Travelport Posts Strong Third-Quarter Growth, Despite Loss Of Expedia Business

Travelport issued a third-quarter earnings statement late yesterday that showed growth despite the loss of air booking revenue from Expedia that the company detailed in a report it filed with the U.S. Securities and Exchange Commission last week.

According to the filing, as of June 30, Expedia processed "very few air segments through Worldspan." This marks a steady decline in revenues since October 2005, when Expedia notified Worldspan of its intent "to move some European transactions to another GDS provider in 2006." In May 2006, Expedia commenced booking "at select points of sale for certain European segments through another GDS." In July 2006, Expedia announced the commencement of "processing transactions in North America with another GDS." For the six months ended on June 30, 2006, Expedia-generated transactions accounted for $142 million, or 28 percent, of Worldspan's total revenues. For the six months ended June 30, 2007, Expedia's transactions represented only $64 million, or 16 percent, of Worldspan revenue.

In separate quarterly earning statements yesterday, both Travelport and publicly owned spin-off Orbitz Worldwide showed strong international growth in revenues and bookings, as the domestic business increased at a lesser rate. Meanwhile, Travelport GDS announced a reorganization of its leadership team through which some GDS executives will leave the company.

The privately held Travelport reported net revenue of $761 million for the third quarter, which ended Sept. 30 and included the results of Worldspan from Aug. 21 onward. The net revenue number represents an increase of 21 percent compared with the same period last year. Included in the results is Galileo, which posted a net revenue increase of 3 percent to $381 million, and Worldspan revenues for the period after the acquisition were $68 million. Galileo saw marginal increases in its booked segments, with its Americas business increasing 3 percent from third-quarter 2006 to 24.7 million segments, and Galileo International increasing 2 percent to 41.6 million segments.

Travelport CEO and president Jeff Clarke said he expects continued progress internationally, especially in the Asia/Pacific region. "In Asia, the Middle East and India, you see booming travel markets. We see great secular dynamics there with new planes coming online and the rising middle class," said Clarke, who added, "The U.S. market and Europe are pretty mature markets. In the U.S., growth has been in the online category."

Worldspan's revenues were not compared with previous quarters, but Clarke said the growth in the GDS bookings were "roughly flat," primarily due to the loss of Expedia's business. According to Clarke, the online travel agency processes "almost no air segments on Worldspan," but Travelport is committed to winning back some of that business, as well as other relationships lost by Worldspan.

The Expedia relationship with the Sabre GDS has undoubtedly hurt Worldspan, which is "going to struggle to maintain itself as its own brand," said travel technology consultant Tom Wilkinson, president of Pennington, N.J.-based TRW Travel Consulting. "The loss of Expedia has to be devastating as one of the largest consumers of GDS clicks moves all of its business away."

Separately, Travelport GDS late yesterday announced a new commercial management team and organizational structure led by chief commercial officer Kevin Mooney, who is responsible for sales, marketing, support and operations of all agency and supplier relationships. Reporting to Mooney is a team of executives from both the Galileo GDS and Worldspan, including Kathy Fitzpatrick, who will head the supplier and subscriber GDS business in the Americas, and Sandra McLeod, who is responsible for global multinational subscribers, including the global travel management companies.

As a result of the reorganization, some executives will leave the company in the coming weeks and months, including Worldspan vice president of account management Andrew Cuomo, Galileo Americas president Dave Falter, Worldspan vice president of EMEA Graham Nichols, Worldspan senior vice president of global operations and agency marketing Mike Parks and Worldspan vice president of e-commerce Jay Rein.

Meanwhile, Orbitz Worldwide, which includes travel management company Orbitz for Business, reported its third-quarter earnings, in which it posted significant gains in its international business. International gross bookings increased 31 percent to $363 million while domestic gross bookings had a smaller increase of 8 percent to $2.26 billion. In the statement, the company noted that the increases were primarily due to the strong international growth of leisure online booking engines HotelClub and RatesToGo.