Gordon Bethune, former CEO and chairman of Continental Airlines, has signed on as non-executive chairman of Cendant Corp.'s Travel Distribution Services spin-off, the company announced late last month. Bethune will play a key role in recruiting a CEO and president for the division and will remain as non-executive chairman of TDS once the spin-off begins this October.
Cendant Corp. president and CFO and interim CEO of TDS Ronald Nelson said he is within 30 days of choosing a CEO and Bethune's assistance and advice will expedite the process. "Attracting someone of the stature of Gordon Bethune in the airline industry not only gives us some advantages, but it speaks legions to the long-term opportunity that is inherent in TDS," Nelson said.
Observers noted that Bethune's hiring coincides with the approaching deadlines for Galileo, Cendant's global distribution system, to renegotiate its airline contracts.
Cendant chairman and CEO, Henry Silverman said of Bethune in a statement, "He is a strong, engaging leader whose turnaround of Continental was marked by his strategic mindset, sharp intellect and exceptional ability to attract and develop a world-class management team. It should come as no surprise his first critical task near-term will be to help me identify and recruit a chief executive for TDS."
Bethune, who is credited with helping Continental emerge from its $600 million annual loss in 1994 to become one of the better-performing major airlines, is expected to guide TDS through what Nelson called a "transition year," as the division begins to establish itself as an independent entity in October. TDS' corporate booking tools, Orbitz for Business and Travelport, are set to unveil new enhancements at the National Business Travel Association convention in July
(BTN, March 20). At the same time, Nelson told investors at a recent conference in New York that the company stands to lose about $30 million from stabilizing its consumer portal, Ebookers, and as domestic GDS revenue takes a hit from the revision of pricing structures with airlines.
Bethune said he views Cendant's travel distribution businesses as positioned for domestic and international growth. "I am encouraged that in the months and years ahead, the further vertical integration of these businesses will continue to prove the viability of the investment thesis," he said in a statement. "I am honored and privileged to serve as chairman and to help the management team and their 8,000 associates around the world shape the future of this very promising enterprise."
Realogy, Cendant's real estate franchise, is set to be the first to spin off from the company this June. Wyndham Worldwide, the company's lodging, timeshare and vacation exchange and rental component, plans to follow in July. The Avis and Budget car rental brands are positioned to spin off as Avis Budget Group in October, at the same time as the TDS unit. Nelson said profitability of the car rental companies would be impacted this year by unanticipated fleet cost increases of 15 percent, "but we do think over the next year as prices come into equilibrium, investments we made in growing the fleet will pay off," Cendant's Nelson said.
Cendant first announced a plan to break out into four separate companies in October
(BTNonline, Oct. 24, 2005) and chairman and CEO Silverman recently told investors the company remains on schedule. "To take Cendant apart is far more difficult than putting it together," he said. "We've had to analyze literally thousands of contracts, relationships, systems and people to make certain that all the new companies will be fully functional on the date of their spin. While it is a work in progress in many respects, we're confident that we'll meet our proposed dates."
Silverman said Cendant is not up for sale because, "we're too big for financial buyers and too diverse for strategic buyers." Though he said the company has no post-spin-off sale plans, he added, "after the spin-offs, each will be an independent public company and will be free to evaluate any potential transaction that will be presented to it."