Skift Take

Travelport's distribution deal with India's largest online travel agency suggests that it can punch above its weight. But Travelport still faces a struggle against its much larger competitors.

Travelport is the smallest of the travel distribution middlemen companies with its $1.83 billion market cap. But a significant deal it signed with India’s largest online travel agency, MakeMyTrip, suggests it is still fighting to be a vital player.

Travelport announced Wednesday that MakeMyTrip will use its platform for receiving content distributed from airlines, hotels, and other suppliers worldwide. This is notable in that MakeMyTrip commands a 41 percent share of the Indian market for online travel bookings, according to analysts at Deutsche Bank.

MakeMyTrip has used Amadeus as its sole global distribution provider since 2009 but in January MakeMyTrip acquired competitor Goibibo, which is a Travelport customer.

Earlier this year, as a combined entity, MakeMyTrip reported in financial filings that its group used both Amadeus and Travelport as providers.

MakeMyTrip is keeping Amadeus and just adding Travelport.

Still, by the end of the year, Travelport should see more revenue flowing to its top line, though MakeMyTrip’s volumes are still relatively small compared with other global players. In the quarter ended June 30, 2017, the loss-making online travel agency generated only $192 million in revenue.

Every win counts for Travelport. It is not only the smallest of the three major distribution systems, but is the smallest by some degree.

Among the travel software companies, the variance in market caps is large. Spain-based Amadeus is at $22 billion, U.S.-based Sabre is at $5 billion, and China-based TravelSky is at $8.1 billion.

In contrast, UK-based Travelport has only a $1.83 billion market capitalization.

To be sure, market capitalization is not the most reliable indicator of the vitality of the distribution divisions within these technology companies — all of which have multiple lines of business.

Yet it’s hard to ignore that Amadeus’ market capitalization is 10 times that of Travelport’s. Given that imbalance, it’s reasonable to believe Travelport faces some headwinds, in some of its commercial efforts.

During Wednesday’s announcement in India, Deep Kalra, founder, chairman and group chief executive officer of MakeMyTrip, said the company picked Travelport because of its “best-in-class technology.”

The agency noted that Travelport uniquely has IndiGo, India’s largest passenger airline, on its platform. (UPDATE post-publiccation: Sabre says that its agents using its platform do have access to full Indigo content via its relationship with UK-based aggregator, Travelfusion, despite Travelport’s original statement to the contrary.)

That’s a sign of how Travelport is focusing its investing in its distribution product while its rivals have tried to diversify into airline and hotel software solutions. Travelport’s focus has meant that it is ahead of its rivals in now having a significantly larger number of airlines — about 200 — live on its platform that sell fare families and paid seat assignments, baggage fees, priority boarding, and other ancillaries. These products have higher margins for airlines than tickets.

Share Battle

Gaining in India will help Travelport keep its market share relative to its rivals.

In the past four years, Amadeus says that its share of global travel agency air bookings grew about four-and-a-half percentage points, to 43.6 percent. Travelport and Sabre have lost some ground, while TravelSky focuses on its near-monopoly in the Chinese market.

Travelport insists these share shifts are minor and fluctuating. In May, Travelport chief executive Gordon Wilson told investors that, “Despite all the commentary about air booking share between the three big global distribution companies on an international basis, effectively, the share has been pretty static over the past six years.”

The MakeMyTrip deal will help Travelport keep pace with it larger rivals. In the first half of 2017, the overall air market for the global distribution systems has grown by 11 percent, and, MakeMyTrip’s rapid growth in ticket sales will support that trend.

Last year, India replaced Japan as the third-largest domestic aviation market globally. The Indian aviation market is forecast to become the third-largest market in the world by 2025, according to the International Air Transport Association.

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Tags: gdss, makemytrip, travelport

Photo credit: Travelport CEO Gordon Wilson (left) and his counterpart at India's MakeMyTrip, Deep Kalra, marked their new partnership in New Delhi August 23, 2017. Travelport

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