Transport Airlines

The Syrian government’s cozy relationship with the world’s leading airline ticketing companies

@denschaal

Jan 09, 2013 7:30 am

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Free Report: The Future of Personalized Marketing in Travel

Michael Dr Gumtau   / Flickr.com

Some big travel companies continued to do business with the Syrian goverment's airline until very recently. Michael Dr Gumtau / Flickr.com


Despite the horrors of the Syrian government’s attempt to brutally crush the uprising in Syria, global distribution system (GDS) and airline IT providers TravelportAmadeus, and Sabre provided services to the Assad-goverment controlled Syrian Arab Airlines, even during its ongoing, brutal crackdown.

Travelport, which took in more than $4 million in revenue from Syria in 2011, only suspended Syrian Arab Airlines’ GDS participation agreement when the European Union imposed sanctions a few months ago, in the fall of 2012, a Travelport spokesperson says.  A Sabre spokesperson says it, too, kicked the airline out of its system, likely around the time of EU sanctions, but would not specify the exact date.

While Travelport has relationships with travel agencies in Syria through a third party, Amadeus in recent years has offered travel agency services through Syrian Arab Airlines, which also made its flight information available in the Amadeus GDS.

An Amadeus spokesperson wouldn’t provide much detail about its current relationship with Syrian Arab Airlines, as well as two Iranian airlines, Iran Air and Mahan Air, which have been tied to the Syrian government’s repressive practices.

“Amadeus complies with all applicable sanctions rules,” the spokesperson says. “These differ from the United States and Europe. Amadeus cannot and does not distribute any of these airlines (Syrian Arab Airlines, Iran Air and Mahan Air) in markets where sanctions have been imposed.”

In 2008, Amadeus signed a 10-year distribution agreement with 13 airlines, including the Syrian carrier, all of which are members of the Arab Air Carriers Organization.

The Amadeus spokesperson wouldn’t answer questions “for proprietary reasons” about whether the Syrian Arab Airlines distribution agreement, which entails Amadeus marketing to travel agencies in Syria through the airline, is still in place.

“The joint agreement is a framework agreement between Amadeus and 13 AACO member airlines regarding distribution in their home countries (to travel agencies), which was implemented by signing a bilateral agreement(s) between each of the 13 AACO member airlines and Amadeus,” Rolad Jawad, AACO’s director of IT and facilitation department, told Skift this week.

Meanwhile, Travelport and Sabre continue to have agreements with Tehran flag-carrier Iran Air, an airline that the U.S. government recently concluded has been sending “military and crowd-control equipment to the Syrian regime.”

Skift examined the tangled involvement of the three travel-tech companies in Syria and Iran which, along with Sudan, are among the countries that the U.S. State Department has designated as “state sponsors of terrorism.”

Travel companies generally get exemptions from U.S. sanctions against the three countries as long as travel providers don’t send any software or equipment to governmental entities or private companies there.

Historical ties

The three GDS companies have had historical ties to a trio of airlines that have been singled out in various ways by the U.S. Treasury Department and its Office of Foreign Assets Control, which enforces trade and economic sanctions.

John Sullivan, a Treasury Department spokesperson, explains that it is permissible under U.S. law for companies to facilitate selling tickets for Syrian Arab Airlines and Iran Air — despite their governments’ despicable human rights records — but OFAC in October 2011 characterized Mahan Air of Iran as a “Specially Designated Global Terrorist.”

As such, there are no exemptions for any dealings with Mahan Air, which along with Iran Air, coordinated activities with Hizballah in mid-August 2012 to put down the rebellion in Syria, according to the U.S. Treasury Department.

Of the three GDSs, the most detail is known about Travelport’s involvement in Syria, Iran, and Sudan. That’s because Atlanta-based Travelport, a private company that is controlled by private-equity titan Blackstone, has to file disclosures with, and answer questions from, the Securities and Exchange Commission because of Travelport’s bondholders and debt.

