Worldspan has suffered a blow to its strategy of backroom domination. Expedia, part of internet mogul Barry Diller's online travel empire, is shifting some of its business away from Worldspan to the Sabre Travel Network.
Worldspan has based its survival as an independent Global Distribution System (GDS) on becoming the "no name", unbranded supplier of back-room distribution services to branded outlets, from internet sites to travel suppliers. Neither party would say how much business would be shifted, although Sabre says it expects to process a meaningful portion of Expedia's GDS bookings over the five years of the contract.
"While disappointed with Expedia's strategic decision, we respect their desire to diversify service providers," says Rakesh Gangwal, Worldspan's chairman. In Securities and Exchange Commission filings, Worldspan has said that Expedia accounted for just under 10% of its total revenues. Gangwal says the change "will not have a material impact on our 2004 cash flow from operations".
Worldspan is in the middle of a flotation, and this can not help, says Richard Eastman of California-based distribution specialists Eastman Group. "Worldspan is caught between a rock and a hard place as Expedia makes a strategic move away from it at the same time that carriers proliferate their direct access connections, bypassing the GDSs," he adds. "Worldspan is left without a strategy other than to be a switch for others." Meanwhile, Expedia is in a "rapid evolution into an interactive distribution host", Eastman says. The move also marks another protest, he adds, against rising GDS prices.
Source: Airline Business
