State of the GDS, Part 1: The Weapon Became Infrastructure

Eric Marketts

It all started with A Tale of Two Smiths .

Eric Marketts

In 1953, R. Blair Smith, an IBM salesman, took his seat on an American Airlines flight from Los Angeles to New York, and the man next to him turned out to be C.R. Smith, the president of American Airlines. By the time that plane landed, the two Smiths had sketched the idea for a machine that would end up deciding how the entire world books travel.

Steph Nell

And seventy years later, that machine is the thing every conversation in this industry is quietly circling. NDC, Offer and Order, AI agents. Every one of those fights is really a fight about whether that machine survives, and who controls what replaces it.

Eric Marketts

So we're doing something a little different. This is a special series. Four parts. Not the Monday news rundown. We're going to take the global distribution system apart and look at it properly, because you cannot understand where airline distribution is going if you do not understand the thing it is trying to move past.

Steph Nell

Welcome to The V1 Airline Retailing Report. I'm Steph Nell.

Eric Marketts

And I'm Eric Marketts. We are the AI avatars for The V1 Advisory Team - human crafted insights and AI executed.

Eric Marketts

This is The State of the GDS 2026: Distribution at a Crossroads feature — a special four-part series. Today is Part 1, which lays the foundation - The Weapon Became Infrastructure . What the GDS actually is, where it came from, and what it gave this industry. Then across the next three parts we take each of the big three in turn. Amadeus, Sabre, Travelport. Three companies, three very different bets on what comes next.

Steph Nell

But none of that lands unless you understand what the GDS actually is. And here is what most people get wrong. The GDS did not start as neutral infrastructure. It started as a weapon. The fairness and the openness everyone credits it for now were forced on it later, by regulators, after a war most of the industry has forgotten. So this is not a nostalgia tour. It is the story of how a weapon became the industry's shared pipe, why that legacy was won and not given, and why the same fight is about to happen again.

Eric Marketts

One quick thing before we get into it. This series is taking over the show. For the next four Mondays, this replaces our usual news rundown. One part a week, each one building on the last. Part 2 lands next Monday. So subscribe to The V1 Airline Retailing Report right now — Apple Podcasts, Spotify, YouTube — and every part shows up in your feed the moment it drops. Miss a Monday and the next part will not fully land. This story runs week to week.

Eric Marketts

Start with the problem in 1953, because it's almost quaint. How did an airline keep track of who was booked on which flight?

Steph Nell

Manually. Literally. American Airlines ran something called the request-and-reply system. A wall of seat cards, a team of people on phones and teletype, and a clerk physically pulling a card to see if a seat was open. It worked at small scale and it fell apart as flying grew. The error rate climbed, the labor cost climbed, and the bigger the airline got, the worse the problem got. Growth was the enemy.

Eric Marketts

And the fix came from an unlikely place. A military system.

Steph Nell

This is the part people forget. IBM had just built a system for the U.S. Air Force called SAGE, Semi-Automatic Ground Environment. It was a Cold War air-defense network, designed to take radar data from all over the country and put a single real-time picture of the skies in front of a controller, so the controller could act on it instantly. Real-time data, central processing, a live terminal that a human reads and acts on. IBM looked at that and realized an airline reservation is the same shape of problem.

Eric Marketts

So they adapted a missile-defense system into a booking system.

Steph Nell

They did. They called it SABRE. Semi-Automated Business Research Environment. American and IBM started building it in the late 1950s, and by 1964 it ran American's entire reservations operation. The number that gets quoted is around seven thousand bookings an hour, with near-zero errors, at a time when the competition was still pulling cards off a wall. That was not an upgrade. That was a different category of company.

Eric Marketts

And the rest of the industry could not ignore that.

Steph Nell

They could not. Through the late sixties and into the seventies, every major U.S. carrier built its own version. United built Apollo. The industry called these CRS, computer reservation systems. And here is the key move. In 1976, United started putting Apollo terminals inside travel agencies. American followed with SABRE. That is the moment the airline's internal tool becomes the industry's shared infrastructure.

Eric Marketts

But it almost went a completely different way, and this is the part the polite version of the history leaves out.

Steph Nell

It does. In the mid-seventies the industry actually tried to build one shared, neutral system. It had a name. The Joint Industry Computerized Reservation System. Airlines, travel agents, everyone at the table. One pipe, owned by no single carrier. And in 1976, United walked away from it. United was the biggest airline, so under a shared system it would have carried the most cost and gotten the least edge. So United killed the joint effort and announced it would sell agency access to its own system instead. Apollo.

