Travel Weekly's Technology E-letter: Feb. 7, 2007

AMERICAN AIRLINES AND EXPEDIA reached an accommodation, and the airline's international fares as well as domestic first and business-class flights were again being sold through Expedia.com. For about three weeks before the resumption of sales Feb. 2, Expedia.com had been selling only domestic coach tickets for American. Expedia and American officials declined to specify what led to the detente. The dispute, according to a source, hinged on the relative economics of Expedia's handling American bookings through Expedia.com's two GDS vendors, Sabre and Worldspan. American and Worldspan concluded a long-term content agreement in late March 2006, about five months earlier than American and Sabre came to terms. The economics were more advantageous to Expedia.com when Sabre processed the AA bookings than they were when Worldspan handled them, the source said. So, Expedia.com removed all but American's lower-yield domestic coach fares to pressure the airline, and to have it exert some influence on Worldspan, to make Expedia "whole" on the financials of an AA booking through Worldspan, the source added. However, Expedia.com spokesman David Dennis said Worldspan was not involved in the new Expedia-American agreement. When Expedia and American initially aired the dispute last month, Expedia said it decided to cease using Worldspan to handle American's bookings, but officials Tuesday declined to comment on whether Worldspan has resumed processing some of American's bookings for Expedia.com.

SABRE AND NORTHSTAR TRAVEL MEDIA, the owner and publisher of Travel Weekly, signed a contract in which NTM agreed to provide its hotel classification ratings systems to the Sabre GDS and Travelocity. The backdrop to the pact is that AAA decided last month not to renew its contract to provide its Diamond Hotel Ratings to Sabre and Travelocity as the automobile club moves to develop more traction with proprietary information on its own Web sites. Agents using the Sabre GDS gained access to the NTM business-to-business hotel rating system, based on Official Hotel Guide Worldwide ratings, last week. And Travelocity, including its extensive network of World Choice Travel affiliates, is expected to begin using NTM's consumer hotel classification ratings system in the next few weeks. Sabre, including its GetThere business, and NTM had pre-existing relationships in which Sabre used NTM data. "This deal means we are intensifying and strengthening our relationship with Sabre and Travelocity," said Sheila Rice, NTM's vice president of content licensing. "I think it reinforces the credibility and reliability of Northstar's hotel classification rating system." Northstar rates far more hotel properties than AAA, including thousands of properties outside the U.S. Northstar doesn't necessarily visit each property to issue a rating but creates them based on the input of seasoned professionals who evaluate properties' amenities and conduct a thorough review based on information from hotel officials, travel guide evaluations, travelers' comments and collateral materials, Rice said.

SABRE'S GDS BUSINESS, the Sabre Travel Network, increased its operating income and margin in 2006, with the tallies impacted by airline agreements and incentive trims in place for the fourth quarter. Operating income in that division increased 11.4% to $249 million for the year, and the operating margin rose 1.2 percentage points to 15% on a GAAP basis. "Our confidence in our business model has never been stronger," Sabre chairman and CEO Sam Gilliland told analysts as the company released fourth-quarter and full-year 2006 financial results. Gilliland said Sabre Travel Network's transactions rose 13.9% to 85.6 million in the fourth quarter, although the rate per transaction dipped "slightly" because of the new airline agreements with major U.S. carriers. The GDS business achieved the margin level it did in part because the unit has "taken out significant costs," Gilliland added. Sabre in the future will be better able to manage the growth of incentives, Gilliland said. The overall 13.9% rise in transactions in Sabre's GDS business included a whopping increase, propelled by new business with Expedia.com and Priceline.com, in the number of transactions processed in the consumer online channel. Those transactions increased 81.3% to 19.1 million in the fourth quarter. For 2006, Travelocity's revenue increased 31% to $1.1 billion. Its operating income for the year was $5 million, compared with a $10 million loss in 2005.

FARECAST added the former CEOs of Expedia and NLG (now World Travel Holdings) to its board as well as another $12.1 million in Series C financing to the corporate kitty. New board members include Erik Blachford, a former Expedia CEO, who has invested in Farecast in this latest financing round; former NLG CEO Brad Gerstner, a current vice president of Par Capital Management; and Jim White, managing director of Sutter Hill Ventures. Blachford joined the board in December, while Gerstner and White are new appointees. This latest financing round, which brings Farecast's venture funding to $20.6 million, was led by Sutter Hill Ventures, a Silicon Valley venture capital firm that focuses on technology start-ups. New investors include Sutter Hill Ventures, Par Capital Management, Pinnacle Ventures and Blachford. Existing investors also participated in the Series C financing, including Greylock Partners, Madrona Venture Group and WRF Capital. Farecast President and CEO Hugh Crean said the new funding will enable Farecast to expand its prediction capabilities. The company's Web site, at www.farecast.com, is still in beta and specializes in advising consumers whether to buy an airline ticket now or later based on its predictions about whether the fare will stay the same, rise or fall.

Technology Editor: Dennis Schaal

Phone: (201) 902-1904

[email protected]

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