Travelport Cues Up Worldspan: One-On-One With CEO Jeff Clarke

Jeff Clarke, CEO of Travelport, owner of the Galileo global distribution system, this month spoke with Business Travel News senior editor Jay Boehmer about last month's agreement to purchase privately held Worldspan for $1.4 billion and integrate the two GDSs' technological infrastructures and salesforces.

BTN: What's the status of the Worldspan transaction?

Jeff Clarke: We've begun the integration planning process, we have a dialogue with regulators, we have filed the appropriate antitrust information with the U.S. government, and we are continuing to look at building out a plan to satisfy those $50 million in synergies that we're looking for. Other than that, we are continuing to compete head to head with Worldspan.

BTN: What attracted you to Worldspan?

Clarke: They've done a very good job of attracting a strong customer base. They have almost a franchise position in the Delta and Northwest markets. They lead the online travel capability and they have been a very efficient provider of technology. When you combine that, you've got a very strong team, giving us the size and the scale to better serve our customers and suppliers.

BTN: What is the timeframe for the transaction to close?

Clarke: We don't know the timing, since it's contingent on the regulatory bodies. We're looking at the middle of the year, or perhaps the fall, and then integration would start on day one that we legally close. At that point, all the integration planning team's work would then get implemented and we'd have product road maps that we could communicate internally and externally, the new organizational structure and new sales strategies and such.

BTN: How do you simultaneously integrate and compete?

Clarke: It's only in the clean-room environment. You wall off a series of executives from both sides. They do planning, and all they can do is plan, they can't execute. They no longer work on the day-to-day business in the company, so you really segregate a small portion of your population. In our case, it will be somewhere between 20 and 40 people in the combined company that will sit in the closed environment and rigorously plan. You take leaders from each function. The leaders are going to be Worldspan CFO Kevin Mooney and Travelport chief reengineering officer Pat Bourke and chief administrative officer Terry Conley. It will be everything from getting everyone on the same payroll systems to what IT systems you use, what product road maps you'll use with sales strategies, and what renegotiations you'll do on the vendor base. All that happens in a separate space. In the meantime, the other 99 percent of your population is competing as if this deal is not going to happen.

BTN: Have European regulators signaled how they'll handle the deal?

Clarke: They haven't signaled anything, as is custom. We're in the process of filing the antitrust approval through the European Union. From that, different countries evaluate if there are any other items they want to review as well. Worldspan is primarily a U.S.-based company, with over 90 percent of its $950 million in revenue coming from the United States. We expect that most of the review will occur in the United States, but we're prepared for any additional review international parties may want.

BTN: Is the ultimate goal to create a single GDS platform?

Clarke: From a technical perspective, we'll certainly maintain multiple cores for a long period of time. We will try to migrate to a single product roadmap and utilize products that are very successful from Worldspan into the Galileo environment and vice versa. For example, Rapid Reprice is a very strong product from Worldspan and some of their technology around servicing online travel agents is industry-leading. We will certainly focus on that across the entire combined base. In turn, we will focus some of Galileo's international capability to some of Worldspan's customer base. Other key elements of the integration, since we're targeting $50 million in synergies, are better product and content. For example, the Gullivers inventory of hotels—60,000 rooms a day—will be offered on Worldspan. Some of the products that Worldspan has are unique content, such as OpenTable. We'll have to contractually discuss that with other parties, but we do want to bring in content that is unique to Worldspan into the Galileo customer base as well.

BTN: Do outstanding vendor and customer contracts have to play out before any true platform integration can occur?

Clarke: It's different for different contracts. Obviously we've had a sampling from a due-diligence perspective, but that is a lot of what the integration planning actually looks at, on the supplier and customer side.

BTN: What other attributes can Worldspan lend to Galileo or Travelport's other offerings?

Clarke: In general, we view Worldspan as the low-cost provider in the industry. Our stated goal is to become the low-cost provider in the industry as a combined entity, so we'll learn from some of the things that Worldspan has pioneered in terms of effective cost management from a technology perspective. We'll couple that with the key elements Galileo brings, particularly on an international basis.

BTN: I would imagine they also bring a desirable customer base to Travelport.

Clarke: We compete today across multiple customer bases. Travelport brings to the table a broader international business and a broader corporate business, whereas Worldspan brings a greater penetration into online travel as well as a great geographic presence in the Southwest and parts of the Midwest.

BTN: How will this deal, as well as Sabre's move to go private, affect the GDS landscape?

Clarke: You had two companies in a four-month period go private: the Travelport piece of Cendant and then Sabre. It signals the strategic flexibility you have as a private entity. Clearly this industry is going to consolidate. There's substantial business-model changes that are occurring in terms of the new pricing of the industry, the importance of having leapfrog technology, et cetera—all of these are factors are better faced as a private company, where you are not beholden to 90-day earning cycles.

BTN: Worldspan president and CEO Rakesh Gangwal said he would depart following the merger. What's the plan for the rest of Worldspan's executives?

Clarke: Both Worldspan and Galileo have talented management teams and in this industry, you need as much talent as you can get. Therefore, we're looking at retaining as many of their executives as we possibly can.

BTN: Content deals with the airlines have been veiled, but some have said these are step-down agreements.

Clarke: All airlines renegotiated with GDSs and received favorable terms to prior contracts, so there is no question there has been improved economics for the airlines and a substantially reduced cost of distribution. This has been facilitated by excellent technology management by Galileo and others. We're becoming more efficient and passing that along to our customers and suppliers.

BTN: Do the economics that were negotiated change over time?

Clarke: It differs by contract.

BTN: Can the GDSs support carriers interested in unbundling or further merchandizing fares?

Clarke: The GDSs need to drive new products and innovation into the industry, and if you can give additional unbundling of product or additional content, these are real features that help both travel agents and suppliers. We'll be looking very seriously at providing additional flexibility across a traditional GDS offering.