Eric Marketts

And American did not hesitate.

Steph Nell

American matched it inside a year. SABRE terminals into a hundred and thirty travel agencies. So understand what happened here. The neutral option was sitting on the table, and the two largest carriers torched it on purpose. Because a neutral pipe is worthless to you if your entire advantage is owning the pipe. That choice, in 1976, is the original sin of airline distribution. The bias, the lawsuits, the fees, the fifty-year fight that follows, all of it starts right there.

Eric Marketts

Unpack why that matters, because that's the hinge.

Steph Nell

Because the second a travel agent has an airline's terminal on the desk, that terminal is the marketplace. The agent books what is on the screen. It is fast, it shows live availability, it issues the ticket. No more phone calls to each airline. And whoever owns the screen owns where the agent's attention goes. The terminal stopped being a back-office machine and became the storefront for the entire travel agency channel.

Eric Marketts

Then 1978 happens. Deregulation. The Airline Deregulation Act. Why is that the accelerant?

Steph Nell

Because before 1978, fares were set by the government. The Civil Aeronautics Board told airlines what they could charge. After 1978, airlines competed on price for the first time, and prices started changing constantly. Now multiply that across thousands of routes and thousands of travel agencies, all of whom need the current fare, right now, to sell a ticket. There is only one thing on the desk that can deliver a fare that changes by the hour to every agent at once. The CRS.

Eric Marketts

So deregulation didn't just allow the GDS to matter. It made it necessary.

Steph Nell

It made it load-bearing. Price competition is impossible at national scale without a system that distributes live fares and availability to every seller in real time. Deregulation lit the fuse, and the CRS was the only thing that could carry the explosion.

Eric Marketts

But there was a problem baked in, and this is where it gets uncomfortable. The airline owned the screen. So whose flights showed up first?

Steph Nell

Theirs. Always theirs. It had names. Screen bias. The halo effect. American's SABRE put American at the top of the screen. United's Apollo put United at the top. And it worked because of something brutally simple about people. Agents booked off the first screen the vast majority of the time. Nobody scrolled. So the airline that owned the terminal did not have to win on price or schedule. It just had to be first in line on its own machine.

Eric Marketts

And the numbers on that were not small.

Steph Nell

They were enormous. When an agency switched its terminal from SABRE over to Apollo, United saw bookings from that agency jump about ten percent. Same flights, same fares, same city. Ten percent, purely from being at the top of a different screen. Multiply that across thousands of agencies, and display bias was worth millions in pure margin to whoever owned the system.

Eric Marketts

And then American and United figured out the second half of the business, which was even better.

Steph Nell

They charged the other airlines to be there. If you were a competing carrier, you had to be in SABRE and Apollo, because that is where the agents were. And the owner charged you a booking fee for every segment. So American and United made money twice. Their own bookings went up from the bias, and every rival paid them a toll just to appear on the screen, ranked underneath them. They owned the marketplace and they taxed everyone standing in it.

Eric Marketts

And this is where Bob Crandall comes in. Because most executives caught running a scheme like that would deny it. Crandall ran American. Crandall did the opposite.

Steph Nell

He defended it. Out loud. To Congress. In 1983 he was hauled in front of lawmakers investigating exactly this, and he did not pretend the bias was an accident. He told them, close to verbatim, that the preferential display of American's flights, and the resulting increase in American's market share, was the competitive raison d'être for having created the system in the first place.

Eric Marketts

Sit with that. He told Congress the bias was the whole point. That American built SABRE in order to tilt the screen. He was not apologizing. He was explaining the business model, and daring them to do something about it.

Steph Nell

And eventually they did. By 1985 a Department of Justice report to Congress laid out the scale of it. American and United together controlled roughly three-quarters of all the travel agency revenue running through these systems. Two airlines. Three-quarters of the channel. So the regulators moved. In 1984 the rules came in to ban display bias and force neutral ranking, and they kept tightening through the eighties as the airlines invented new tricks, like a sneakier second screen. That long fight to make the screen neutral changed everything about the industry's structure.

Eric Marketts

How so?

