Google spent less than $2bn to buy 79 businesses in 2011, the largest being its $700m cash purchase of flight data specialist ITA Software. "By combining ITA's expertise with Google's technology, we'll be able to develop exciting new flight search tools for all our users," Google says.

Within five months of the deal closing in April 2011, Google launched Google Flight Search (GFS) in the USA. GFS, which despite being live is officially still in testing, searches inventory and fares from airline websites, giving users a direct link to the airline's booking page. At the moment GFS is limited to major airlines and key domestic routes, but it includes filters so users can search by budget, departure times and location-specific tools. In its current form, it presents a clear idea of how powerful it might be once more airlines become involved. GFS does not have a presence in Europe, although Google's official soundings promise an international roll-out.

Ian Tunnacliffe, an independent IT consultant, believes Google is serious about becoming a major player in airline distribution. "Arguably, with so many large online travel agencies (OTAs) dependent on traffic from Google's natural and paid search, it already is," he adds.

In the long run GFS could, Tunnacliffe says, give airlines the ultimate convergence between revenue management and customer relationship management. He says recent changes to Google privacy - amalgamating policy across its products to collect more data about users - means it can "generate targeted offers based on users' preferences". He adds that after buyin ITA, Google will be able to "get under the skin of airlines' revenue management".

Google has already made huge inroads into established models in sectors such as images, newspaper archives, scholarly papers, books and geographic data "by organising hard to find data". Its entrance into travel and flights could have the same impact.

Chief executive of travel distribution software supplier Datalex, Cormac Whelan, sees little impact so far, citing its low-key launch, its promotion of commoditisation and that airlines - the owners of the product - have not yet decided how to adopt it. "I think airlines will be a lot smarter and wiser this time around and will be less likely to let somebody else control their distribution. Longer term we think it will be a good feeder channel into the airlines direct disribution strategies."

Hugo Burge, chief executive of Cheapflights Media, says the search giant "encroaching on our turf is flattering", but notes Cheapflights operate in a different space. "Currently, GFS is only working with airlines direct," he says, "whereas we work with partners, airlines, OTAs, traditional agents. One issue with GFS is that it does not offer the range of content which we believe the consumer wants."

He adds: "GFS hasn't really made a mark in the USA, but I think anyone breathing a sigh of relief should be careful - Google is in it for the long-term."

Europe presents different opportunities and challenges for Google, where it has a greater market share than in the USA., a US lobby group, says: "Google controls more than 79% of search in the USA and up to 94% in some EU countries."

Industry bodies in Europe are also concerned about monopoly issues. The European Technology and Travel Services Association is the trade body for independent travel distribution. Secretary general Christoph Klenner expresses concerns about Google becoming "a gatekeeper rather than a gateway" by limiting, rather than providing, choice to the consumer via a European version of GFS.

"Our members include Travelport, Amadeus and Sabre, and have to operate under strict rules as they fall under computer reservation systems [CRS] regulations. This guarantees transparency and a level playing field. GFS would not fall under the current CRS rules, which is dangerous for the consumer."

Both Klenner and Tunnacliffe suggest if and when GFS emerges in Europe, it might attract the attention of consumer-focused competition regulators in Brussels. Europe also presents operational difficulties for GFS. The US site is entirely dependent on ITA, which has a negligible presence in Europe. When buying ITA, Google said ITA's "European revenues aren't large enough to warrant European regulatory review".

Burge says the US air market is more dependent on published fares than Europe, and the European inventory was not set up to be shoehorned into the ITA model as it exists. Cheapflights Media has its own metasearch business, Momondo, which it bought days before Google's ITA deal closed.

The economics of GFS in the USA is a closely held secret but, as Tunnacliffe points out, Google "isn't a charity". Burge was more explicit: "Google is putting a bigger emphasis on paid search across its entire business, and it's hard to differentiate this strategy from the roll-out of GFS."

Source: Airline Business