Saturday, December 02, 2006

Travelport and Worldspan rumours

Hat tip to Tim Hughes of the excellent The Boot blog in Australia for picking up on a rumour that Travelport, owner of the Galileo GDS, is eyeing up rival Worldspan.

The lead comes from a article on ATW, an airline industry newswire, and follows comments made by Travelport boss Jeff Clarke at the recent PhoCusWright conference in Hollywood, USA.

The reports says:

"Worldspan chairman Rakesh Gangwal, who has all but posted a 'For Sale' sign on the company's front lawn."
Of course this could just be wild interpretation of publicly made comments. But, as Tim Hughes points out in his post:
"I have no idea either way but the searches of 'Worldspan' and 'Travelport' in the same search entry are one of the leading drivers of traffic to my blog. Clearly someone/people are typing that a lot into Google."
NB: Worldspan is the only GDS out of the leading four that is not part of a wider group with other travel interests, mainly online travel agencies - a position it fiercely defends.

Amadeus has a controlling stake in Opodo; Sabre owns Travelocity and; and Galileo parent company Travelport owns Orbitz and Ebookers.

UPDATE: Link to story in the US courtesy of JaneSmith in the comments.

Kevin May, editor, Travolution



A deal would make a lot of sense. Not sure what Sabre/Amadeus would make of it.

JaneSmith said...

Amadeus have been prowling for years and, if they have the inclinaton, could well make a counter bid.

The rumour mill is indeed spinning wildly. Some analyst reports flying around:

Anonymous said...

Yeah - and a suspicious 'all employee call' was scheduled for Monday afternoon (US Time) then cancelled. Per managers, it was an announcement that is 'positive' and something they wanted to announce before the press got wind of it. Interesting indeed...

Anonymous said...

December 7, 2006

Dear Fellow Employee,

Today is an exciting and important day in Worldspan’s history and future as we announce an agreement with Travelport to combine our two great organizations and create the world’s foremost travel distribution and technology company. The combined company will offer cutting-edge technology, expanded access to content, broader global reach and more resources to meet the travel industry’s rapidly changing needs. We are very excited about today’s announcement, and do not expect any material change in the short term. As with any merger of companies, there is much work to do and a number of things that need to happen before we can close the transaction, which we expect to do in the coming months. In the interim, it is business as usual and we will continue to develop our technology and to serve our customers with our unparalleled service levels.

This consolidation is driven by a number of fundamental changes that have been going on for several years in the travel distribution industry. Until 2003, under a largely regulated industry, GDS fees had been growing every year. However, beginning in 2003, booking fees reached a peak and travel suppliers were successful in negotiating significant discounts to future booking fees. The travel suppliers had developed or had available to them numerous alternatives to GDSs including their own ticket offices, call centers, and websites, as well as new entrants like G2, ITA and meta search engines that offered new distribution channels at significantly reduced costs.

Back in 2003, we recognized that the pressures to continue to lower travel distribution costs would continue. Over the last three years and in anticipation of those changes, we have done a phenomenal job of restructuring our operations, lowering our costs, and improving our technology and capabilities. Those years of hard work prepared us well for the current environment in which new competitive forces have enabled suppliers to command significant additional discounts to their distribution costs in return for long term content for distribution through the GDSs. The changes that were unleashed after deregulation will not abate and travel suppliers will continue to demand further fee discounts in the years to come.

In the GDS industry, there are significant economies of scale by spreading the costs associated with product development, data center operations, sales and marketing and other costs across large volumes of transactions. Our strengths in management, sales and marketing, product and technology innovation, data center operations as well as in other areas have made us successful, and will continue to do so. These strengths also provide Worldspan with the prospect of long term growth and success as a stand alone entity even though we are currently the smallest in the industry. However, by combining our unique advantages with those of Travelport, we will help drive additional scale efficiencies allowing the combined company to further lower our suppliers’ distribution costs in the future while providing our agency and technology customers’ outstanding content, products, and customer service.

The combined new company will require not only superior products, product development capabilities, data center operations, technology and sales expertise, but will also require the talent and expertise to manage its expanded operations. While we have worked hard to build the strengths and efficiencies that have and will continue to make us successful as a stand alone company, these same strengths give us the opportunity to join together with Travelport to build an exciting travel distribution and technology company of the future.

Until the companies have made final, post-merger plans, we are restricted in what we can discuss during this period, in relation to any plans for the future combined businesses. This period can be as short as one month but it may take several months, and it isn’t until the transaction is officially complete that we can speak in detail of any future plans.

Today’s announcement raises a number of questions and issues for our employees and our customers; travel suppliers, travel agencies and end consumers. I am sure that one of the most pressing questions for you is: “What does this mean for me personally?” As you can imagine, in any transaction of this size there are many things that need to be worked out and addressed. We will answer your questions as soon as we can and we will be holding departmental meetings to facilitate this process. However, answers to certain questions may take some time as we work with Travelport on the various integration plans. We will keep you informed of updates and integration plans as they become available.

Thank you for your hard work and innovation and I look forward working with you as we continue to build the future of our company.

Rakesh Gangwal