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Orbitz Worldwide took a substantial financial hit in 2011 when American Airlines ceased providing it with flight information, but the online travel company today announced a series of new agreements that should give it more flexibility if similar battles occur in coming years.
Beginning in 2015, Orbitz Worldwide’s North America brands, including Orbitz, CheapTickets and Orbitz for Business, will receive global distribution services from Amadeus, Sabre and Travelport, whereas previously in North America this flight and hotel information came almost exclusively from Travelport.
For the past seven years, and until the new agreements kick in on January 1, 2015, Orbitz Worldwide is subject to exclusivity provisions in its Travelport agreements that limited the online travel company’s ability to use other distribution service providers or enter into direct distribution agreements with airlines.
The Orbitz and American Airlines tiff in 2011 revolved around the airline’s insistence that Orbitz access its flight information through a direct-connect instead of getting it through Travelport’s global distribution systems. The impasse was widely seen as American’s way of extracting some hurt on Orbitz Worldwide’s benefactor, Travelport.
Until it completed its debt refinancing on April 15, 2013, Orbitz Worldwide was a “controlled” company, with Travelport owning 53% of its common stock.
Travelport owned 45% of Orbitz Worldwide’s shares so although it is no longer a controlled company, Travelport is Orbitz Worlwide’s largest shareholder and still exercises great influence over its affairs.
Sources with knowledge of the new agreements indicate that Orbitz will still have to meet certain minimum thresholds in the airline segments its processes from Travelport, but Orbitz can pursue alternative distribution agreements once these minimums are met.
Travelport revealed that under the terms of the new agreement, it will pay Orbitz Worldwide “incremental benefits in 2014 and further fees in later years for each air, car and hotel segment Orbitz Worldwide books through the Travelport GDS or through Travelport’s universal application programming interface.”
Travelport says the increased fees it will pay to Orbitz Worldwide will negatively impact its 2014 cash flow, but have “no impact” on adjusted EBITDA.