Travelport is using its financial muscle to ensure that Orbitz Worldwide does not establish a direct-connect with American Airlines -- or any other airline.
Orbitz and Travelport, which controls Orbitz, amended their global distribution system-subscriber contract, with Travelport agreeing to pay Orbitz increased segment incentives as of Dec. 22, 2010 -- the day after American Airlines removed its flights from Orbitz Worldwide websites.
Those increased segment fees would remain in place through April 21, 2011, unless American Airlines' flights become available again through Orbitz Worldwide, or Orbitz establishes a direct-connect with American Airlines -- or is likely to agree to create a direct-connect with American Airlines or any airline, for that matter.
The segment incentives "would be increased effective December 22, 2010, until the earliest of April 21, 2011, the reinstatement of ticketing authority by AA for the Company’s Orbitz.com website, the consummation of a direct connect relationship with AA, or the determination by the Company’s Audit Committee of the Board of Directors that the Company is engaged in a discussion with AA that is reasonably likely to result in a direct connect relationship between the Company and AA," an Orbitz Worldwide Securities and Exchange Commission filing says.
The amended agreement also contains a clause that establishes a higher threshold triggering decreased segment incentives from Travelport. In other words, the provision buffers Orbitz Worldwide from decreased payments from Travelport in the event GDS volumes from Orbitz fall because of American Airlines' withdrawal.
Of course, the increased threshold for short-fall payments remains in place only as long as Orbitz Worldwide doesn't entertain direct-connect plans with any airline.
Orbitz Worldwide says it "is entitled to receive these benefits as long as the Company’s Audit Committee of the Board of Directors does not determine that the Company is engaged in a discussion with any airline that is reasonably likely to result in a direct connect relationship and the Company has not consummated a direct connect relationship with any airline."
Another provision of the Travelport-Orbitz Worldwide agreement pertains to ITA Software's QPX airfare shopping and pricing product, as well as a competing product, Travelport e-Pricing.
The agreement gives Orbitz Worldwide permission to arrange to use ITA Software's QPX solution beyond Dec. 31, 2011. Orbitz.com was ITA Software's first QPX customer about a decade ago.
The ITA Software-Orbitz Worldwide agreement expired Dec. 31, 2010, and was subject to one-year renewals.
In addition, Orbitz Worldwide agreed to use Travelport e-pricing on some of its websites through the end of 2014.
Orbitz Worldwide currently uses e-pricing for airfare searches for some of its ebookers' websites in Europe.
The e-pricing agreement gives Orbitz Worldwide added flexibility in its airfare-search vendors.