Virgin America Has Problems Converting to a New Reservation System
Reservation systems are the digital nervous systems of airlines. Among other things, reservation systems store, organize, and calculate flight schedules, prices, and passenger lists. To future growth, Virgin America (www.virginamerica.com) switched to a reservations system developed by Sabre Holdings Corporation (www.sabre.com). This system enables airlines to enter codeshare agreements, meaning that participating airlines can sell tickets for each other's fl ights. Virgin America switched to its new reservations system on October 28, 2011. The airline had informed customers that its Web site would be down for 12 to 24 hours as it transferred 239,000 reservations and created 2 million new frequent-fl ier accounts. When the Web site went live again, however, it encountered widespread problems that persisted for several weeks.
To compound this problem, these disruptions occurred during the airline's busy Thanksgiving travel period. Most Virgin America customers were unable to modify their flights online, and many customers complained that they were overcharged or they could not book flights or check in online. Customers also complained that they could not select seats or book flights using frequent-flyer miles. Because customers could not perform these activities online, they did so in person at the airport. As a result, long lines developed at Virgin America ticket counters in airports across the country.
To further compound the issue, Web site error messages directed customers to call the airline, but phone lines were clogged with long waits, and some calls were disconnected altogether. Virgin America call centers were overwhelmed, despite the fact that Virgin had temporarily doubled its call-center staff. Fortunately, Virgin was able to fix almost all of its Web-related problems by December 1, 2011. The company placated its customer base by waiving certain fees and awarding free fl ights to about 56,000 affected fliers, at a total cost to the airline of more than $7 million. Virgin reported a first quarter (2012) operating loss of $49 million. The airline attributed the loss partly to a revenue shortfall associated with the airline's transition to a new reservation system. Sources: Compiled from J. Shillinglaw, "Virgin America Reports $49 Million First Quarter Operating Loss," Travel Pulse, July 3, 2012; "Virgin America Website Problems: Unable to Upgrade Online," Travelsort.com, February 13, 2012; P. Carr, "Virgin America's Broken Booking System," Pandodaily.com, January 24, 2012; B. Mutzabaugh, "Virgin America Dogged by Reservation Glitches," USA Today, December 22, 2011; J. Nicas, "Jet Lagged: Web Glitches Still Plague Virgin America," The Wall Street Journal, November 23, 2011; H. McCracken, "Virgin America's Web Site Meltdown: Four Weeks and Counting," Technologizer, November 22, 2011; www.virginamerica.com, www.sabre.com, accessed March 21, 2013.
Questions
1. What could Virgin America have done to reduce the risks associated with converting its reservation system? Provide several specific examples to support your answer.
2. What are the potential long-term problems for Virgin America that could result from its diffi culties in converting to its new system?