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Travelport expects to offer Worldspan technology to Galileo users and Travelport content to Worldspan users within "a matter of weeks," now that the merger between the United States' second- and third-largest global distribution system firms is official, a Travelport executive said last week. The company on Aug. 21 announced the closure of its $1.4 billion purchase of Worldspan, hours after the European Commission cleared the deal and declared it "unlikely" to hurt competition.
Although he specifically said Worldspan's online ticket exchange and fare searching capabilities are on their way to Galileo, Travelport president and CEO Jeff Clarke last week could not comment on the fate of Worldspan's Trip Manager corporate booking tool.
"We haven't gone into any specific product areas like that, but I'm aware that it's a well-regarded product and I'm sure it's going to do very well," Clarke said during an interview with The Beat. Travelport already offers what it's now calling Travelport Classic and is developing a new tool called Traversa. Orbitz Worldwide, meanwhile--which remains majority-owned by Travelport--offers two brands of travel management companies (Orbitz for Business and Travelport for Business) that also have their own corporate booking interfaces. Clarke is chairman of Orbitz Worldwide, which has a non-exclusive role in co-marketing Traversa outside the United States.
Establishing the new Travelport's product strategy is "one of the high priorities of the company," Clarke said. "An example of a product that is highly regarded is parts of the online search capability of Worldspan and the Rapid Reprice. Those are products that are real gems within Worldspan, and efforts on the Galileo side to [develop] similar things would most likely be curtailed." Rapid Repriceoffers automated repricing, reissuing and refunding of airline tickets.
Clarke said there is currently no particular need to consider merging the Worldspan GDS with either the Apollo or Galileo "cores" already run by Travelport. "It's too early to tell, but we certainly have the ability, if we choose to, to be the only GDS with truly redundant redundancy," he added.
The company is "targeting $100 million in cost savings from the integration," Clarke said, including a headcount reduction. That's double the "conservative" estimate he provided when Travelport first announced the acquisitionin December.
One of the highest costs for GDS firms is the per-segment "incentive," "inducement" or "financial assistance" monies they pay to users, although in many cases those have fallen on a unit basis as part of new airline agreements announced last year. Those new agreements mean participating airlines pay less to GDS firms for bookings than they had previously, and Travelport earlier this month said the reduction had "more than offset" the benefit of Galileo's U.S. bookings growth during the June quarter. The U.S. declines were counterbalanced by higher rates outside the Americas, where Galileo generates about two-thirds of its segments, the company said. Travelport said Galileo's inducements rose during the second quarter, compared with same period in 2006, but did not indicate by how much.
Clarke said he does not expect the removal of one of the four main U.S. GDS competitors to impact incentive payment rates. Incentives help subsidize travel management company operations and profitability, which are otherwise supported by client fees and commissions from other suppliers. "It will continue to be hand-to-hand combat out there to provide the best products, service and price," said Clarke.
Regulators in Europe also thought as much, indicating that "incentive payments from GDSs to travel agents have increased over the last five years and switching costs do not prevent travel agents from switching GDSs."
EC noted that the now-larger Travelport still ranks second in Europe, behind European GDS market leader Amadeus. Transaction figures provided publicly by the companies are not comparable as definitions differ and some include airline host system bookings or corporate booking system transactions while others do not--but Travelport appears to now be at least as large as Sabre in the United States.
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