US View – April 2008

The two Jeffs are ‘on track’

Listen to top officials at Sabre and Travelport and they seem mighty comfy in their roles at the once-public but now private companies, and they still are ready to conquer the travel world.

Although they are owned by out-of-vogue private equity firms, which not too long ago were buying up companies as easily as supermarket shoppers tossed extra bags of cookies into their grocery carts, Sabre and Travelport are executing on their strategic plans, investing heavily in their myriad businesses, considering new (but pint-size) acquisitions, and even improving their balance sheets while Bear Stearns gets humbled and the Blackstone Group’s stock price tanks, according to respective status reports offered by Jeffery Jackson of Sabre and Jeff Clarke of Travelport.

The two ‘Jeffs’, interviewed separately, concur that large acquisitions are out of the question at the moment because the capital markets are effectively closed, but their companies are hitting cost-removal, or company re-engineering, targets and have hardly missed a beat as their owners leisurely mull over exit strategies of five to eight years (so says Sabre) or a mere five years (according to Travelport).

Jackson, the chief financial officer at Sabre, Travelocity’s parent, says he’s “loved” the experience of working in a top executive position at a private company because Sabre can focus on making long-term
investments without having to meet those pesky quarterly expectations of Wall Street’s analysts.

And, Clarke, the president and chief executive of Travelport, which owns some 48% of Orbitz Worldwide, as well as 100% of Galileo, Worldspan and Gullivers Travel Associates, says he probably “sleeps better at night” than when Travelport was part of a public company, especially since Travelport has pulled off a “paradigm shift” with the acquisition of Worldspan.

Suppliers like Southwest Airlines, which chose Travelport and Sabre as GDS distributors, and EasyJet, which opted to use Travelport and Amadeus, have to deal with Travelport these days because it has the greatest global reach, Clarke says.

I fear Jackson and Clarke doth protest too much about the relatively hassle-free mandates and timelines of their private equity owners. After all, when a journalist requests a couple of interviews for a story, it isn’t often companies immediately offer up their CFOs or CEOs without the journalist even bringing up their names in conversation. That’s what happened here.

Sabre and Travelport clearly want to pound home the message to the industry and investment community that they are on track to meeting their performance goals, and perhaps also the competitive juices are flowing and they want to set the record straight about who’s zooming who.

Jackson of Sabre says the company had a several-year headstart in going on a cost-cutting binge, and today, with Sabre owners Texas Pacific Group and Silver Lake Partners, expressing confidence in Sabre’s management and portfolio, the  company can methodically invest for the long-term while other companies – and we know who you are, Travelport – must be expedient because of a short-term window in place to carry out an exit strategy.

Meanwhile, Clarke of Travelport says the company has been able to improve its capital structure during the credit crunch by buying back debt at “80 cents on the dollar.”

“Our horizon is more or less the same as Sabre’s and we have less debt,” Clarke says.

Clarke, who came to Travelport from software firm CA (formerly known as Computer Associates), notes that Worldspan was a pioneer in online technologies, and he believes that Travelport has a technology edge and an advantage in global scale over Sabre. Sabre is “so sub-scale” in many markets, Clarke huffs.

A sub-text to the entire discussion is that the journey could get a lot tougher for both Travelport and Sabre if a global recession takes hold. No-one in the travel industry, whether they work for pubic or private companies, will be sleeping soundly if that scenario unfolds.

Get the Inside knowledge

Once again meta-search is showing how innovative it can be with the introduction in beta of InsideTrip, a lead-generation site that taps into multiple databases to score the trip quality of flights based on 12 elements of airline itineraries, including leg room, security wait time, aircraft age and on-time performance and lost luggage track record.

InsideTrip – – comes up with a TripQuality score based on these 12 ‘pain points’, but also enables consumers to customise that rating by deselecting any of the 12 data points that they might not feel are important to their own trips.

InsideTrip knows that consumers are interested in price, but it is betting that consumer concerns about their holidays go beyond the bottom line, too.

The Seattle-based start-up was founded by TWA veteran Dave Pelter and InsideTrip is privately held.

“Travellers have been asking for a resource that helps them sort through the hundreds of airfare listings. InsideTrip visually shows that each trip is different and helps consumers quickly determine the perfect trip by directly searching the features most important to them,” Pelter states.

“The fact is, real product differences exist – with the best flight options offering more leg room, on-time schedules, new aircraft and other amenities that simply offer a better experience.”

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