Travelport Reports Continued GDS Segment Softness

Travelport today reported global distribution system segments for the fourth quarter were down 15 percent, year-over-year, as bookings continue to decline amid recessionary demand and airline capacity reductions.

Travelport executives today during the company's earnings call said fourth-quarter GDS segments in the Americas were down 14 percent from the fourth quarter of 2007, while international segments were down 16 percent—including a 15 percent decline in Europe, the Middle East and Africa and a 21 percent drop in Asia/Pacific. For the full year, segments at Travelport GDS—which include Worldspan and Galileo—were down 11 percent globally.

Jake Fuller, a former analyst for Thomas Weisel Partners, last week during The Masters Program in Washington, D.C., said he anticipated the major GDSs collectively to register "a mid-teens" percentage decline for the first three months of this year. He noted that leisure bookings led the downturn in travel last year, while "corporate held up pretty well."

"Looking into 2009, you probably see the reverse of that. Leisure travel will stabilize and maybe even rebound first, particularly after midyear," Fuller said.

Travelport CEO Jeff Clarke during Travelport's earnings call today said GDS segments so far this year are tracking along Fuller's "mid-teens" estimate at "roughly 15 percent down" in all regions, Clarke said, "seeing the same trend as we saw in the fourth quarter."

Fuller said the erosion in demand would continue to take a bite out of GDS transactions this year, though he expects to see "at least stabilization in the back half of the year. The first half is going to be pretty tough, but we think in the back half we'll start see a modest uptick."

Fuller is not anticipating a "big recovery" this year in GDS transactions, but he does expect "the scale of declines will abate" in the back half of the year, with the likelihood of "mid-single digit demand growth in 2010."

On the heels of the segment declines, Travelport today reported net revenue for the fourth quarter was $524 million, down 19 percent from the same quarter in 2007. Travelport CFO Mike Rescoe, who will leave the company in October as it moves some key functions to the United Kingdom, said a reduction in the company's cost structure and higher yields per segment helped to offset the segment declines. The company posted $48 million in operating income for the quarter, up from a loss in the same period in 2007.