Steph Nell

Because once the system has to be neutral, owning it as an airline gets complicated, and the antitrust pressure mounts. So through the late eighties and nineties the airlines spun their systems out into independent companies. Amadeus was founded in 1987 by a group of European carriers, Air France, Lufthansa, Iberia, SAS. Sabre eventually separated from American. Galileo was a European joint venture — nine carriers: British Airways, KLM, Swissair, Alitalia, Austrian Airlines, Sabena, Aer Lingus, Olympic Airways, TAP Air Portugal. In 1992 Galileo absorbed Apollo, United's system. Worldspan was a different line entirely — Delta, Northwest, and TWA, formed in 1990 out of Delta's DATAS II system and the PARS partnership. All of them, Apollo, Galileo, Worldspan, eventually consolidated into what becomes Travelport. And outside the Big Three entirely sits TravelSky, China's state-owned system, quietly clearing the bulk of one of the world's largest aviation markets. Not our story here, but no honest map leaves it off. The airline-owned CRS becomes the independent GDS. A neutral marketplace that aggregates the inventory of competing airlines and delivers it through one terminal to any agency on Earth.

Eric Marketts

And here is the irony that still lands in 2026.

Steph Nell

SABRE, the tool American built to tilt the screen in its own favor, eventually grew so valuable that as a standalone company it was worth more than American Airlines itself. The reservation system outgrew the airline that invented it. Crandall built a weapon to win the airline business, and the weapon turned out to be the better business.

Eric Marketts

And here is the part that matters for the whole arc. That neutrality, the thing we now treat as the GDS's defining virtue, was not a gift from the people who built it. It was taken from them.

Steph Nell

Forced out of them. Crandall did not wake up one morning and decide to rank flights fairly. Regulators made him. The bias got banned. The second screen got banned. Antitrust pressure made airline ownership untenable, and only then did the systems get spun out into something neutral. So when we call the GDS the Switzerland of distribution, every carrier's content in one pipe, ranked by rules nobody can rig, remember how Switzerland got there. It was imposed. Neutrality is the product the GDS sells. It is also the peace treaty that ended a war.

Eric Marketts

And that distinction is the whole point of this episode. Because the things the industry now thanks the GDS for were not designed in. They were the dividend of disarmament.

Eric Marketts

So now we can ask the real question, and ask it honestly. Once the weapon was disarmed and the pipe was forced neutral, what did the industry actually get out of it? Because this is the part that is genuinely worth respecting, and it is easy to miss in 2026 when everyone is trying to route around the GDS. The legacy is real. It is just not the legacy of a benevolent founder. It is the legacy of a captured weapon turned into public infrastructure.

Steph Nell

And four things came out of that, and they are real. First, price transparency at scale. A two-person travel agency in Detroit had access to exactly the same fares, on exactly the same screen, as a giant multinational corporate travel department in New York. That is extraordinary. The GDS democratized access to inventory. The little guy could compete because the little guy could see everything.

Eric Marketts

Second?

Steph Nell

Real-time availability across thousands of routes and hundreds of airlines at once. Before the GDS, comparing carriers meant separate phone calls and separate systems. The GDS put the whole market on one screen, live , so a traveler could actually be shown the best option instead of whatever one airline happened to answer the phone fastest.

Eric Marketts

Third is the boring one that nobody thanks it for.

Steph Nell

Settlement. And it is the most underrated. The GDS sits on top of the industry's financial plumbing, BSP and ARC, the Billing and Settlement Plan and the Airlines Reporting Corporation. That is the machinery that lets a travel agent in one country sell a ticket on a carrier from another country and have the money move correctly between all the parties. Without that, global ticketing through agencies is operationally impossible. The GDS made a planet-sized settlement problem tractable, and it did it so well that nobody ever thinks about it.

Eric Marketts

And there is a quieter twin to that settlement plumbing, and nobody thanks it for that one either.

Steph Nell

The language. For the GDS to put every airline on one screen, everyone had to speak the same technical tongue. That tongue is EDIFACT. A messaging standard from the eighties that became the lingua franca of global distribution. Every availability request, every booking, every ticket, moving among thousands of airlines and agencies in one shared format. It is clunky, it is decades old, and it works at planetary scale precisely because everyone agreed to speak it. Standardizing the language is its own kind of gift. And hold that thought, because when we get to NDC in the coming weeks, understand what NDC actually is. It is the industry trying to replace that language with a modern one. The fight over the future of distribution is, underneath everything, a fight over which language the machine speaks.

Eric Marketts

Now let me push on all of this, because here is where the thesis gets uncomfortable. Transparency. Settlement. A shared language. The GDS built those, deliberately. Nobody forced BSP or EDIFACT on anyone. So how is that not a gift? How is that the story of a weapon?

Steph Nell

Because building the function and sharing it fairly are two different things, and only one of them was voluntary. The GDS engineered all of it, and it was impressive engineering. But it built every piece to serve the owner first. Transparency that ranked American on top. A pipe competitors had to pay to stand inside. The plumbing was real. What made it serve everyone equally, the neutral ranking, the level screen, that part was taken, not given. So yes, they built the machine. They did not choose to point it at the whole industry. Regulators did that.

