Galileo to merge with Worldspan

GDS consolidation has taken a major step forward with plans for Galileo to merge with Worldspan in a $1.4 billion deal.

Galileo owner Travelport is to acquire the rival GDs subject to regulatory approvals, it was announced yesterday.

The initial integration focus will be on consolidating technology and administrative operations resulting in “near-term” cost savings of approximately $50 million, according to Travelport.

Worldspan completed a recapitalisation plan to coincide with the merger agreement. Travelport loaned $125 million to Worldspan in exchange for a payment in kind PIK note which Travelport funded through cash on hand. In addition, an unnamed Travelport parent company also loaned Worldspan $125 million in exchange for a PIK note.

The companies see opportunities to cross-sell Worldspan’s technology products to Travelport’s global customer base.

More than 750 travel suppliers and 63,000 travel agencies use the two companies. Worldspan will enhance Travelport’s technology platform, in particular in the online distribution segment, a statement said.

Travelport CEO Jeff Clarke said: “Increasing cost pressures on travel suppliers and agencies combined with the strengthening of alternative distribution channels, such as supplier direct channels, continue to influence how travel is purchased.

“This merger will create a more effective and efficient travel distribution provider and will ensure that we are better positioned to meet the evolving needs of our customers, the travel suppliers, travel agencies and end consumers.”

“As the travel industry continues to grow at a substantial rate, travel suppliers and agencies require the technology and networks capable of handling the increased demand.

“Competition in the travel distribution industry has increased, driven in part by travel bookings via alternative travel distribution channels. According to Forrester Research, more than half of US travel bookings are already processed through alternative non-GDS channels.

“Globally, sales from supplier direct websites are expected to continue to grow as airlines encourage direct bookings through frequent flyer programs, exclusive fares and potentially through removal of content from the GDSs.

“The combination of Travelport and Worldspan addresses the increasing demands of the travel distribution industry and supports the need for cost-effective and efficient GDS offerings.”

Worldspan chairman, president and CEO Rakesh Gangwal said: “This merger builds upon the complementary strengths of our two companies, which will benefit existing and future customers, allowing them to address an increasingly competitive marketplace.

“The combination of Travelport and Worldspan directly addresses industry trends and will provide a new standard of technology, high quality content and world-class customer service.”

“Clarke will lead the combined company as CEO. Gangwal will leave following completion of the merger.

Report by Phil Davies