Travelport Begins GDS Integration

Travelport last month completed its acquisition of global distribution system competitor Worldspan, but Travelport CEO Jeff Clarke said it would be some time before Worldspan clients migrate to new systems.

Meanwhile, the company is working to become what Clarke calls the "low-cost leader" in the GDS business—integrating the two companies, jointly developing new products and reaching out to agents and suppliers to "make sure they understand we can now speak as one voice." Travelport said the $1.4 billion acquisition would enable the GDSs to integrate technological infrastructure and sales forces. Since the proposed acquisition went public last December, the two companies have deployed integration teams to work toward those goals.

"The scope was to do as much planning as you can possibly do, given the obvious gun-jumping rules of the Department of Justice," Clarke said of the buildup to approval. "You can't do any coordination on customers and you can't see customer data or key economic data. We were able to come to some conclusions on key appointments and key organization structures. A lot of the technical strategy, a lot of the product strategy—all that was done."

Clarke said development teams already have started the move "to a single applications set" and a single product road map. "That's stage one," he said. "That's the largest set of expenses, maintaining the 30 million lines of code on Apollo/Galileo and a similar amount on Worldspan and developing products, rather than the hardware infrastructure people tend to focus on. We don't want to disrupt the customer-facing piece for the travel agent, so we'll be very cautious on platform crossover. Galileo and Apollo have had two platforms for many years and were quite successful in driving significant increases in profit and decreases in delivery cost every year. I'm not awed by having another outstanding platform as part of the program and we'll look for savings on the platform and software development side."

The Travelport GDS division also seeks further cost-containment initiatives, of which less than half would come from headcount reductions, Clarke said. "I wouldn't necessarily jump to any conclusion that layoffs would be on one side or the other. This is a merger. Worldspan does many things well, Galileo does many things well, and we'll adopt the best practices from both companies. In terms of layoffs, we have not given any specific numbers but we do see some overlap. We have stated that there will be $100 million in savings, which if it follows the same path in some of the reengineering we've done in Travelport, less than half of that will be people-related."

Shortly after the transaction closed, Clarke restated Travelport's desire to incorporate Worldspan's Rapid Reprice functionality into the Galileo GDS. Regarding suspicions that Worldspan TripManager clients will migrate to Travelport's Traversa booking tool, Clarke said, "It's still too early to determine that, but any switches we have we believe we can make relatively seamless to the customer."

Meanwhile, Clarke said it's likely the "signed and sealed five- to seven-year deals" reached in 2006 between airlines and the GDSs will be maintained through expiration. "We're going to honor the contracts in place. As it makes sense, if the suppliers are interested in discussing broader content or any item that could be mutually beneficial, we'll certainly open those doors, but I would expect that we'll simply manage both contracts."

The European Commission last month approved the deal, which the companies quickly sealed. Despite initial concerns, the EC concluded that the deal is "unlikely to result in unilateral price increases by the merged firm," while also noting that reducing the number of GDSs in the market from four to three would not yield "coordinated behavior" among competitors. The U.S. Federal Trade Commission in July also gave its blessing to the Travelport-Worldspan deal, which the companies announced in December.