Travel Weekly's Technology E-letter: May 16, 2007

ORBITZ WORLDWIDE, which is being primed for an initial public offering, saw EBITDA increase 18% to $17 million in the first quarter, on net revenue of $207 million, a 12% hike. The revenue increase occurred because of a 21% increase in gross bookings, including increases of 19% in the U.S. and 36% internationally. Increases in air, hotel and vacation package transactions drove domestic growth, Travelport said. And Galileo, which operates out of a separate Travelport division, experienced an EBITDA decrease of 12% to $117 million. However, Travelport stated that Galileo recorded net revenue of $414 million, a 3% increase compared with the first quarter of 2006. "Higher revenue resulted from growth in GDS transactions, primarily in the U.S. and Asia-Pacific regions, and higher international yields," Travelport stated. And the revenue growth outstripped expected yield declines from U.S. airline contracts, the company said. Galileo's segments rose 2% to 74.8 million.

MEANWHILE,TRAVELPORT'S ORBITZ WORLDWIDE division will attempt to raise up to $750 million in an IPO, and Travelport's private equity owners would retain all voting control of the publicly traded subsidiary. Orbitz Worldwide, which includes some 20 brands, did not disclose the exchange that the stock would trade on, the percentage of shares Travelport's owners would retain or the offer price. However, Orbitz Worldwide disclosed that Travelport's private equity owners valued the Orbitz Worldwide portion of the Travelport purchase in August at nearly $1.2 billion. So, Travelport will attempt to take Orbitz Worldwide public, in one of the few consumer online IPOs in the recent crop of offerings, to leverage a much higher public valuation of the unit, reportedly at $2.5 billion to $3 billion, while keeping the slower-growing Galileo, a cash-flow generator, private. The net proceeds of the IPO would go to Travelport.

THE EUROPEAN COMMISSION opened an in-depth inquiry May 3 and gave itself another three months to probe Travelport's proposed $1.4 billion acquisition of Worldspan after the E.C.'s initial investigation "identified serious concerns" that the merger "might lead to significant impediments to competition" in Europe. In its now-concluded initial investigation of the Travelport-Worldspan deal, according to the E.C., the pending merger appears as if it would lead to "competition concerns" for suppliers in Europe and for travel agents in the U.K., Ireland, Italy, Belgium, the Netherlands and Hungary. A combined Worldspan-Galileo would be the second-largest GDS firm in Europe, a standing Galileo holds on its own now, and would have market shares ranging from 40% to more than 70% in those six European countries, the E.C. stated. Amadeus is first, Sabre third and Worldspan fourth in Europe marketshare. Travelport, saying the merger would increase competition, stated that it still expects the deal to close in the third quarter after the second phase of the E.C.'s review concludes.

SABRE CUT OFF content-aggregator BookingBuilder Technologies' access to the Sabre system May 11 and warned agencies that they would violate their GDS contracts if they use Sabre in tandem with an "unauthorized application" to book inventory outside of the GDS. Chris Kroeger, Sabre Travel Network senior vice president, wrote in a May 11 customer letter obtained by "Using the Sabre system in conjunction with an unauthorized application to facilitate shopping or booking outside the Sabre system, or to merge back reservations made outside the Sabre system, could result in the agency being out of compliance with the terms of its Sabre customer agreement." He added: "Such use of the Sabre system also represents a violation of Sabre's YK [passive segments] policy and could result in the agency losing the ability to create YK segments in the Sabre system." At issue is that Sabre wants BookingBuilder to sign a developer agreement and prepay a minimum annual fee of $100,000 plus $3.75 per booking to access the Sabre GDS. BookingBuilder stated the actual tab would come to about $700,000 per year. Thousands of Sabre agents use BookingBuilder to check the Web against Sabre content for lower fares or to book inventory, such as certain low-cost carriers, missing from the Sabre GDS. BookingBuilder hasn't signed on and this week opted to release a new version of BookingBuilder Desktop for Sabre users that BookingBuilder said does not access the Sabre system.

FARECAST, the air fare-prediction Web site, ended its beta and officially launched May 15. The Seattle-based company said new search functionality at launch includes "one-way, multicity, nearby airports and any class of service." A new Flight Quality Filter also enables users to sort searches by "red-eye," long layover, short connection and total duration. So, how accurate are Farecast's fare predictions? The company cites a Navigant Consulting study that pegged Farecast's accuracy at 74.5%.

Technology Editor: Dennis Schaal

Phone: (201) 902-1904

[email protected]

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