Jeff Clarke, the chairman, president and CEO of Travelport and also the chairman of Orbitz Worldwide, was explaining why Travelport opted to invest $50 million in Orbitz.
In a Travelport conference call with investors about the company's third quarter results, Clarke said the investment would help Orbitz, which is Travelport's largest customer, deleverage the business and give it more operational flexibility.
Private equity firm Blackstone and its affiliates own private-company Travelport and control public company Orbitz.
Clarke says Travelport has confidence in Orbitz management [including himself, I assume] and sees Orbitz as a company in growth mode.
Of the $50 million investment, Clarke says: "I think this is a good thing for Orbitz and a very good thing for Travelport."
Orbitz earns big bucks in incentives from Travelport GDS, and its Galileo, Apollo and Worldspan units have been benefitting so far in the fourth quarter from an uptick in online travel agencies' segments in the U.S.
In fact, Clarke says, the OTAs' segments are up 24% so far in the fourth quarter, and that is driving a 6% increase in GDS segments in the Americas.
You see, this is very much a push-pull relationship between the two companies, although Travelport -- despite the $50 million infusion into Orbitz -- is still the prime beneficiary, as Orbitz, a unit of Travelport before Orbitz's IPO, deals with legacy issues.
One of those legacy issues, Orbitz Worldwide President and CEO Barney Harford told analysts in a third-quarter-results conference call Nov. 5, a few hours earlier than Travelport's, is that Orbitz had been too dependent on third-party providers, including Travelport's GTA, for hotel inventory.
Travelport announced Nov. 5 that it will be taking an $800-$900 million impairment charge for GTA because of its performance during the economic downturn as Travelport also weighed the future of the wholesale business.
Showing a bit of an independence streak in this dynamic with Travelport, Harford said Orbitz's hotel business is benefitting by establishing and optimizing direct relationships with hotels and reducing its use of third-party aggregators like GTA.
Harford sheds a little further light on the OWW hotel strategy, saying the focus is on second- and third-tier markets in Europe and Asia, and local and inter-regional travel.
In response to a question about the Orbitz-GTA relationship, a Travelport spokeswoman downplays the import of the change, saying "OWW has not been a key component of GTA's volume for the past two years."
Speaking of volumes, fresh numbers came in showing the impact of Orbitz's decision to eliminate air booking fees and reduce hotel booking fees.
In the third quarter, Orbitz Worldwide's U.S. air transactions grew 27 percentage points, although domestic air revenue declined 32% because of the removal of the fees and lower air fares.
There was a similar story on the hotel side, which saw revenue down 27% because of lower hotel-booking fees and lower room rates.
If and when air fares and room rates recover, Orbitz would be well-positioned to cash in because of those increased volumes, goes the thinking.
For the third quarter, OWW posted a modest $7 million profit, compared with a $287 million loss a year earlier, on revenue of $187 million, a 22% decline. Gross bookings were down 6% at $2.5 billion.
One OWW brand differentiating itself in the revenue sphere is London-based ebookers.
OWW says ebookers is seeing benefits in its transition from using 12 disparate technology platforms to feasting on one. OWW says both hotel net revenue and transactions increased at ebookers in the third quarter.
Part of the success, Harford says, is that ebookers is taking advantage of the increased inventory it can provide to consumers because of its consolidation into one global platform.
ebookers struggled both as part of Travelport and then OWW, but now it seems that finally it may be getting its act together.