HP Acquires Open Skies, Inc.; Deal Marks HP's Entry into New Business: Transaction-based Business-Process Services for Small- to Medium-Sized Airlines
Business Wire - October 22, 1998 16:39
PALO ALTO, Calif. and SALT LAKE CITY--(BUSINESS WIRE)--Oct. 22, 1998--Hewlett-Packard Company today announced that it has acquired Open Skies, Inc., a privately held company. Terms of the sale were not disclosed. Open Skies, based in Salt Lake City, provides reservation solutions for small- and medium-sized airlines.
The acquisition marks HP's entry into transaction-based business-process services. Under this new business model, HP systems and Open Skies software would enable small- to medium-sized airlines to achieve extremely affordable airline-passenger reservation services. For a transaction-based fee of just cents per ticket, airlines could save potentially millions per year in ticket-distribution costs. This new business model leverages HP's decades of technical expertise and leadership in running large, mission-critical data centers.
The deal combines the strength of the workhorse HP 3000 platform with the Open Skies software suite, which allows airlines to maximize revenues by ensuring an optimal mix of fares and by slashing the time it takes a reservations agent to make a booking.
"Worldwide distribution and ticketing for airlines is a growing, multibillion-dollar business," said Darryl Jenkins, director, The Aviation Institute at George Washington University, Washington, D.C. "I would estimate that the total worldwide distribution and ticketing cost for the airline industry will be in excess of $35 billion for 1998, roughly 15 percent to 18 percent of total airline revenues."
"Ticket distribution is the second-largest cost of running an airline, right behind operating the aircraft itself," said David Parker Evans, president of Open Skies, Inc. "For smaller airlines, every fare is critical; these airlines' very survival depends on getting the most revenue out of their reservation systems."
"This is an exciting business prospect for all of us, including existing Open Skies customers. It's the first non-airline-affiliated system of this type and a brand new business model for HP," said Harry Sterling, general manager of HP's Commercial Systems Division. "New-business creation is key to our future success, and this new model is a prime example of how we continue to reinvent ourselves in innovative, customer-focused and profitable ways."
The acquisition is part of the HP 3000 business strategy to ensure future growth and innovation. This strategy is centered on a commitment to the IA-64 (Intel Architecture, 64-bit) microprocessor platform and on aggressive, targeted efforts in five key vertical markets: mail order, healthcare, airlines, manufacturing and credit unions.
Open Skies is now an operation hosted by HP's Commercial Systems Division. It will continue to be based in Salt Lake City, and its employees will become HP employees. All of Open Skies, Inc.'s employees have accepted positions within HP.
The Software
Open Skies software consists of the OpenRes airline reservation system, designed specifically for internal use by an airline. This database accommodates ticketed and ticketless travel, and can be used to help airlines reduce costs, monitor sales and market interventions, increase efficiencies, enhance revenues and improve customer service. The product's GUI is designed to reduce the average talk and work time for agents to make bookings, resulting in substantial cost savings and high booking capture ratios.
It also can be used by travel agents as their front-end to OpenRes.
Open Skies RMS is a state-of-the-art revenue management system designed for small and medium-sized air carriers. The system integrates directly with Open Skies OpenRes reservation system to take advantage of the full breadth of information contained within OpenRes. It includes sophisticated forecasting, overbooking and optimization models to ensure maximized system revenues. Its powerful analysis and reporting tools allow users to pose "what-if" scenarios for making sound capacity-control decisions.
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