<B> TechTalk</B>
By Cheryl Rosen
<B>CO Remains With EDS</B>
Continental Airlines has signed a $1.5 billion contract for IT services with Electronic Data Systems of Plano, Texas, which has held the contract since 1989, and insiders said the win is indicative of EDS' renewed interest in the travel and transportation business.
Some industry insiders hinted that Sabre's proposal, which made it to the final cut, was hurt by the fact that AMR's Don Carty is acting as temporary Sabre chairman while a search firm looks for a successor to Michael Durham.
But Eric Speck, Sabre executive vice president of marketing and sales, said the folks at Continental told him "they were impressed with our products, staff and people," but decided to postpone a major change in light of "the inertia that's always associated with major change of suppliers, regardless of provider, and the difficulty of making long-term platform decisions" in a rapidly changing airline distribution system. "They didn't want to preclude themselves from a larger alliance decision," he said. All the carriers--including United, which also is looking at IT proposals--are "feeling their way through" decisions about whether to choose independent IT providers or a single one for the whole alliance.
Amadeus passed on the RFP for IT services for at least four Star Alliance carriers--United, Air Canada, Air New Zealand, Ansett "and perhaps more," said vice president of supplier strategies Hans Jorgensen, because it "didn't have the airline IT functions they were looking for, like inventory and departure control. That's an area we absolutely must get into," he said, though he declined further comment, constrained by the "quiet period" until Amadeus' IPO.
Meanwhile, in the "matter of months" until a new Sabre head is named, Carty "has made it clear that he has no intention of getting involved in the day-to-day decisions at Sabre, and that I and my colleagues will effectively take on those responsibilities. Going public involves tremendous discipline and that was Michael's strength, and now we'll transition to a different leader," Speck said. Durham, former CFO of American Airlines, was brought in to Sabre when it was spun off as a separate unit of AMR.
Bear Stearns managing director of equity research Jim Kissane, however, said the industry is not totally convinced. "I think the Continental decision was related to the fact that AMR owns 81 percent of Sabre and, strategically, there will be pressure on AMR to carve out Sabre. Even without Travelocity, Sabre is an Internet play. It's the engine for thousands of travel agency sites and is way out front in terms of investments for the future. It's going to generate 15 percent growth for the next few years, it has no debt and, from a pure financial standpoint, it's very attractive. But it will be difficult to attract a world-class CEO without holding out a carrot--and I'm not sure a world-class CEO would want to report to Don Carty.