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What the Google-ITA Deal Really Portends
Much of the discussion about Google's bid to buy ITA Software, including here, has been limited by the lack of understanding all around about how airline search and reservations actually work now, and what it is exactly that ITA Software does. Travel expert Edward Hasbrouck wrote a detailed 3-part piece on his blog explaining the back story, what ITA Software does, and what it means for travelers. "...because CRS/GDS [Computerized Reservation Systems or Global Distribution Systems] companies are generally invisible in their intermediary role (and currently all owned by groups of private equity investors, so they need not report publicly on their finances or operations), few analysts outside the travel tech industry know how to interpret the implications of Google's decision to invest $700 million in this sector. Frankly, I'm not at all sure Google itself understands what ITA Software does (and doesn't) do, and what they are getting for their money. ... What will this deal mean for travelers? The short answer is that it is likely to be a bad thing for travelers ... because it is likely to exacerbate the trend toward personalized and less transparent pricing of airline tickets (and other travel services) and the de facto disappearance of key consumer protection principles embodied in the definition of a common carrier and the requirement for a published tariff applicable equally to all would-be customers complying with the same rules."
Posting anonymously as I work for an airline and wrote a fair bit of the code which keeps ITA's software in realtime.
ITA's core product is a fares shopping engine. Basically, as laid out in the blog posts, the price you pay for your seat is a function of an airline's published fare for a particular "fare class" (there are 26 fare classes per flight in the SABRE GDS, with about 21 functional) and the willingness of the airline to sell you a seat in that class (due to seat allocation). So what happens is that as seats are purchased in real-time, ITA's software must get an update from the airline in real-time so that it constantly knows whether a particular fare is still available to be purchased. Otherwise, the fare you are presented would be rejected by the GDS when you attempt to make your purchase.
This real-time querying is a huge coordinated effort between the airlines and ITA, which basic functionality being that the airline will publish fares to ITA nightly (with push adjustments to these fares as airline analysts make changes throughout the day) and real-time seats sold information, with all information flowing as compressed XML via standard messaging protocols.
Obviously in a scenario like this, there is momentary lack of synchronization between the GDS and ITA's shopping engine, and in these windows exist the possibility for a failed booking as the GDS deems a class non-sellable but ITA's database has yet to receive the pushed data. The major goal of ITA and the airlines in this scenario is to reduce the booking failure rate to 0%, which is of course unattainable, but each percentage point north of this counts as major lost revenue to the airlines. Anything north of 5% booking failures is considered unacceptable and generally sends the rats scurrying in attempts to resolve the synchronization issues.