If the global financial markets continue their recovery this year – or at least a return to 2008 levels – then the rumours about travel-related public listings may not be so wide of the mark.
The initial benefit of throwing the doors open to the world’s stock exchanges is a well-trodden path for travel firms as it gives the listed company access to growth capital from the outset, opportunity to create an acquisition warchest, ability to spread the equity base, and the chance to reward the best management and staff.
The big publicly listed online travel agencies have seen a strong return to 2008 levels during the latter part of 2009 and it now appears other tech and online travel firms are either weighing up their options or are in advanced stages.
The New Jersey-based tech giant is the first of the big three GDSs expected to IPO in 2010. After resting in the cosy bosom of private equity – The Blackstone Group, One Equity Partners and Technology Crossover Ventures - since 2006, Travelport appears to be ready to list wholesale on the public markets. Rumours abound that Jeff Clarke will position the company in London rather than on the New York Stock Exchange, with deputy CEO and Europe-based Gordon Wilson tipped to take over. Lest the industry forgets, Travelport retains a sizeable share in Orbitz Worldwide, itself listed in New York – prompting some to also ponder the future of that particular investment.
Officials at Amadeus are steadfastly tight-lipped whenever the the letters IPO are mentioned. This has done little but spin the rumour mill even faster as the GDS and tech firm is believed to be heading for a Q2 listing in its home town of Madrid, Spain. An IPO for Amadeus would mark the company’s biggest corporate strategic shift in the 23 years since it launched as a European rival to air distribution giant Sabre from the US, notwithstanding its takeover by Cinven and BC Partners. Like Travelport, interesting elements of a deal remain, not least what to do with its involvement with online travel agency Opodo and its part-ownership by a number of airlines including Air France, Iberia and Lufthansa.
The only one of the GDSs to publicly state it is considering a public listing. Sam Gilliland said in October 2009 that his company would look at an IPO if various cost, revenue and growth indicators were favourable. Sabre is one of the three dominant players in the GDS market but has major competition amongst the OTAs in all markets for Travelocity, lastminute.com and Zuji. Some wonder if Sabre’s interest in an IPO is almost a corporate decision by default given that its GDS and OTA rivals are all either on the public books or considering a similar move.
An IPO for metasearch site Kayak would potentially be one of the most interesting corporate moves in travel for a decade, and a test case for others in its marketplace. No other exclusively travel metasearch business (Travelsupermarket parent Moneysupermarket floated in 2007) has offered itself up to the markets and questions remain as to how scalable the sector can really be. But with a $1 billion price tag being rumoured for months, there are clearly some who believe Kayak has the model and the stomach to go for it. A public listing would give Kayak the funds it needs to grow in tough-to-crack markets in Europe and elsewhere.
Backed by Boston-based venture company General Catalyst (also an investor also in Kayak), ITA Software is the dark horse amongst those more widely talked about in relation to an IPO. Formed in the mid-1990s by a group of ex-MIT scientists, ITA has raised plenty of capital in recent years and could be a strong candidate for an IPO in the capital markets loosen.
Outside bet -Â Cheapflights:
The price comparison site spent much of 2008 investigating the potential for a public listing, but backed away when the markets starting indicating stocks were likely to have a tough few years ahead. But with international expansion still on the agenda, its own metasearch site in the offing, founders and executives to reward, perhaps the company will reconsider…
Great analysis, as usual. Surprised to hear about a possible Cheapflights IPO, in particular.
One significant complication for a Travelport listing in the UK would be that all operations worldwide of a UK corporation would be subject to UK (and of course EU) privacy laws. That would subject all Travelport PNR’s, personal profiles, and other personal data to requirements for access and accounting for disclosures, which would require substantial technology upgrades because PNR’s don’t currently include access logs. And that might also preclude significant potential data mining and direct marketing revenue in the USA that is permitted by US-based entities but that would violate UK and EU privacy laws. Travelport is already at risk of sanctions for these aspects of its operations in the EU, but would likely come under much greater scrutiny by the ICO and EU authorities were it to move its place of incorporation to the UK.
Sean: Thanks. Addition of Cheapflights is really just a cheeky outside bet, as indicated, but based on their previous desire to explore the opportunity, admittedly under a different CEO and different economic era.
Edward: A good point. I suspect those in NJ are working out how to attack this particular issue if and when it becomes a problem.
Is there a precedent for this elsewhere in travel or other verticals?
I’m not aware of any precedent in another area of a personal data warehousing, aggregation, or mining company being acquired by, or shifting its place of incorporation to, the EU.
Amadeus already has serious exposure under EU data protection law for its operations in the USA, especially from its acquisition of PNR aggregator and processor Airline Automation, Inc., which doesn;t seem to make any pretense of compliance with EU privacy law. But EU regulators seem to have thought of Amadeus as primarily a European company, focused on Amadeus’ European activities, and not paid any attention to what they do in the USA. It’s much more obvious that the bulk of Travelport’s operations are in the USA, and it would be harder for EU authorities to overlook them.
Edward:
Well, perhaps Travelport is willing to take the upgrade risk (financially) and move to Europe?