October 03, 2003

Orbitz Terminates Worldspan agreement

Airline NEWS

Orbitz to terminate Worldspan agreement
Dateline: Friday October 03, 2003

Orbitz, the airline-owned online travel site, yesterday delivered a "notice of termination" of its agreement with Worldspan effective Oct. 31.

According to Worldspan, which announced the termination, Orbitz took the action "because of a material service level failure by Worldspan," a claim the global distribution system denied. "Worldspan has provided and continues to provide a superior level of service and Orbitz does not have the right to terminate the agreement," the company said in a statement, adding that it "is currently considering its remedies against Orbitz, including with respect to wrongful termination of the agreement."

However, a statement from Orbitz said only that the company is "discussing service level issues with Worldspan, and given our long and constructive relationship, expects to find a mutually agreeable resolution."

Michele McDonald, editor of e-newsletter Travel Technology Update, said disagreements between the companies should be viewed in the broader context of Orbitz's desire to increase its so-called "direct connect activity [direct links] with suppliers."

In a recent filing with the US Securities and Exchange Commission, Orbitz noted that it "is obligated to meet minimum volume guarantees" with Worldspan "for any year in which we utilize Supplier Link [direct connect]." If Orbitz does not meet "specific quarterly thresholds," it must "pay Worldspan a segment fee for each segment that we fall short."

Worldspan is owned by Travel Transaction Processing Corp., which was created by Citigroup Venture Capital Equity Partners and Teacher's Merchant Bank, the private equity arm of the Ontario Teacher's Pension Plan. It was sold to the company earlier this year by its three airline owners--American Airlines, Delta Air Lines and Northwest Airlines--all of whom also were involved in the founding of Orbitz (ATWOnline, July 2)--Perry Flint

Posted by Craig at October 3, 2003 04:34 PM