Is it true Worldspan is
aggressively coercing Orbitz into limiting its so-called
supplier-link business; i.e., the direct connections that bypass
the GDS?
A: This was the precise charge leveled by
America West in its testimony at the Department of Transportation's
GDS hearing in May. For three months, these allegations bothered
me, as they sounded so bizarre that I assumed America West must be
wrong.
Here is what America West told the DOT: "Both Orbitz and America
West have been working on the automation needed to consummate the
supplier link, and we had expected to have it up and running in the
late-May, early-June time frame.
"Last month, we were advised by Orbitz that Worldspan, the GDS
used by Orbitz for its bookings that do not use Supplier Link, had
subverted Orbitz and its customers' efforts to find a more
economical way to do business.
"As explained to us by Orbitz, Worldspan presented Orbitz with
an ultimatum: either sign the new agreement that guaranteed that
Orbitz would meet or exceed a minimum level of bookings through
Worldspan, or Worldspan would disconnect Orbitz, effectively
putting them out of business."
As I suspected, the truth of the matter is totally different.
There was no "ultimatum," "new agreement" or threat to
"disconnect." America West misunderstood the relationship between
Worldspan and Orbitz, just as it has misunderstood virtually all
aspects of the GDS business since it began complaining to the DOT
six years ago.
On Aug. 28, Orbitz filed a 200-page prospectus with the
Securities and Exchange Commission. The prospectus tells us about
the Worldspan relationship in detail.
In December, Orbitz and Worldspan revised their GDS contract to
cover the next nine years, even though DOT rules prohibit GDS
contracts in excess of five years.
As in most conventional contracts with travel agencies, there is
a quarterly booking quota and a per-booking penalty for not
achieving the quota. In Orbitz's case, the penalty is $1.78, which
is an odd number that may correspond to the bonus Orbitz gets from
Worldspan for each booking it does make.
So, Orbitz actually was telling America West that it didn't want
to risk going below its quarterly quota and incurring these
penalties, which would make another supplier link unprofitable.
In other words, Orbitz voluntarily took on a contract quota in
return for hefty bonuses from Worldspan, just like any other travel
agency would. World-span didn't coerce anyone.
Orbitz could have gotten a no-quota, no-bonus contract if it had
wanted to get one, just as any agency can today. It is only its own
actions that have stifled more supplier links.
Mark Pestronk is a Fairfax, Va.-based attorney specializing
in travel law. He answers your questions in the TravelWeekly.com
Legal Ease forum. To contact Mark directly, e-mail him at [email protected].