.-93

11. Holme, I.M and Solvang, B.K.(1991), Forskingsmetodik- Om Kvalitativa och

quantitativa metoder. Lund: Studentlitteratur

12. Johnson, G. And Scholes, K. (1999) Exploring Corporate Strategy, Prentice

Hall Europe, Hemel Hempstead.

13. Leong, A (1998) “The ICDT Model: A Framework for e-business” [Online]

Accessed From:

http://www.mediacircus.net/icdt.html

[Accessed On: 14/05/2009]

14. Klein, S., “Web impact on the distribution structure for flight tickets,” in

Information and Communication Technology in Tourism, K. W. Wober, A. J.

Frew, and M. Hitz (eds.) , SpringerComputerScience, NY, 2002, pp. 219-228

15. Malhotra, K.M. and Birks. F.D. (2003) “Marketing Research: AN Applied

Approach” (Second edition), England, Pearson Education Ltd.

16. Organization for Economic Co-operation and Development (OECD) (2000)

Realizing the potential of electronic commerce for SMEs in the global economy:

Conference for Ministers responsible for SMEs and Industry Ministers.

Bologna,, Italy.

17. Patel and Tebelius, U.(1994) 'the basic of research methodology', Lund

university, Student literature.

18. Rowe, Mason, Dickel, Mann, Mockler; "Strategic Management: a

methodological approach" 4th Edition, 1994, Addison-Wesley. Reading Mass.

19. Sarantakos S. (2005), Social Research, Palgrave Macmillan.

20. Saunders. M, (2000), Research Methods for Business Students; Prentice Hall,

Second edition

http://www.mediacircus.net/icdt.html



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21. Saunders, M., Lewis, P., and Thornhill, A. (2006), Research methods for

Business Students (Prentice Hall)

22. Silverman, D. (2001), Interpreting Qualitative Data: Method for Analysing Talk,

text and Interaction. SAGE Publication

23. Wallen, G.(1993), Vetenskapsteori och forskingsmetodik. Lund:

Studentlitteratur

24. Yin. R., Case Study Research Design and Methods: SAGE Publications Inc

1994. Vol.5, Second Edition.

25. Zikmund, W. G. (1999), Essentials of Marketing Research : Dryden press Fort

Worth, TX



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Appendix I

Questionnaire for Travel Agents:

Instructions: Please complete the following questions to reflect your opinions as

accurately as possible and to the best of your knowledge. Your information will be kept

strictly confidential.

Name (optional): _______________________

Travel Agency: _________________________

1) What percentage of your business deals with airline ticketing?

a. Less than 30%

b. More than 30%

c. More than 50%

2) What percentage of your ticketing business deals with domestic airline

ticketing?

a. Less than 50 %

b. More than 50 %

3) In average how many calls do you make to book and confirm a domestic

ticket?

a. Less than 10 calls

b. More than 10 calls

c. More than 20 calls

4) Have you ever operated GDS/CRS like Amadeus, Galileo or Abacus?

a. Yes

b. No

5) Do you find it easy to use?

a. Yes

b. No

6) Does that help in easy processing of ticket selling?

a. Yes

b. No

7) Would you like to use a similar type of GDS/CRS for Domestic air ticketing

services in Nepal?

a. Yes

b. No



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8) Will a GDS/ CRS help to reduce operational cost of selling?

a. Yes

b. No

9) Will that help to reduce time?

a. Yes

b. b. No

10) Customers prefer buying domestic air ticket via travel agents or directly

from an airline?

a. Travel Agents

b. Airline

11) Why do people prefer travel agents?

a. Ticket fares are cheap

b. Good customer contact

12) In average how long does it take for you to sell (reserve, book and

confirm) a domestic airline ticket to a customer?

a. Less than 4 hours

b. More than 4 hours

c. More than a day

13) How often do you miss a deal because of lack of actual and real-time

information about available ticket?

a. Less than 20 %

b. More than 20 %

c. More than 50%

14) Will this system for domestic airline ticketing reduce cost for the end

customer?

a. Yes

b. No

c. May be

Notes:

GDS: Global Distribution System (like Amadeus, Abacus, Galileo)

CRS: Computer Reservation System

Operational cost of selling: the indirect cost incurred for sell of ticket like telephone calls, fax, other office

operations etc.

Any Comments:



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Appendix II

Questionnaire for Airline Service Operator:

Instructions: Please first have a look at a presentation slide provided to you and then please do complete the following form of questions to reflect your opinions on the subject matter as accurately as possible and to the best of your knowledge. Your information and support will be highly valuable and will be kept strictly confidential within the ethics of the research.

