Notes From Sabre's IPO Prospectus

Sabre Corporation on Tuesday filed a registration statement with the U.S. Securities and Exchange Commission for a proposed initial public offering. In addition to detailing financial performance during the past few years, Sabre's nearly 400-page document included other notable tidbits, some of which are collected below.

• A "restructuring" of Sabre's technology organization began in the fourth quarter of 2013 "to better align costs with our current business, reduce our spend on third-party resources and to increase focus on product development." The company expects that restructuring to be mostly complete by the end of the current quarter, resulting in 350 cut positions.

• Citing "strong bargaining" power among large travel agencies, Sabre noted that incentive payments "tend to increase in each round of contract renewals." Sabre explained that while incentive fees "have been increasing in real terms," they have been "relatively stable as a percentage of Travel Network revenue over the last four years partially due to our focus on managing the incentive fees we pay. We believe we have been effective in mitigating the trend towards increasing incentive fees by offering value-added products and content, such as Sabre Red Workspace, a [software as a service] product available to our travel buyers that provides an easy to use interface along with many travel agency workflow and productivity tools."

• Sabre highlighted its dependence on "several large travel buyers, including TMCs and OTAs." While no single entity accounts for more than 10 percent of Sabre Travel Network revenue, "the five largest travel buyers" represented 35 percent of Sabre Travel Network revenue for the nine months ended Sept. 30, 2013. According to Sabre, "such revenue concentration in a relatively small number of travel buyers makes us particularly dependent on factors affecting those companies."

• Sabre claimed that the user base for its TripCase itinerary management product increased "six-fold" from the beginning of 2012 through 2013, to about 2.5 million. It added that 15,000 agencies and 26 airlines also are using TripCase to deliver documents to customers.

• Sabre specifically mentioned as a potential "significant competitor" Microsoft's in utero Travel 2015 trip planning tool. It also mentioned Concur's TripLink open booking service as having "the potential to evolve and pose a significant risk to our Travel Network business." However, discussing direct distribution generally, Sabre wrote that such initiatives "have not and will not have significant adoption by travel agents since cost and lack of features are not currently competitive with GDS offerings."

• Sabre hasn't been very keen on the International Air Transport Association New Distribution Capability. In its prospectus it noted that the initiative "suffers from many of the same problems" as direct distribution initiatives. Yet, Sabre claimed that it is "committed to working with IATA to develop uniform technical standards that would incorporate NDC capabilities in a manner that integrates with the GDS for the benefit of travel buyers and travel suppliers."      

• News of a U.S. Department of Justice antitrust probe into global distribution systems broke in May 2011. DOJ subsequently has provided few updates. Sabre in its prospectus suggested the probe is ongoing and noted that it is "fully cooperating" with DOJ, which according to Sabre, is investigating "the pricing and conduct of the airline distribution industry." Among potential outcomes, DOJ could "close the file," seek a "consent decree to remedy issues it believes violate the antitrust laws" or file a lawsuit against Sabre, and potentially others, "for violating the antitrust laws, seeking injunctive relief."

• Sabre estimated that the pending federal antitrust lawsuit brought by US Airways likely would go to trial in September or October this year. US Airways quantified damages "at either $281 million or $425 million, (before trebling)," according to Sabre. (Trebling refers to an antitrust statute that enables plaintiffs to collect three-times damage amounts). Sabre called the damages "highly overstated. In the event US Airways were to prevail on the merits of its claim, we believe any monetary damages awarded (before trebling) would be significantly less than either of US Airways' proposed damage amounts."

• Regarding the Oct. 30, 2012, federal antitrust lawsuit settlement with American Airlines, Sabre "expensed $347 million in 2012 related to this settlement agreement," or "$222 million, net of tax." AMR previously reported "a $280 million benefit from settlement of a commercial dispute" for the period of its settlement with Sabre.

• Sabre acknowledged that last year it lost significant transaction volumes from Expedia. But those bookings Expedia handles on behalf of and will continue to be processed by the Sabre global distribution system "until 2019," as per last year's "strategic marketing agreement" between Expedia and Travelocity. After that, Expedia "may choose to use another intermediary for a portion or all of such air travel, subject to earlier termination under certain circumstances."

• Sabre claimed "a 37 percent share of GDS-processed air bookings in 2012."