Airline group picks Oracle to run its trading exchange

One of the two online trading exchanges being developed by rival groups of airlines yesterday said it has chosen Oracle Corp. to provide the software that will run the business-to-business marketplace.

The Oracle-aligned exchange, which is growing out of plans outlined in April by an international network of airlines called the Star Alliance (see story), also announced an initial lineup of 10 founding members, each of which will have a seat on its board of directors. U.S.-based airlines on the list include America West Airlines, Federal Express Corp. and Northwest Airlines Inc.

Three other international airlines have also committed to take equity stakes in the exchange without getting board seats, bringing the total number of participating companies to 13 at this point. The venture is being named Aeroxchange and is slated to begin operating by Sept. 1, the founding airlines said.

Oracle and the participating companies added that they expect Aeroxchange to eventually process $45 billion in annual purchases of goods and services by the airlines that sign up as members. The exchange won't handle purchases of fuel and aircraft, but items that will be able to be traded include airplane and engine components as well as maintenance services.

Aeroxchange faces potential competition from another online exchange that was also announced in April by a group of six airlines: American Airlines Inc., Continental Airlines Inc., Delta Air Lines Inc., United Air Lines Inc., Air France and British Airways (see story). An American Airlines spokesman said that exchange -- which expects to process more than $32 billion in annual purchases -- hasn't finalized its technology plans yet but will do so in the near future.

Lisa Williams, an analyst at The Yankee Group in Boston, said several online exchanges are also being developed by The Boeing Co. and other manufacturers that supply the airlines. But the airline industry is big enough to have "room for more than one [business-to-business] exchange," Williams said. She added that multiple exchanges could survive by focusing on different niches, such as fuel sales, repair parts and construction of airplane frames."

The airlines setting up Aeroxchange said Oracle's software for managing online marketplaces will provide them with capabilities for running both online and reverse auctions, contract and spot buying and collaborative supply-chain planning.

Oracle already provides the software for several major exchanges, including a retail-industry one being set up by Sears, Roebuck and Co. and French retailer Carrefour SA. Along with Commerce One Inc., Oracle is also working with an auto-industry exchange being developed by the Big Three automakers. But Williams said rival vendors such as Commerce One and Ariba Inc. are still strong contenders in the race to sign up exchanges.

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