It's been a busy week for the world's leading GDSs. It started with four major players and went down to three with the merger of Worldspan with Travelport, owners of Galileo.
To round off the week, Sabre Holdings was sold to two private companies, Silver Lake Partners and Texas Pacific Group (TPG) for around $5bn.
The first deal, which valued Worldspan at $1.4bn, has been hanging fire for some time. People have grown old predicting it.
At first glance it seems a sensible tie up. Worldspan is strong on some aspects of technology and in distribution in America whereas Travelport has what its ceo Jeff Clarke calls a "massive distribution network."
Founded by a consortium of airlines led by BA in 1987, Galileo has also retained its powerful position in the UK and Ireland.
But while their rivals Sabre and Amadeus have both shown a determination to invest strongly in new technology and adapt to the rapidly changing travel world, Galileo and Worldspan have not so obviously shown the same ambition. Both have kept a lower profile than their rivals and it would be fair to say have had less impact on the market in recent years.
Worldspan did seem deliberately to lower its profile in 2003 after its purchase by Citigroup Venture Capital Equity Partners and Ontario Teachers' Pension for $745 million from American Airlines, Delta Air Lines and Northwest Airlines.
But its third quarter figures, released in November, indicated it was not faring that well in the market. Revenue was down from $239.7m in the third quarter of 2005 to $212.5m in the same period of 2006, operating income down from $35m to $32.2m and net income down from $18.1m to $15.5m.
Perhaps more crucially, transactions were also down, both for the quarter and for the year to date. In the quarter they dropped from 50.4m in 2005 to 44.9m in 2006, a decline of 11%. For North America they dropped 12% and for the rest of the world 5%.
For the year to date, the total figure fell from 160.2m to 151.3m while for North America the loss was from 127.1m to 119.8 and for the rest of the world from 33.1m to 31.5m.
This was a trend which might have been difficult to reverse in view of the changing nature of travel reservations. Mr Clarke himself noted in his statement regarding the Worldspan/Travelport merger how “the strengthening of alternative distribution channels, such as supplier direct channels, continue to influence how travel is purchased.” In other words, more customers are going direct rather than through GDSs. They have a fight on their hands.
There is also the question of de-regulation. GDSs were de-regulated in the US in 2004, removing the obligation of GDSs to display airline inventories in an impartial way i.e. the abolition of the level playing field.
One of the results was the bruising confrontation between American and Sabre over access and fees, a show down which other airlines, determined to cut their distribution costs, were prepared to join in.
If de-regulation goes ahead in Europe, as is likely, even with safeguards because of the continued ownership stake three airlines have in Amadeus, such encounters can not be ruled out. Some industry observers believe the summer skirmish between American and Sabre was just the start of a longer running battle which could resume next year.
It will only be the stronger GDSs which can take on the airlines and their direct booking websites, not to mention any other alternative distribution channels, like the GNEs.
But from the customer point of view, the merger may not be such good news. ECTAA, the organisation representing European travel agents, has already noted that the merger will "effectively reduce competition in the CRS market in Europe where four players will become three" and questions whether neutral information from them can still be guaranteed.
It added: "In light of these developments, ECTAA considers it of paramount importance to have a specific European legislation regulating the CRS services in the Community in order to prevent unfair practices in a highly concentrated market."
It would be wrong to see the three remaining GDSs as under siege. But 2007 may not be the most comfortable of years for them.
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