Case Study: American Airlines' Sabre System for Competitive Edge

This case study delves into the American Airlines Sabre System, a pioneering computerized reservation system developed in collaboration with IBM. Originating from a chance encounter in 1953, the Sabre system revolutionized airline bookings, replacing manual processes with an efficient electronic system. Sabre provided American Airlines with a significant competitive advantage, leading other airlines to develop their own systems. The system's evolution included direct access for travel agents in 1976 and online access via easySabre in 1995. The introduction of revenue management practices further enhanced its impact. Sabre's success underscored the importance of continuous innovation and value addition. Today, the Sabre system continues to drive innovation, and its principles are widely adopted in the industry. Desklib provides this case study and other resources for students.

Running head: A CASE STUDY OF AMERICAN AIRLINES 1
A Case Study Of American Airlines
Student Name
Embry-Riddle Aeronautical University

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Abstract
Over five decades ago, facilitating seamless and efficient reservations for travelers was the
achilles heel of many airlines. The American Airlines Sabre System - which was developed by
American Airlines and IBM - was a key breakthrough in the sector of industry data processing.
The system was designed to address issues surrounding American Airlines’ passenger sales,
control of seat inventory and other daily reservations processes. Today, the utilization of
information technology though this reservation system has helped American Airlines to gain a
competitive edge at the expense of other airlines. In light of this, customers continue to
experience efficient operations as far as reservations are concerned and on its part, American
Airlines is striving to ensure that the Sabri system continues to drive innovation when it comes to
airline seat reservations.

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The American Airlines Sabre System
Sabre came as a result of a chance meeting between IBM salesman, R. Blair Smith and
the president of American Airlines, C.R. Smith in 1953 (Sabre, 2017). The two were seated next
to each other during a flight from Los Angeles and decided to engage themselves in a
conversation. Back then, airline reservations were hand-written on cards and later sorted out in
boxes. As the industry expanded this became an untidy mess (Sabre, 2017).. The two would go
on share their contacts and later decided to join hands and come up with a computerized
reservation system (Sabre, 2017).
The Sabre reservation system came about in 1960, borrowing from the lessons drawn
from IBM’s SAGE air defense computer system of the 1950s. In the beginning, Sabre only
operated in Briarcliff Manor, New York on two IBM 7090 mainframes. Come 1964, the system
was already processing about 7500 reservations per hour (Sabre, 2017).. By contrast, the average
period to handle a reservation in the previous manual card system was about 90 minutes. The
new electronic system cut the time to seconds (Sabre, 2017).
For American Airlines, Sabre turned out to be a competitive advantage and prompted
other airlines to create their own reservation systems – most also turned to IBM (Barney & Ray,
2015). In 1976, travel agents were allowed to make reservations directly. As such, the system
had become so advanced to a point where it was capable of storing one million airfares. In 1995,
American Airlines launched easySabre to allow customers access to the reservation system over
the internet as well as other services such as CompuServe (Barney & Ray, 2015). In 1996,
American Airlines continued to improve Sabre by creating the first ever revenue management
system which allowed airlines to maximize the airfare base on how a seat was sold (Barney &
Ray, 2015).

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The huge success of Sabre created a belief that to retain customers, it was important for
businesses to embrace continued change. Customers are constantly on the look out for new
concepts as well as better services and introducing Sabre enabled American Airlines to enjoy a
competitive advantage at the expect of other firms who had not introduced such an
innovation(Vinod, 2016). Furthermore, the launch of Sabre brought the need for continued value
addition not only to its customers but also employee and other stakeholders (Vinod, 2016).
The revenue management practices introduced by Sabre are still widely adopted today.
Travelocity, the American travel website, is powered by Sabre. When it launched, it became the
maiden Global Distribution System (GDS) to cater for the needs of customers in search of an
online booking engine (Barney & Ray, 2015). Every step of the way, Sabre opened the eyes of
many people as to how computers could be beneficial when it came to handling transactions in
an instant. By 1983, 43% of revenue for airline computer reservation systems came from Sabre
(Barney & Ray, 2015).
ICT is also vital for American Airlines as far as monitoring performance and forecasting
is concerned (Vinod, 2016). In fact, it assists in determining which markets the airline should
penetrate while also providing on overview of how it can endear itself to customers in these
markets. The Airline company has also incorporated ICT in key business functions such as route
planning, crew planning, choosing of flights, finding out the frequency of service and lastly,
fostering of relationships with partners (Vinod, 2016).
Furthermore, American Airlines has achieved competitive advantage which owes much
to company’s move that involves the running of sophisticated algorithms which are mostly used
to come up with strategic pricing measures as well as displaying profitability and management
output of the company (Vinod, 2016). Moreover, the branding and communication between

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sections of the company is vital at a strategic level. Through adoption of ICT, branding as well as
continuous communication have been streamlined and made efficient (Vinod, 2016).
Conclusion
The coming together of American Airlines and IBM to build the first reservation system
took airline booking to a whole new level. On it’s part, American Airlines enjoyed a competitive
advantage before new rivals decided to follow suit and launch their own reservation systems.
Through Sabre, three processes namely: management reporting, customer sales and reservation
services became more seamless and efficient. To date, American Airline’s Sabre system is still
vastly used to spur innovation and continues to expand in line with emerging technologies
(Vinod, 2016).

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References
Barney, J., & Ray, G. A. U. T. A. M. (2015). How information technology resources can provide
a competitive advantage in customer service. Planning for Information Systems, 3(2),
444-460.
Belobaba, P., Odoni, A., & Barnhart, C. (Eds.). (2015). The global airline industry. John Wiley
& Sons.
Sabre. (2017). The Sabre Story. Retrieved from Sabre: https://www.sabre.com/files/Sabre-
History.pdf
Vinod, B. (2016). Evolution of yield management in travel. Journal of Revenue and Pricing
Management, 15(3-4), 203-211.