Q: Now that Galileo's parent
company has agreed to acquire Worldspan, I am sure that in the next
couple of years Worldspan agencies will have to migrate to the
Galileo system or vice versa. Which do you think will happen? Do
Worldspan agencies have a right to terminate their contracts if the
Worldspan system is discontinued? What about Galileo agencies? If
we can be forced to migrate, will we have to sign a new contract
with lower incentives?
A:
My guess is that Worldspan agencies will be asked to migrate to
Galileo, mainly because it is the executives at Galileo that will
making the key integration decisions. Those decision-makers will
naturally tend to favor a solution that leaves them in charge after
the merger.
However, these
kinds of mergers take years to do properly, so half or more of
Worldspan agencies will likely find their contracts ending before
they are faced with having to migrate to Galileo.
Note that I do not
mention technology as a factor, even assuming that Galileo is
superior to Worldspan technologically. As we all know from Windows
vs. Mac, the superior technology does not always become the
dominant technology.
The contracts that
almost all Worldspan agencies have signed incorporate "standard
terms and conditions" in a separate, single-spaced document that is
10-plus pages. Although the standard terms and conditions have
undergone changes through the years, every version used since 2000
says, "Worldspan reserves the right to migrate the customer to a
new computer reservation system used by Worldspan."
Therefore, as long
as Worldspan stays in business as a separate legal entity, and as
long as the legal entity uses a computer reservations system such
as Galileo, Worldspan can force subscribers to migrate. You will
have no option to terminate.
Incidentally, the
standard contract signed by most Galileo agencies is a bit less
straightforward, but Galileo's rights are really no less clear. It
says that Galileo will provide "access to a computerized
reservation system, support and such other services provided to
subscriber by Galileo."
So as long as
Galileo offers any kind of access to any kind of computerized
reservations system, it is not in breach, and the subscriber agency
cannot terminate if it is forced to migrate to
Worldspan.
Although you can be
forced to migrate, you cannot be forced to sign a new GDS contract.
Therefore, your vendor must honor your existing contract and
continue to pay you incentives under it.
Up to half of all
Worldspan and Galileo agencies will have their contracts for
renewal in the next few years, probably before the migration is
complete.
A renewal
negotiation is a good opportunity to try to get your vendor to
agree to give you some termination rights under your new contract,
if you are going to be forced to migrate after your new contract
becomes effective.
For example, you
could ask for the right to terminate as of the effective date of
the migration. If your vendor refuses, you could ask for a trial
period with the new system, with the right to terminate after, say,
six months if you are dissatisfied.
Although you may
never actually want to convert to Sabre or Amadeus, having the
right to do so might help ensure that the migration goes smoothly
for you.
Mark Pestronk is a Washington-based lawyer specializing in
travel law.