What’s next for ITA Software?

The Cambridge, Mass., travel technology firm has a thriving airfare pricing and shopping business, as evidenced by its recent QPX deals with Southwest Airlines and Air Canada.

But with half of ITA’s employees working on its fledgling airline reservations and departure control system, one technology consultant, who closely follows the company, terms ITA’s loss of the Air Canada reservations system project “a debacle” and says it is an open question whether ITA, now without any customers for this product, has a place in the airline res system market at all.

After all, ITA was not a finalist when American Airlines recently selected HP and its still-to-be built Jetstream passenger services system over the Amadeus Altea platform as a replacement for longtime host Sabre.

ITA co-founder and CEO Jeremy Wertheimer says the company’s airline res system isn’t in production, but “is working,” runs at full scale and “is pretty close to done,” adding that the departure control system needs “more work.”

“We’re talking to all people who want a system and we’re looking to a brave few who want to be early adopters,” Wertheimer says.

Wertheimer contrasts the status of ITA’s  res system with competitors’ “usually broad pronouncements [when] not much has happened.”

In addition to Jetstream, perhaps he is referring to a 2005 United Airlines-Amadeus declaration that the airline would scrap Travelport’s Apollo res system for Altea. That transition remains on hiatus.

Wertheimer says ITA had a busy summer talking to potential airline customers, which sometimes use 50-year-old legacy systems, about deploying ITA’s  full-blown res system, components of the system, or apps.

“It’s not the sort of thing where you show up on a Monday and you have a sale by Friday,” Wertheimer says. “We are working hard to get other customers in the pipeline.”

Wertheimer declines to say whether ITA is profitable, and it would be hard to imagine it is, given all of the resources it is pouring into its res system business.

Still, with ITA’s QPX business humming along, and considering the $100 millon in funding it attracted three years ago, it would be surprising — despite the Air Canada setback — if ITA were facing a cash crunch.

Speaking of  what he calls that “pile of money,” which came from venture capitalists, Wertheimer claims, “we really haven’t used it.”

So, as ITA woos res system customers, it is continuing to build out its QPX business, with new solutions for airline merchandising efforts in the works.

Asked how significant the merchandising business might be for ITA, Wertheimer says, “I don’t think anyone knows the precise shape of it.”

Pursuing the merchandising angle puts ITA into competition with numerous entities, including the airline solutions units of the GDSs, as well as companies like iSeatz, which offers merchandising solutions for Delta and Air France-KLM.

Companies like iSeatz and Viator provide destination activity options to airlines or online travel agencies, and ITA is getting into that arena, as well, as it refines its airfare shopping business as evidenced here.

One of the newest wrinkles is the “Needle,” an internal name for a platform that facilitates the collection of data about destination activities from myriad sources ranging from the Web to company spreadsheets.

Here’s an example of a prototype Needle activities solution from ITA which may appear on some airline websites one of these days:

When you click on one of the above events near an airport destination, you get event details and the name of source websites such as Stubhub.com.

ITA spokeswoman Cara Kretz says the Needle “uses Artificial Intelligence (AI) techniques to extract data not only from discrete fields or tables, but from within fields, across fields, and from regularly formatted text of all kinds. It then automatically restructures the extracted data to match the schema of your target database. Once learned by the system, a data source can be routinely re-acquired without manual intervention.”

Despite my, ahem, needling, Kretz declines to divulge details on the product’s commercial name, pricing or business model.

For ITA, the Needle and its still-unproven airline-res system business are all part of the company’s evolution.

Now, it’s time to see whether ITA management is as adept at business as it is at technology solutions.

Air Canada, which took a $61 million write-off several months ago and scuttled a 4-year-old ITA Software project to overhaul the airline’s reservations system, apparently is ready to assist the technology firm in its efforts to pedal the Passenger Services System to other airlines.

In an ITA Software announcement about a second deal to implement ITA’s QPX pricing and shopping system across AirCanada.com and its agency websites, ITA stated: “Air Canada will provide testing and domain expertise to ITA as it completes the remaining work on its industry-changing Passenger Services System (PSS) solution.”

When asked if that work with ITA pertained to eventual implementation of the discontinued Polaris res system project, Air Canada spokesman John Reber told me:  “The testing and domain expertise provided on PSS is to support ITA in proposals for other airlines.”

That’s a very unusual stance. And, you can interpret that in a few ways.

Either there is something very special about the Air Canada-ITA relationship that goes beyond the usual parameters of technology vendor and client, or perhaps Air Canada is keeping its options open about following through on the Polaris project at a later juncture.

Would Air Canada get a piece of the business when ITA signs PSS contracts with other airlines?

This development occurs as the PSS/airline hosting  market in the U.S. seems to be a wide-open affair.

HP is at the beginning stages of building a new reservations platform, Jetstream, for American Airlines. The system would replace American’s long-time arrangement with its offspring, Sabre.

And, United Airlines’ transition to the Amadeus Altea platform, which would replace Travelport’s Apollo host system, is stalled.

There are other important competitors, but ITA Software certainly would fit into the mix as a potential partner as airlines attempt to retire some of their legacy platforms.

However, Air Canada’s cancellation of the Polaris project was a major blow to ITA because it leaves the company without an existing reservations system customer.

Meanwhile, Air Canada’s implementation of ITA Software’s pricing and shopping system across the airline’s online channels — a project which is distinct from the discontinued Polaris host system job –  is slated for introduction in summer 2010.

This just in: ITA Software picked up another airline customer for its QPX airfare pricing and shopping system: Southwest Airlines.

The press release hadn’t dropped at press time, but the functionality is now live on Southwest.com. The use of ITA gives Southwest a bunch of new capabilities, including calendar-based search and air search using flexible dates.

One key element of this whole thing is that it doesn’t seem to alter the airline’s distribution strategy. You can’t find Southwest flights in any of the metasearch engines, including the crowd powered by ITA (including Kayak, TripAdvisor and others) and Southwest’s absence in metasearch will remain in place. It also doesn’t change Southwest’s availability status in the Sabre and Apollo GDSs.

Another important aspect of this relates to international codeshares.

Southwest spokeswoman Brandy King indicates that the use of ITA QPX will enable Southwest to implement pending international codeshares with Volaris in Mexico and WestJet in Canada.

“We are working on the technology,” King says.

ITA’s QPX system is to believed to be the dominant one among U.S. airline websites, and the addition of Southwest certainly won’t crimp that status.

ITA already powers air pricing and shopping for Continental, American, United, Alaska, US Airways, Air Canada, TAP, Al Italia and ANA.

Sabre hosts Southwest’s res system, but didn’t operate the air search function on Southwest.com.

King says implementing ITA on Southwest.com amounts to an “enhancement to some of our current internal technologies. Our current reservation system technologies did not change.”