Ebookers, much-criticised because of the drag it placed on Cendant’s and later Travelport’s earnings, will be the first among Orbitz Worldwide’s international brands to begin the transition to the all-important platform.
“One of our brands, ebookers, operates on systems that require a significant amount of manual processing, which has resulted in substantial costs for reporting and maintenance,” Orbitz Worldwide stated in a document it filed with the US Securities and Exchange Commission. “If we are unable to improve on its systems to address these concerns, we will continue to incur these excess costs and be unable to take advantage of efficiencies of scale.”
The latest twist in the Ebookers saga was revealed in connection with release of details about Travelport’s proposed initial public offering of the Orbitz Worldwide business.
Despite the importance of Ebookers’ migration, there was no explanation from Orbitz Worldwide about what led to what looks like a several-month delay, and likewise the Travelport unit shed no light on the much-anticipated Ebookers redesign. As reported, Travelport CEO Jeff Clarke and local officials previously had pointed to April as the timetable for the move to the new platform.
Orbitz Worldwide hopes to raise up to $750 million on its IPO, with the net proceeds going to Travelport. The parent company’s private equity owners, the Blackstone Group, Technology Crossover Ventures and One Equity Partners, would retain total voting control of Orbitz Worldwide and its ebookers’ business after the IPO.
Key elements of the sales pitch that Orbitz Worldwide is making to potential investors in its stock offering are the efficiencies and cost savings it will reap with the move to the global platform, and the Travelport division’s “strong positions in the fast-growing European and Asia Pacific regions” with ownership of Ebookers, HotelClub and RatesToGo.
The global platform will enable Orbitz Worldwide “to reduce development costs, streamline back-office operations and efficiently deploy innovative features across our global brands,” Orbitz Worldwide stated. Revenue management, finance and accounting also could be centrally managed globally with the new infrastructure, the Travelport unit said.
Ebookers, in particular, would benefit from improvements in Orbitz Worldwide’s information technology systems and infrastructure because “EWbookers operates on systems that are less reliable than our US systems and, as a result, is more likely to suffer from service slowdowns or outages,” Orbitz Worldwide said.
In Orbitz Worlwide’s view, importing talent from the US helped execute an Ebookers turnaround. “For example, in 2006, when we moved certain senior executives from our U.S. operations to Ebookers to deploy our best practices, we experienced improved performance and increased growth in our European operations,” Orbitz Worldwide said.
Cendant acquired Ebookers in February 2005 for $350 million, and the following year recorded a $122 million impairment charge because of poor operating performance at ebookers. Basically that means that ebookers’ fair value had decreased by $122 million by the end of 2006.