G2 SwitchWorks’ reported “disappearance” following its sale of technology assets to Travelport GDS earlier this month was greatly exaggerated, says company founder and CEO Alex Zoghlin.
“The lights are still on, we’re still here in Sears Tower, and our GDS is still live,” Zoghlin said.
But things are changing rapidly for the Chicago-based company.
Zoghlin told Travel Weekly that what's left of G2 SwitchWorks, its GDS, is for sale. He said the company is completing due diligence over the next two weeks, and is in discussions with several active bidders. He declined to identify them, but there are indications that a major travel agency may be among them. A sale is expected by next month, Zoghlin said.
The majority of G2’s employees have left to join Travelport GDS and help the company finish developing the Kestrel technology platform that G2 built and sold. Principals who were involved in the development of G2’s GDS will remain with the company until it is sold, and possibly afterward, he said.
“A good portion of the company was working on the [Kestrel] product,” Zoghlin said. “But we have a core set of employees who understand source code and operations of GDS products. To my knowledge, we are the first company in the last 20 to 30 years to build an entirely new GDS system. Part of me says I can’t believe we pulled this off. And given the way economics work in the GDS business, I don’t think it will be profitable for someone to ever try it again."
But the existing business, Zoghlin said, is healthy and economical to operate, with far lower costs than traditional GDSs. The res system is attracting bidders he described as “big players” who may see the system as a way to save money.
"I was actually surprised that there are several companies out there interested in owning a GDS,” he said. “If they are a large travel agency, it gives them the opportunity to control their own distribution network. It’s extremely low-cost to manage, so low it is almost comical, about one-thousandth of the price of other GDSs. So from a financial perspective, players are interested because they can cut better deals with travel agencies or other GDSs. I think some see it as a breakaway opportunity."
Zoghlin said G2 Switchworks, which he and other former Orbitz executives launched in 2004, eventually developed reservations relationships with some 700 airlines but only contracted for services with a few. It processed as many as 2 million tickets at one time, but those numbers are smaller now, he said.
The company has focused on developing technology through a graphical user interface (GUI) to allow agents more online and offline flexibility. The Kestrel agent desktop was at the core of that effort. The GDS is fully functional and is operated primarily by company executives.
“We’ve spent last three or four weeks trying to decide what we want to do,” Zoghlin said. “We could have done some different things with the assets and could have reallocated them to some other interesting projects. But we talked to investors, secured creditors and others, including air carriers, and this was ultimately what we decided to do. It doesn’t mean that the board could not change their mind or the carriers we serve could not change their mind about participating and go in a different direction.”
Travelport GDS purchased Kestrel and the G2 core GUI technology to help it integrate services through a common agent desktop application for all three of its GDSs: Worldspan, Galileo and Apollo. The product remains in development; a rollout of the new agent desktop is expected over the next year or so.
Part of that sale agreement included a lease-back of certain parts of the Kestrel technology, Zoghlin said, but not the part that would allow G2 to market the product to travel agencies. Those lease agreements with Travelport will be part of G2’s sale of remaining assets, he said.