Amazon enters flight bookings. Is this the beginning of the biggest ever potential upheaval in airline distribution?

21 May, 2019

For several years since the advent of the large data aggregators like Google, Facebook, Apple and Amazon, there has been speculation about the potential for them to disrupt the whole process of selling air tickets.

Ever since it bought fares originator ITA Software, Google has fiddled around the edges with its market presence in ticket sales. So far at least, the search engine however seemingly prefers to sit on the sidelines and pluck revenue from airlines paying for position, as consumers happily provide their data by searching for a flight.

IMAGE -Sample of a search on google for 'Sydney-Los Angeles flight'

But Google hasn't gone the next step by offering direct sales, instead acting like a metasearch engine, referring searchers to the airline website to complete the sale. Through Google Maps it also allows consumers to book accommodation and other related travel products, in the process adding vastly to its store of consumer data.

Now however, Amazon has embarked on a venture where it is selling domestic tickets in the Indian market by partnering with Cleartrip, an online travel agent. So Amazon effectively works like a metasearch engine; but, instead of referring customers to a variety of ticket sellers, sells only through Cleartrip.

According to media company, Skift, the fares offered are not significantly discounted from other providers, but Amazon users, including Amazon Prime, get a cash back payment on each transaction. This ties into and builds on the existing loyalty of Amazon app users.

A simple market access method for Amazon

For Amazon the arrangement offers an easy entry to the travel market, providing access to its millions of existing commodity-buying customers and enhancing its range of products - and its ability to collect valuable data on its customers' expenditures.

By partnering with an OTA - in this case a mostly local India/Middle East operator - it offers the basis for a model that can easily be extended into other markets. All that is needed is to do a deal with other relevant OTAs.

The dynamics are attractive for the OTA, latching onto the power of Amazon's mighty customer database.

For now the threat is mostly to other metasearch engines, but….

By dipping its toe in the Indian market, Amazon is achieving two things:

  • first of all, with very little outlay it is conducting an experiment to test the power of the model (while also expanding its Indian market footprint). If it works, expect this to extend to other markets and other partners;
  • secondly, and perhaps more importantly, it is setting a match to a fire that could push other major players like Facebook into similar activities. In fact it really is only a matter of time, not of whether.

The immediate market threat of these developments is to other metasearch engines. But the market power and presence of these megaliths greatly outweighs the marketing strength of any individual airline. Amazon had sales of over USD230 billion in 2018, over 10 times the size of a substantial airline; but more importantly, the massive knowledge bank of intimate information about its nearly 200 million users and its ability to use that data.

Every step taken down this track gets a little closer to creating the ability to dominate air travel sales - and to disrupting the existing framework.