Travelport to get back to basics after sale of content distribution business

It’s tough being a global distribution system: The business is highly competitive and you can’t raise prices every year like you could in the good old days.

Those were some of the themes that emerged from Travelport’s fourth quarter and full-year 2010 earnings call today, as Jeff Clarke, president and CEO, noted that selling its travel-content distribution GTA business will enable Travelport to deleverage the company and focus on its core GDS business. The GTA sale to Kuoni is slated to close in May, pending approvals.

In the fourth quarter, Travelport’s GDS segment revenue fell 3% to $452 million, although for the full year in 2010 it increased 1% to nearly $2 billion.

For Travelport as a whole, its fourth quarter adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) rose 1% to $139 million and EBITDA was flat for full-year 2010 at $629 million.

Clarke characterized 2010 as a “tough year” in the highly competitive GDS business, where revenue per segment was down, but incentives paid to travel agents rose in the “mid-single digits.”

Clarke noted that Travelport’s GDS model is advantageous because although Travelport charges lower fees to airlines in their home markets, it can charge them higher fees in international markets. The mix, however, will be relatively flat, he added.

Clarke was asked about the Travelport’s and Orbitz Worldwide’s dispute with American Airlines, where the airline has removed its flights from  Orbitz, which is Travelport’s largest travel agency customer.

He said American Airlines accounts for less than 3% of Travelport’s GDS revenue so although Travelport would like American’s flights back on Orbitz, the impact is “relatively small” to Travelport.

Asked whether Orbitz Worldwide is a core asset to Travelport, Clarke said Orbitz “is strategic to us.”

Travelport owns 48% of Orbitz Worldwide’s outstanding equity.

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Dennis Schaal

About the Writer :: Dennis Schaal

Dennis Schaal was North American editor for Tnooz.

 

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