Citing "current market conditions," Worldspan Technologies yesterday said "it has elected to postpone the previously announced initial public offering of its common stock. Worldspan will continue to evaluate market conditions and may proceed with a public offering at a later date."
A Worldspan spokesperson this morning did not immediately respond with information about which market conditions prompted the decision. The NASDAQ yesterday closed slightly higher than where it was on March 30, the date the Atlanta-based global distribution system provider filed its registration for the IPO
(BTN, April 26). The Dow, too, is back where it was on March 30. Both indices dipped in May.
Since March, Worldspan has announced quarterly profits and closed new content deals with Continental, Delta, Northwest and US Airways, but the news hasn't all been good. On May 5, Worldspan said Expedia "has indicated that it will move a portion of its transactions" to Worldspan's GDS competitor Sabre Holdings
(BTN, May 10). None of the parties offered a sense of how many bookings would be diverted to Sabre, but Worldspan's March 30 SEC filing outlind the worst-case scenario. According to the document, Expedia and Worldspan in July are scheduled to renegotiate the financial terms of their contract, and if they do not come to an agreement on the per-booking inducements Worldspan pays to Expedia, Expedia "can terminate its contract with us," Worldspan said.
Even the best-case scenario is pretty rough. Worldspan is losing at least part of a customer that provided more than 10 percent of its 2003 revenues and 20 percent of its transactions. Expedia and Worldspan also have cooperated deeply on such technological developments as their e-pricing engine.
"We are highly dependent on a small number of large online travel agencies, and the success of our business depends on continuing these relationships and the continued growth of online travel commerce," according to Worldspan's filing. "In 2003, Expedia, Hotwire, Orbitz and Priceline represented approximately 43 percent of our total transactions." The long-term contracts held with these online subscribers "allow the online travel agencies to terminate their relationships with us in the event of, among other things, payment or service level defaults by us and, in some circumstances, changes of control."
Orbitz and Worldspan in January said they came to terms after Orbitz had threatened to leave Worldspan because of a service-level issue. "Although both parties currently continue to operate under the agreement, we cannot assure you that Orbitz or another travel agency will not attempt to terminate its agreement with us in the future," said Worldspan in March.
Worldspan had abandoned plans to market directly to corporations, instead seeing its Expedia and Orbitz partnerships as its avenues to "a substantial opportunity to capitalize on the trend of corporate travel departments toward making bookings for business travel through online services. In most cases, we work in conjunction, rather than compete, with travel agencies using our travel products and services to support their efforts with corporations."
Meanwhile, Hotwire, which makes only air bookings with Worldspan, "has the right to terminate its contract with us for any reason on 90 days advance notice," Worldspan said.