Travelport Facilitating Corporate Airline Bundles, Negotiated Ancillaries In GDS

Travelport released functionality that lets airlines recognize corporate clients and enables them to distribute fare bundles, discounted ancillaries and other negotiated benefits by way of the global distribution system, Travelport CEO Gordon Wilson said today during a quarterly conference call with investment analysts.

Like other GDSs, Wilson noted, Travelport already had enabled airlines to recognize individual bookers by way of their frequent-flyer number and transmit offerings based on status. Yet, Wilson noted that Travelport has a few major airlines testing its merchandizing capability at the corporate level.

"This would be the case where the corporation negotiates not only a fare deal with an airline for their key routes but certain ancillaries—be they bag fees, seat assignment charges or the like—uniquely packaged into that deal for the employees of that corporation," said Wilson. "Travelport can now serve up unique, tailored content onto the booking screens of their chosen travel management company or their corporate self-booking tool, provided of course that both are powered by Travelport."

In addition to discounted, or waived, ancillary purchases, Wilson said the functionality enables corporate negotiated bundles by which an airline can offer a suite of benefits inclusive in a corporate negotiated fare. Major carriers, including American Airlines and Delta Air Lines, have envisioned such bundles for years.

In a follow-up call with The Beat, Wilson declined to identify airlines using Travelport's new capability, but he said "some of the big North American airlines," as well as "a number of international carriers," were in production.

While only "a handful of airlines at the moment" were using the feature, Wilson said it is available to any airline that uses Travelport's Rich Content and Branding module, an extension launched last year that facilitates various merchandizing and display capabilities for airlines.

"We have a rules-based capability, which enables you to put in rules based on who is asking and where the demand is coming from," Wilson told The Beat. "And we've put in place identifiers where a particular corporation can be identified. Therefore, the deal they've got, which can be loaded into Rich Content and Branding, can then be applied to them."

Travelport's competitors also have announced personalization features this year by way of their airline IT businesses that power internal airline systems.

For example, Amadeus in February announced Lufthansa became the first airline customer of Altéa Corporate Recognition, an extension of its Amadeus passenger services suite. The module enables airlines to recognize corporations and customize offers or services to them. That could include special services throughout the journey, discounted ancillaries or corporate bundles. Amadeus said Altéa Corporate Recognition can "identify a corporate customer via any channel, including indirect and corporate self-booking tools." Meanwhile, Sabre Airline Solutions this year released several data-based offerings that enable further personalization through various touch points.

Wilson suggested that Travelport's new capability was a first in a GDS. Amadeus and Sabre did not immediately reply to comment on any similar endeavors.

Travelport Segments Fall, Revenues Grow

As anticipated, Travelport reported a decline in airline tickets issued for the three months ending Sept. 30, down 5 percent, while hotel room nights and rental car days sold rose 3 percent and 9 percent year over year, respectively.

Reported segments—defined as "revenue generating units" sold by subscribers, including non-air transactions—tumbled 5 percent year over year to 84 million.

Representing Travelport's largest regional decline, Wilson attributed a 13 percent fall in U.S. segments "largely" to its renegotiated contract with Orbitz, which altered its GDS mix.

Meanwhile, Travelport reported a total segment decline in Europe of 2 percent and segment growth in Asia/Pacific, up 7 percent, and Latin America and Canada, up 10 percent. Segments held flat year over year in the Middle East and Africa region.

Travelport had positioned 2015 as "a transitional year," as it moved beyond the impact of contracts with Orbitz and Delta Air Lines. "We've already lapped the impact of our new contract to host Delta's key applications, and we will lap the new contract with Orbitz from Q1 2016," said Wilson.

Despite those headwinds, which Travelport anticipated would diminish revenue by $100 million, the company reported that net revenue rose 6 percent year over year to $560 million during the third quarter.

A key Travelport metric on business diversification is revenue per available segment, which rose 11 percent year over year to $6.29. That contributed a $42 million increase in GDS revenue, "which was offset by lower volumes," according to a company filing.

Travelport has looked for revenue beyond air segments, including airline merchandizing, hotel and rental car bookings, payments by way of its eNett joint venture and mobile solutions by way of the recently acquired Mobile Travel Technologies.

Travelport reported "Beyond Air" revenue for the quarter rose 17 percent to $129 million. Meanwhile, air revenue rose 2 percent year over year, owing to "improved mix and merchandizing."

Rich Content and Branding is a big component of Travelport's airline merchandizing push. Travelport reported that more than 100 airline customers have implemented Rich Content and Branding. "We have well over 50 percent of our airline customers by volume upgraded onto this capability," Wilson said. During the quarter, Travelport added Cathay Pacific, Air China, China Eastern and Shanghai Airlines to its Rich Content and Branding platform.

That module has been revenue generating since July, following the conclusion of a free trial period for airlines, said Wilson. He said Travelport charges airlines that use Rich Content and Branding "a small incremental sum per net segment booked." Further, if an ancillary were sold, Travelport also would levy a "small" transaction fee, he said.

For the third quarter, Travelport reported that adjusted earnings before interest, taxes, depreciation and amortization fell 2 percent year over year to $131 million, "the result of lower volumes and increased expenses as we continue to invest in our platform through acquisition, expansion of our go-to-market commercial capabilities and incremental public company administrative expenses," according to a company filing.

Net income fell $150 million year over year to $5 million, "primarily due to a $304 million gain on the sale of Orbitz Worldwide shares" that Travelport recognized in the prior-year quarter.

Meanwhile, Travelport noted that it has increased its stake in Australian corporate travel management system provider Locomote from 49 percent to a majority 55 percent.