In a move that signals a de-emphasizing of the new entrant GDS market, ITA Software and Air Canada will soon announce a deal to develop an internal reservation management system for Air Canada, TravelWeekly.com has learned.

The deal, to deliver what would be ITAs first airline host system, is in the final stages of negotiations, according to airline spokesman John Reber.

When asked about the Air Canada deal, ITA President and CEO Jeremy Wertheimer acknowledged that, ITAs marketing and branding efforts notwithstanding, the technology companys core business focus now is on developing similar airline res systems, not constructing an alternative GDS.

Wertheimer described building airline host systems as the biggest project weve ever done. Such systems, he said, have a direct impact on the level of flexibility carriers enjoy in distributing their products.

Flexibility, of course, is the issue that has driven Air Canadas dispute with Sabre and other GDSs over its Tango fares: The airline insists that the traditional GDSs, built largely on outdated mainframe systems, cant accommodate selling Tango fares in the flexible way that AirCanada.com sells them.

Reber said an ITA-Air Canada contract would cover the airlines internal reservation management system but would not entail developing a new booking engine for AirCanada.com or a distribution solution.

Wertheimer acknowledged that the deal, and ITAs host system development efforts generally, represented a shift away from the GDS new entrant (GNE) market.

Everyone is still interested in distribution, he said of the GNE product, but certainly for us, a lot of horsepower has been in the [airline] res system.

He said the companys focus was on building airline host systems that offer carriers new technologies and capabilities for inventory management, airline reservations and departure control.

ITA Software built its reputation on its QPX air fare pricing and shopping system, first rolled out in 1999. Since then, QPX has expanded from domestic-only to international. Users include Continental, Alaska, Alitalia, US Airways, Accovia Travel Solutions, CheapTickets, Orbitz, Orbitz for Business, Kayak, Galileo and G2 SwitchWorks.

Much of the buzz about ITA has focused on its push to compete with Sabre, Galileo, Amadeus and Worldspan by developing a GNE system, dubbed 1U for its IATA GDS designation code.

That may have been a misreading of ITAs real priorities. ITA has said little about 1U for months, and Wertheimer said the firm had no dedicated sales team pursuing distribution contracts.

Wertheimer acknowledged that ITA had been quiet about all this [airline hosting systems development]. But he added that it had always been ITAs intent that its business would be driven by airlines needs, wherever that might lead.

To that end, he said, ITA has quietly been developing a host system since 2004. Today, 75 of 225 employees work on host systems at the companys Cambridge, Mass., offices.

The pace and scope of that effort intensified as ITA ramped up its staffing following a $62.5 million infusion of venture capital in January. Wertheimer said his investors -- Battery Ventures, General Catalyst Partners, PAR Investment Partners, Sequoia and Spectrum Equity -- never directed ITA to develop one product line or another.

ITAs new emphasis on airline host systems means the company still may take on legacy companies like Sabre and Amadeus, but the brunt of the competition may revolve around their airline solutions/IT business rather than their distribution businesses.

To contact reporter Dennis Schaal, send e-mail to tweditorial@ntmllc.com.