The Unlikely Union of Sabre and Farelogix

Let’s take a trip way back to February 2013.  Right around the time that the American and US Airways merger was announced, I headed out to Florida for a media day with Farelogix. If you had told me then that just over five years later, the company would be acquired by Sabre, I would have asked if the swampy Florida heat had made you delusional.  Yet here we stand today with Sabre having decided to buy Farelogix for $360 million.  I spoke with Farelogix CEO Jim Davidson to learn more about how this all happened, and what it means for the future.

Farelogix has long built tools to help airlines merchandise their offerings in a way that Global Distribution Systems (GDSs) never did.  (You can see some examples from this media day post.)  If we go back a few years, the airlines were mad at the high rates they were paying GDSs, especially since in return they were getting sub-par functionality.  GDSs were ripe for disruption.  Airlines liked what Farelogix could do, and that had to make the GDSs nervous.

See, the GDSs were built in a world where price and schedule were all that mattered.  And that price was all-inclusive.  As airlines moved to an ancillary model, the GDSs didn’t bother trying to keep up.  Instead they stuck to their guns and tried to use their market power to stymie innovation.  Sabre was a leader in that effort.

Back in 2013, you wouldn’t be corrected if you said Sabre and Farelogix were enemies.  Sabre may have wanted Farelogix gone, but Farelogix didn’t feel the same way about the GDSs.  As far as Farelogix was concerned, it was up to the GDSs to decide if they wanted to take part in that vision or not.  As Jim explained it…

My vision is the airline is creating the offer, controlling the offer, deciding where they want to send the offer. I believe that’s very consistent with the direction the industry is going in.

If Sabre wanted to become a part of that process, then great.  If not, well, Sabre would find itself left out.  The success of Farelogix didn’t require the GDSs to die.  It just required the GDSs to change, and that was undoubtedly a more difficult ask.

With the adoption of IATA’s NDC standard, Farelogix and others were well-positioned to push the issue, because, again, it’s what the airlines wanted.  Before NDC, airlines were setting up direct connections with travel sellers to improve retailing and merchandising opportunities, but there was no standard.  They created these unique, one-to-one relationships that made it hard to get everyone on the same page.  With NDC, a standard emerged that allowed everyone to develop toward the goal together. 

The GDSs should have seen this as an opportunity.  They easily could have realized that even with direct connections, there was a need to aggregate and operate a platform for bookings. Instead, they spent far too much time fighting the new direction, and they risked becoming irrelevant in the long run.  Amadeus and Travelport cracked first, but Sabre held firm for way too long.

Change accelerated once Sean Menke took the reins at Sabre at the end of 2016.  Sean had an airline background, and he knew Sabre would have to change for it to have a long-term future.  Actually turning the old battleship wasn’t easy, but this acquisition certainly points to a successful change of course.

Jim says that the relationship started to thaw with Sabre about a year and a half ago.  Sabre had begun trying to work more closely with its airline partners to help sell travel the way they actually wanted to sell it. That sounds obvious, but within Sabre it was a radical thought.

So it was that Sabre and Farelogix started working together to help an airline integrate its Farelogix tools.  Jim says ” [we] found ourselves engaged in a lot of tech discussions on how to deliver.”  And these discussions were friendly because they had a joint goal of pleasing the airline partner.

After some time, Jim says they both “realized there were limitations as two companies.  You can only go so far.”  Discussions about how much closer they could collaborate accelerated, but Jim remained concerned. 

[There was] a lot of questioning on my part on how they saw the future of NDC, how they saw the future of the airline controlling their offer.

But the more Jim heard Sean talk about his vision for Sabre as a retailing platform, one that was more airline-centric, he started to believe that Sabre was serious.

At the same time, he realized Farelogix had a daunting task ahead of itself in trying to scale.  Most of its customers were in the US, but it was growing. He knew the company could scale globally if needed, but it wouldn’t be easy.  Once he felt that Farelogix and Sabre were on the same page, he knew that an acquisition could solve that problem.

Sabre has people and data centers around the world.  It knows how to provide local support, and it deals with some of the challenges like data privacy that vex every company that handles sensitive data.  This was a way for Farelogix to be able to scale quickly and relatively easily.

In the last month, things accelerated quickly, and the deal was done around 2:30 in the morning with an announcement just a few hours later. 

Farelogix will be a standalone subsidiary (for now) under the Sabre Airline Solutions group.  That’s the right place for it, because that’s the group that is supposed to be building things that the airlines want.  Jim will continue to run it, though now he’ll have a much greater arsenal behind him.

This should be viewed as good news by just about everyone. It should mean that Sabre has accepted its place as an aggregator of airline content, an enabler of airline merchandising.  Instead of controlling the relationships between airlines and suppliers, Sabre can facilitate them.  Farelogix has been trying to do that for years, and now it has a very unlikely owner with the resources to push this much further, much faster.

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3 Responses to The Unlikely Union of Sabre and Farelogix

  1. Those old reservation systems would be to hard to tweak to 21st century life I would think, and a new start from scratch web based system would be the way to go.

  2. J Walter says:

    Ah, now we know what Sabre wants us to think!

    What do Amadeus and Travelport think about pumping carriers’ NDC traffic through Sabre? What does AA think about their good friends Sabre (who AA/US both sued in the last 10 years) grabbing their Farelogix goose? And LH, who built their distribution strategy on Farelogix and is being sued by Sabre in Texas over LH’s Farelogix direct connects?

    There are real questions here. So far, Farelogix and Sabre are doing a great job of distracting Cranky, BTN, the Beat, Skift, Phocuswire and others from those real questions.

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