Eric Marketts

Built it, then forced to share it. That is the tell. And it brings us to the last gift, the one airlines like least.

Steph Nell

Leverage. Collective bargaining power for agencies. A single small agency has no negotiating position against a major airline. But the GDS aggregates thousands of agencies into one channel, and that gives the channel commercial weight no individual agent could ever have. And notice the reversal, because this is the heart of the whole story. The exact same system that two airlines once used to tilt the screen in their own favor became, once it was forced neutral, the thing that gave ten thousand small agencies leverage against those same airlines. The barrel got turned around. The weapon ended up protecting the people it was first aimed at. Travelers benefited from that tension whether they knew it or not.

Eric Marketts

So put it together. What did the GDS build?

Steph Nell

It made travel a genuinely competitive, accessible, global market. Price transparency, real-time choice, a shared language, working settlement, and a balance of power between sellers and suppliers. But here is the honest version of the legacy. The GDS did not hand the industry those things out of goodwill. It built a weapon, the weapon got too powerful, the regulators broke it open, and what was left, once it could no longer be used by one player against the rest, became the most important neutral infrastructure travel has ever had. A weapon that became infrastructure. That is the GDS's real legacy, and it is a bigger story than nostalgia. It is earned.

Eric Marketts

But there is one thing the regulators never touched.

Steph Nell

The meter. They banned the biased screen. They never banned the toll behind it. The GDS still charged the airline a fee for every segment, for distributing the airline's own inventory. And here is the part that still stings in 2026. When airlines cut agent commissions to zero in the early 2000s, the GDS raised the incentives it paid agencies to keep them loyal, and it funded those incentives out of the airline's segment fee. So the airline pays the toll, and then pays for the loyalty program that keeps the agency booking through the toll. Neutrality fixed the ranking. It never fixed who pays. That unpaid bill is what NDC is really trying to settle.

Eric Marketts

Here's the turn. Every function you just described, transparency, aggregation, settlement, neutral ranking, is now being rebuilt somewhere else. NDC moved content control back toward the airline. Offer and Order moves the booking record into the airline's own systems. And AI agents are starting to do the shopping and the comparison that used to happen on the GDS screen. So the question for this whole series is simple to ask and hard to answer.

Steph Nell

Does the function survive, and in whose hands. Because notice, the GDS's jobs are not going away. Somebody still has to aggregate competing content, range it neutrally, settle the money, and give the buyer a fair view of the market. Those jobs are permanent. The open question is whether the company called a GDS is the one that keeps doing them, or whether an airline, or Google, or an AI agent, takes them over.

Eric Marketts

And this is where the history stops being history. Because we have seen what happens when one player controls the screen. They rig it. That is not cynicism, that is the documented record. Crandall told Congress it was the whole point. It took the government a decade of antitrust to pry that screen open and force it neutral.

Steph Nell

And now control is concentrating again. NDC and Offer and Order pull the screen back toward the airline. Google and the AI agents are building screens of their own. So the question this series asks is not only does the function survive. It is does it stay neutral, or are we watching the industry quietly re-run 1976, with new owners and a new weapon. The original sin was never paid off. It was just regulated into a truce. And truces end.

Eric Marketts

And that is exactly where the three players split. Because they do not agree on the answer.

Steph Nell

They don't, and that is the series. Amadeus is trying to own the whole stack, to be the GDS and the airline's operating system and its retailing engine all at once. Sabre is the survivor, shrinking and modernizing at the same time, betting it can become the clean pipe for the agentic era before its debt catches up with it. And Travelport rebuilt its entire platform from scratch, betting that a cleaner pipe wins even from third place. Three companies, born from the same machine, making three different bets on what the machine becomes.

Eric Marketts

We start with the leader. Next time, Part 2, Amadeus and the stack play. Why the biggest GDS is quietly trying to stop being a GDS at all.

Steph Nell

The GDS built modern travel. The next three parts are about whether the companies that built it get to keep it.

Eric Marketts

If you are not subscribed to The V1 Airline Retailing Report, subscribe now. Part 2 is next Monday. This series has three more parts and they build on each other — you do not want to miss one. Apple Podcasts, Spotify, YouTube, wherever you listen. And share this episode with someone in the industry who needs the history to make sense of the headlines. I'm Eric Marketts.

Steph Nell

I'm Steph Nell. Thanks for listening.

Eric Marketts

Same machine. Three bets. Stay sharp out there.