Worldspan parent Travel Transaction Processing Corp. last month changed its name to Worldspan Technologies Inc. and registered with the Securities and Exchange Commission for an initial public offering of common shares. The company also announced 2003 net earnings of $13.7 million on 2 percent lower year-over-year revenues of $896.9 million. Total 2003 bookings rose 0.4 percent, to 192.9 million, with the traditional channel dropping 12 percent and online rising 19 percent.
In its SEC filing, Worldspan said its global distribution system handled more than 65 percent of all 2003 global distribution system-processed online airline transactions, which total about 23 percent of all GDS airline bookings made in the United States. Worldspan also claimed it processed 30 percent of the combined online and offline 2003 U.S. GDS airline transactions, 17 percent worldwide.
Among other noteworthy figures: Total online transactions in 2003 grew to 90.3 million from 14.6 million in 1999; Expedia, Hotwire, Orbitz and Priceline combined to deliver about 43 percent of Worldspan's total 2003 transactions; the largest, Expedia, generated more than 10 percent of company revenues.
Worldspan said inducements paid to travel agencies rose 17.5 percent in 2003, down from a 32.4 percent increase in 2002. In a short conference call late last month with the investment community, Worldspan chairman, president and CEO Rakesh Gangwal noted that "online inducements are materially higher than on the traditional side." On that score, "Expedia has the right to renegotiate the inducements payable to it by us every three years, with the next renegotiation scheduled for July 2004," according to the SEC filing. "It can terminate its contract with us if we don't reach an agreement on inducements." The pair's existing contract expires in 2010.
Worldspan elaborated a bit on the marketing support it gets from Delta and Northwest airlines
(BTN, July 7, 2003), noting that Delta this month "notified us that our GDS transaction fee pricing did not satisfy the conditions of our marketing support agreement with Delta. Delta indicated that, until we modify our GDS transaction fee pricing, it would suspend marketing support of us and the discount that Delta has provided to us for business travel. Pursuant to the agreement, we are working with Delta to review the relevant data and to resolve these issues." American, Delta and Northwest sold the company last year
(BTN, March 10, 2003).Worldspan now is in a quiet period, but Business Travel News editors in February asked Gangwal about Worldspan's ties with its former owners. "In the initial phases, we have a marketing agreement with both Northwest and Delta, which have agreed as part of the sale to continue to market Worldspan," he said. "Because they owned us, there was a deep relationship already there. Long term, starting now, I can't count on a contractual obligation to ask Delta and Northwest to push and sell Worldspan. They have to see that working with Worldspan is 'better for me as an airline' than working with another GDS, and we have to adopt that thought process very quickly. We also host those airlines' internal systems, so there is already a strong bond from that perspective. But we don't want that to contaminate or influence their need to use us as a GDS—it has to stand on its own as those carriers continue to find ways to lower their distribution costs."