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 EC's initial investigation "identified serious concerns" that
the merger "might lead to significant impediments to competition"
In contrast, the
next day the EC gave its relatively swift blessing to MyTravel
Group's merger with KarstadtQuelle, the department store and mail
order entity that owns Thomas Cook Group.
now-concluded initial investigation of the Travelport-Worldspan
deal, according to the EC, the pending merger appears like it would
lead to "competition concerns" for suppliers in Europe and for
travel agents in the U.K., Ireland, Italy, Belgium, the Netherlands
Worldspan-Galileo would be the second largest GDS firm in Europe,
as Galileo is on its own now, and would have market shares ranging
from 40% to more than 70% in those six European countries, the EC
stated. Amadeus is first, Sabre third and Worldspan fourth in
"In its in-depth
investigation, the commission will assess the effects of the
reduction of the number of GDSs from four to three and the
elimination of competition between Galileo and Worldspan on
competition in the European Economic Area, and in particular
whether prices for GDS services to travel service providers would
increase," the EC said.
stated that it would conclude this second phase of its
investigation of the merger by Sept. 13.
spokesman Elliot Bloom told TravelWeekly.com that both companies
still expect the deal to close in third-quarter 2007, after
Asked whether the
merger agreement allows Worldspan to entertain other bids in the
interim, Bloom said: "No, Worldspan cannot merge with another
In a statement,
Travelport said: "Alternative distribution channels, such as
supplier Web sites and other direct channels, have expanded
considerably in recent years and exert strong competitive pressures
on GDSs such as Galileo. The contemplated merger of Worldspan into
Galileo, a subsidiary of Travelport, will establish a more
effective and efficient travel distribution provider as the
combined company will promote technology innovation and compete
more effectively in an increasingly competitive market driven by
demands for lower prices."
Michelle Grant, a
research analyst for Euromonitor International in Chicago, said she
doesn't think the EC's action is a "major threat" to the deal's
Worldspan and Travelport can present a strong case that the rise of
supplier-direct channels and low-cost carriers have put stronger
competitive strains on the GDSs.
She added that the
EC's decision to undertake a deeper investigation "might reflect
its unfamiliarity in how the landscape has changed."
regarding Thomas Cook's pending acquisition of MyTravel, the EC
found that the merger "would not significantly impede effective
competition" in Europe.
noted that the combined company would continue to face competition
from TUI and First Choice, and many smaller tour
The commission said
it would also rule on the proposed TUI merger with First Choice by
contact reporter Dennis Schaal, send e-mail to [email protected].