Name: ___________________________

E-mail: ___________________________

Airline: ___________________________

Position Holding: ___________________

Contact Number: ___________________

The Questions

1. How are the tickets being sold for your airline to the end customer?

a. Through travel agents (Yes/No) b. Through your own sales counter (Yes/No) c. Through online reservation (Yes /No) d. Any other channels(Please do mention)___________________

2. What percentage of your ticket sales are done by travel agents?

Answer:

3. What percentage do you actually sell through your own sales counter?

Answer:

4. Do you have sales counter in all your cities/places of operations?

a. Yes b. No

5. Do you have sales counter in other cities/ places where you do not operate?

a. Yes b. No

6. How do your customers reach you in places where you do not operate?

Answer:

7. Do customers buy more tickets from your sales counter directly or from travel agents and why?

Answer:



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8. As you know the research is focused on the ticket reservation in domestic airlines, can you please tell me about the process how ticket are being booked, reserved and confirmed by your airline at the moment?

a. Through your sales outlet:

Answer:

b. Through Travel agents:

Answer:

c. Through Online Reservation:

Answer:

9. What mechanisms is / are there for sales counter staff or travel agents to keep track of number of tickets sold for a flight? (Help: Do they have to do telephone calls for every

reservation booking and confirmation process or is there any system setup that informs them about available seats for reservation or booking?)

Answer:



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10. Do situations occur where same ticket is being sold to two customers by mistake or lack of correct information at that moment?

a. Yes b. No

b. If yes, how often does it happen?

Answer:

c. What measures do you take so that such problems do not occur in future again?

Answer:

11. What do you think about Computer Reservation System (CRS) for domestic airline ticket sales in Nepal?

Answer:

12. Is there any computer reservation system being used by your airline service? a. Yes b. No

b. If yes how effective is the system?

i. Is the system is helping the airline to sell the ticket in quick time than

before?

Answer:

ii. Is the system it helping the airline to reduce cost of selling each ticket?

Answer:

c. What percentage of total ticket sales do you do by your online reservation

system?

Answer:

d. Do you expect the percentage of online reservation sales to grow in near future?

Answer:



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e. Have you implemented online payment system? If no, Why?

Answer:

f. How do people pay for your online purchase of ticket?

i. Online card payment (Yes/No)

ii. Cash on delivery or collection of tickets (Yes/ No)

iii. both

13. You must have known about the CRS/GDS systems like aMadeus or Abacus which are serving international sectors for ticket reservation. Do you think an independent system like aMadeus or Galileo is necessary for the domestic air sector of Nepal?

Answer:

14. Do you think such system can be implemented successfully in the domestic airline sector of Nepal?

Answer:

15. Will such system help to reduce the operational cost of selling?

(Operational cost of selling: the indirect cost incurred for sell of ticket like telephone calls, fax, other office operations etc)

Answer:

16. Will such system help the airline to sell the ticket in quick time than before and will help to serve more customers during the same time frame?

Answer:



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17. What do you think should airline have its own Computer Reservation System in place or a common centralise Computer Reservation System(CRS) like aMadeus or abacus which has information about all the flights from all airlines direct or indirect , connecting or interconnecting in real time ?

Answer:

18. The proposed model helps in giving information about interconnecting flights as well from

first destination to other destination. The airline being a part of a centralise system would

benefit from gaining customers from the sectors where it does not operate because of

interconnecting flight of different airlines. For example a scenario is given below:

Scenario: if a customer wants to travel from Biratnagar to Jumla in same day then the

routes to follow would be like shown in the figure below:

The travel sales agent in Biratnagar will be able to serve the customer instantly in real time for

the Nepalgunj -Jumla sector or Kathmandu -Jumla sector as well, whichever is available if

airline C is a part of centralise system otherwise, it has to contact and wait for confirmation

from Airline C CRS which operates independently.

Airline A

Airline B Birat-

nagar

Kath-

mandu

Nepalgunj

Jumla

Airline A

Airline C

Airline C



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In your opinion will this centralise CRS model will be beneficial for airlines in terms of

1. Gaining more customers

a. Yes b. No

2. A providing quick and instant reservation and booking services

a. Yes b. No

19. In your opinion are airlines ready for such change?

a. Yes

b. No

c. May be in near future

d. Never

20. What challenging factors do find for the implementation of such system?

(Could be any of social, financial, political, legal, or technological)

Answer:

21. Any Comments or suggestions:

Thank you for giving your valuable time and support

Deepak Adhikari

THE END