Travelport’s ties to the these countries, or lack thereof in the case of Sudan, triggered reviews by the SEC in 2008 and 2011, and both inquiries were closed without any SEC penalties being levied. The SEC limits its reviews to the issue of appropriate financial disclosures; OFAC, on the other hand, takes enforcement actions pertaining to sanctions’ violations, and none have been carried out in recent years against Travelport, Amadeus, or Sabre.

Over the last few years, the only aviation-related OFAC settlement came in 2010 when Aviation Services International, a Netherlands company also known as Delta Logistics, was fined $250,000 for sending communication equipment and aircraft parts to Iran.

Steps and missteps

But, the SEC reviews and Travelport’s responses to them revealed the following highlights about Travelport’s practices:

  • In October 2008 Travelport stated that it voluntarily disclosed to the Commerce Department’s Office of Export Enforcement that “Travelport may have improperly exported” software, directly or indirectly, to travel agents in Syria, and to Syrian Arab Airlines.
  • The SEC noted that Travelport issued a press release in September 2011 announcing a new agreement with Mahan Air, revealing that the carrier’s flight information would be immediately available to travel agents using Travelport’s Galileo and Worldspan GDS systems. Travelport also provided Mahan Air with e-ticketing capabilities via SITA. However, in a June 1, 2012, answer to the SEC, Travelport explained that in October 2011, a month after it signed the agreement with Mahan Air, OFAC labeled Mahan Air a “global terrorist,” and Travelport then severed all direct and indirect ties with the carrier. Travelport did not issue a press release to announce the about-face.
  •  From 2005 to 2008, Syrian Arab Airlines was Travelport’s only national distribution company dealing with travel agents on Travelport’s behalf in the country. By 2011, Travelport had switched to Phoeniq LLC as its sole NDC in Syria. Travelport has had contracts to display Syrian Arab Airlines’ fares and schedules in its GDS for at least seven years, and despite a global outcry since March of 2011 about the Assad regime’s brutality toward the insurrection, Travelport only suspended the airline from its GDS in the Fall of 2012, at the best of the EU.
The following chart depicts Travelport’s revenue from Syria, Iran, and Sudan which the company supplied to the SEC:

Travelport Revenue from Syria, Iran and Sudan

Year Syria Iran Sudan
Revenue % Total Revenue Revenue % Total Revenue Revenue % Total Revenue
2005* $3,468,997 0.10% n/a n/a n/a n/a
2006* $4,160,292 0.20% n/a n/a n/a n/a
2007* $4,670,821 0.20% n/a n/a n/a n/a
2008** unknown unknown n/a n/a n/a n/a
2009** $2,208,459 0.11% $67,617 0.00% $21 0.00%
2010** $3,407,011 0.17% $110,750 0.01% $4 0.00%
2011** $4,048,674 0.20% $231,445 0.01% $0 0.00%
2012 Q1** $801,502 0.15% $63,890 0.01% $0 0.00%

* Includes GDS revenue and wholesale revenue from then-subsidiary Gullivers Travel Associates (GTA)
** Includes GDS revenue and indirect Airline IT Solutions revenue from SITA for e-ticketing services
Note: The percentages of total revenue are rounded

Source: Travelport SEC filings

Of the three countries, Syria is Travelport’s largest market by far, and 99.1% of its Syria revenue in 2011 came from the GDS/travel agent side of the business, and not the airline e-ticketing portion.

Even at its height at nearly $4.7 million in 2007, Travelport’s “Syria origin” revenue was a minuscule part of Travelport’s overall revenue, or about 0.2% of total global revenue.

Iran

Travelport told the SEC on June 1, 2012, that in Iran it had GDS participation agreements with Iran Air and Caspian Airlines, but Caspian was suspended for nonpayment. Travelport said it didn’t provide these airlines with any hardware or software.

While Travelport has no direct relationships with travel agencies in Iran, it has indirect relationships. Travelport markets its services to them though its sole NDC in the country, Persian Global Web Distribution Ltd.

Travelport stated it also gets indirect revenue from Iran Air and its subsidiary Iran Air Tours, Iran Aseman, Taban Air, and Caspian Airlines for e-ticketing services through SITA.

Travelport’s revenue over the years from Iran has been paltry: $231,445 in 2011 was the high-water mark over the last few years.

