15/03/10, 11:22:43 EDT

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Panic as Galileo deal rumours fly around Uganda travel industry

nationmedia.com

Trouble is brewing in Uganda’s travel industry in the wake of reports that the local franchise for Global Distribution System (GDS) vendor Galileo International has been quietly contracted out to one of the bigger travel agencies in the country.

Galileo is the traditional GDS vendor in Uganda, but has recently faced competition from Amadeus, which entered the market about four years ago. The GDS is an online ticketing and reservation system that allows travel agents to access the systems of most international airlines and not only book tickets but also specific seats, special meals, and other requests. In recent times, the market has been saturated with reports, vehemently denied by Galileo International but drawing an ambiguous response from the agency in question, that the franchise has been contracted out to the latter and another travel agent in Kampala. This has kicked off a frenzy of enquiries as many travel agents consider switching to rival GDS provider Amadeus. The agency that has allegedly acquired the franchise through the back door is linked to a controversial businessman who acquired majority shares in the agency in June 2005 as part of a bailout for the firm, which had collapsed under unclear circumstances. According to several travel agents The EastAfrican spoke to, allowing the agency or any other direct player in the travel trade to run the franchise would not only mean travel agents contributing to the revenues of a competitor but hand the franchise holder unrestricted access to client information, giving it an unfair advantage. “There are no ifs here. The choice is between fuelling a competitor and making up your mind to move to a system where your transactions will be more secure,” said Let’s Go Travel Uniglobe managing director Joan Kantu Else. Uganda Airlines liquidator Bemanya Twebaze told The EastAfrican that Galileo International took over direct operations of the Ugandan franchise in 2005 from the national carrier, which managed the service before it was dissolved. Agents are reporting improved services on the back of capital injections by Galileo, which has gone ahead to provide hardware and software to agents who sign exclusivity agreements with it. Galileo International commercial director Shashi Menon denied the reports and insisted they were still waiting for a credible offer from anybody in Uganda. “It is not true that we have given the franchise to anybody at the moment; we are still open to a big distributor in Uganda who can come up with a good business plan,” he said. However, the reaction of a senior attorney in Kampala, who is listed as one of the directors of the travel agency in question, was more ambiguous. “I am not sure that I can say yes or no at this time, so I am not making any comment,” he said in response to enquiries from The EastAfrican. The Galileo franchise, worth nearly $5 million in gross annual revenues, has been the object of acquisition manoeuvres by various parties since the liquidation six years ago of the defunct national carrier Uganda Airlines, which operated it. At one time during the Uganda Airlines liquidation, TUGATA, the umbrella body representing Ugandan travel agents, made a bid for the franchise but, according to chairperson Eugene Windt Nsubuga, were rebuffed on the grounds that there would be a conflict of interest in their operating it. Now industry players argue that the agency allegedly granted the franchise can take advantage of owning Galileo to access market data on the competition. “There is nothing that they cannot see — from which clients you have to what you are offering. This is valuable information in terms of knowing where to go for business and the way you train your sales staff,” Ms Kantu Else said. Curiously, Mr Menon says it would be impossible for a franchise holder to access information on competitors and that TUGATA is still eligible to contest for the coveted franchise if they are interested. GDS vendors provide airlines, travel agents and hotels the connectivity to make bookings and sell reservations. Typically, travel agents don’t pay a user fee and it is the airlines that pay a negotiated charge per sector. [Sector is industry jargon for flight legs on a route. For example, Entebbe-Nairobi-Johannesburg is two sectors]. The vendor will in turn pass on a portion of the revenue to the franchise holder. Before they are provided free computer terminals, agents are also made to sign user agreements committing them to generate up to 200 sectors a month for each terminal installed. Uganda Airlines is reported to have been earning monthly revenues running into hundreds of thousands of dollars when it ran the franchise. Unless Galileo moves to reassure the market, it stands to lose its leading position in a market that is estimated to have generated nearly one million sectors in 2007.

 Printable Version  | published Feb 25, 2007