Posted on: February 3, 2014
The new era?
Ten years ago in this space we were predicting a new era for the GDS business, owing to a decision by the Transportation Department (DOT) to stop regulating it.
This page is protected by Copyright laws. Do Not Copy. Purchase Reprint
It's worth remembering that from the mid-1980s until Feb. 1, 2004, the DOT regulated the format of GDS displays to prevent bias, restricted the pricing freedom of GDS companies to prevent discriminatory rates, and regulated certain provisions in agency contracts to protect agents from becoming captive to onerous GDS contract clauses.
Long before 2004 we had come to the conclusion that these rules had outlived their usefulness and had stifled innovation. With the demise of the rules, we were hoping to see market forces bring about a renaissance of innovation in distribution technology and airline-GDS-agent relationships.
We're not sure that's how we would describe the decade that followed.
It now appears that the biggest change for the GDS companies in the years following deregulation was in their corporate structures.
Apollo, Galileo and Worldspan came together as Travelport and went private as a property of the Blackstone Group in 2006. A year later, Sabre was taken private by TPG and Silver Lake Partners.
Sabre's owners recently filed for an IPO to sell a minority stake, and the financial disclosures show that the company posted net losses for six straight years. Travelport didn't do much better, reporting a net profit for only one year since 2007, and that was because of a one-time asset sale.
It may not matter to the rest of the industry that the two biggest U.S. GDSs are controlled by private equity funds, but it could matter a lot that both of them have been losing money for so long.
The airlines have already shown how a perpetually unstable sector can produce ripples of disappointment through the entire travel industry. We don't need another demonstration from another sector.
Fortunately, the financial reports from both Travelport and Sabre show that the trend lines are positive. The early word on the Street is that investors will be drawn to the Sabre IPO. These are good signs.
Now let's have that new era we were talking about.