Sudan

The SEC inquired about Travelport’s relationships in Sudan, but Travelport said it has no airline or travel agency customers there.

Travelport argues that it is in compliance with all trade sanctions and regulations pertaining to Syria, Iran and Sudan, and its policies help “oppressed people” exercise their right to travel. Here’s Travelport’s full statement to Skift:

Categorically, we are compliant with all trade sanctions and regulations. In line with our business ethics and operating principles, we encourage openness and fair play regarding the search, selection and procurement of travel content – within, of course, the parameters of relevant regulations, embargoes or sanctions. Promoting travel in these countries is consistent with the objectives of U.S. policy, as it facilities travel by these oppressed people.

 

Subject to certain limitations, the U.S. government generally permits travel-related transactions involving Iran, Southern Sudan and Syria either under particular statutory exemptions for transactions ordinarily incident to travel or pursuant to general or specific licenses issued by the U.S. Department of the Treasury, Office of Foreign Assets Control.

 

Travelport is a travel business and benefits from these authorizations. Such U.S. Government support of travel facilitates, among other things, the movement of people and exchange of ideas consistent with the objectives of U.S. policy. The travel industry has consequently not been a target of divestment initiatives of which we are aware.

 

However, in Travelport’s June 1, 2012, reply to the SEC, it offered a different twist about “divestment initiatives” and its stance toward Syria, Iran, and Sudan, stating:

The travel industry has consequently not been a target of divestment initiatives of which we are aware and the Company has not received any complaints from investors in its debt instruments about its business contacts in Syria, Iran or Sudan. Should this change in the future, the Company will reevaluate its position.

In other words, Travelport may be complying with existing regulations, but since it is not feeling any pressure from bondholders about its business dealings in Syria or Iran, it hasn’t felt any need to change its practices.

Amadeus

Madrid-based Amadeus, a public company which has U.S. offices in Miami, Chicago and Boston, may have had the deepest involvement of the three GDSs in Syria in recent years, although a spokesperson wouldn’t provide details, citing “customer confidentiality.”

In addition to being a distribution provider to Syrian Arab Airlines and a dozen other airline members of the the Arab Air Carriers Organization, Amadeus had a presence in Syria through partners since 2004, and had a 73% travel agency market share, Jordan-based Al Bawaba reported in 2009.

In 2009, Amadeus planned to expand its position in Syria through the partnership with Syrian Arab Airlines, according to the Al Bawaba story.

Amadeus won’t provide further details about its relationship to Syrian Arab Airlines.

In Iran, Amadeus reportedly signed a contract with Iran Air in 2003 to distribute GDS services to Iran’s travel agents through the airline.

Sabre

A spokesperson for Sabre, a Southlake, Texas, travel-tech company privately held by Silver Lake Partners and Texas Pacific Group, says Sabre suspended operations with Syrian Arab Airlines, and Iran’s Mahan Air, although the precise timing of each action was unclear.

And, Sabre still provides GDS services for Iran Air, the Sabre spokesperson says.

A U.S.-based travel agent using the Sabre GDS says Iran Air apparently benefits from  enhanced capabilities in the system through a direct-connect, making the airline’s presence in the GDS more dynamic.

Sabre Travel Network Middle East, a joint venture with Gulf Air, is headquartered in Bahrain and serves that country, along with Qatar, Oman, Yemen, Saudi Arabia, Egypt, Jordan, Lebanon, Syria, and Kuwait.

SITA

The GDSs aren’t the only travel entities that have had business relationships with pariah airlines Syria Arab Airlines, Iran’s Mahan Air (the one that’s been designated a global terrorist), and Iran Air, although theirs are the most prominent.

Europe-based SITA, which provides communications and IT services to airlines around the world, counts all three airlines as members, although a spokesperson says the organization follows national and international regulations, such as prohibitions against supplying services to Mahan Air.

“Membership of SITA is open to all the world’s airlines, and to other air transport community organisations, on a completely neutral and indiscriminate basis,” the SITA spokesperson says. “This has been the case since SITA was founded in 1949, and has been a cornerstone of our global reach.”

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