During a Travelport earnings call last week—its first since The Blackstone Group purchased it from Cendant Corp. in August—Travelport CEO Jeff Clarke announced a substantial loss for the quarter, as well as the news that 100 percent of its agency customers opted in to the Galileo global distribution system Content Continuity Program. Meanwhile, Travelport's Internet travel management company leadership said they would follow the precedent set by Carlson Wagonlit Travel and charge $2 per ticket to offset the cost of opt-in programs established by GDSs.
The company said it has visibility into future economics thanks to new airline contracts established with its Galileo GDS, the first to come to new terms with all Big Six carriers since deregulation
(BTN, July 17). Though Clarke declined to give specifics, he said Travelport has identified $75 million in prospective savings. "We're comfortable with that number," he said, "but I don't want to talk about any particular actions until we're able to communicate those internally."
Clarke also declined to divulge details of agency negotiations for its Content Continuity Program, which cuts agency incentives. "There have been no surprises in the opt-in process and it's been very consistent," he said. "I don't want to be more specific because of the sensitive and competitive nature of negotiations."
Meanwhile, in a statement released to BTN, Dean Sivley, COO of Orbitz for Business and Travelport, said Travelport and Orbitz for Business on Oct. 15 would begin charging customers $2 per transaction. "Like many other travel management companies, Travelport Corporate Solutions has decided to administer a modest fee increase that is competitive in the marketplace and allows us to maintain the service and content our customers rely upon," he said. "We have elected to opt in to Galileo's Content Continuity program for the benefit of our Travelport for Business customers, and we have sought assurances from Worldspan that they will continue to provide full content for Orbitz for Business. We believe this is in the best interest of our corporate customer base, and the moderate price increase—which is less than one-half of one percent of the average ticket price of $428, according to PhoCusWright—represents the first such price increase in our company's history."
Meanwhile, quarterly revenue for the Parsippany, N.J.-based company was up 5 percent from 2005, though Travelport experienced a net loss of $1.1 billion, which senior executives attributed to three items: a pretax non-cash impairment charge of approximately $1.2 billion and separation and restructuring costs of $20 million and $11 million, respectively, from Travelport's recent sale to Blackstone.
Travelport CFO Daryl Raiford—who during the call also announced he is leaving Travelport to pursue other opportunities—said if it were not for the impact of those three items, the company's EBITDA would remain unchanged and operating income would have grown 5 percent.
Clarke said much of the company's growth in the United States is owed to its consumer brands, Orbitz and CheapTickets, which grew gross bookings by more than 40 percent. Because airline bookings do not flow into Travelport's revenue, bookings growth did not translate into earnings. "It's unlike hotel, where it's a market mix and we benefit from an increase in those prices," he added.
Tom Wilkinson, president of TRW Travel Consulting in Pennington, N.J., said Travelport's numbers aren't necessarily indicative of the company's overall performance. "It's no secret that the components of the company have been going through a number of transitions from a technical, business and marketing perspective. Any company that's changing itself in all three dimensions at the same time inevitably is going to have some balance sheet difficulties," he said, noting he did not review Travelport's financial report. "That's most likely what we're seeing. The people and the technology are both good. They have some ground to make up against their competitors, but they have the talent, the resources and the models to make that happen."
Earlier this year, Travelport was set to spin off from Cendant, its then-parent company, when Cendant came forward and said it received several unsolicited inquiries from private equity firms about the sale of Travelport, which includes Galileo, Orbitz, Orbitz for Business/Travelport and global travel content wholesaler GTA.
The Blackstone Group this June emerged as the ultimate buyer of Travelport
(BTNonline, June 30)."We're excited to begin our operations as an independent company," Clarke said in a statement accompanying the earnings report, "and proud of our solid performance in the second quarter despite the significant changes underway in our business."