Sabre to acquire Farelogix in $360M deal, touts benefits to entire industry

Sabre has entered into an agreement to acquire Farelogix for $360 million.

When Sean Menke, the boss of the Texas-based distribution giant, talked of the company being ready for M&A activity again during the recent Q3 earnings call, he might just have had this acquisition on his mind.

The deal, which has been in discussion for around nine months, was announced this morning with a statement from Menke saying:

"By integrating Farelogix's capabilities into Sabre's leading airline technology platform, we'll be able to offer the innovative and comprehensive solutions that airlines require.

The statement on the acquisition, which is expected to close late 2018 or early 2019, also says full-year revenue for Farelogix is expected to be $40 million.

Back story

Those with good memories will recall a former incarnation of Farelogix as a so-called GDS New Entrant (GNE) - one of a new breed of companies looking to bypass the traditional distribution players in favor of direct connectivity for airlines somewhere around 2005.

Fast-forward 10 years and Farelogix was one of the first onboard the IATA New Distribution Capability with the launch of its NDC-Xpress tool.

The technology was developed to help airlines implement NDC and was able to connect to GDS companies and other aggregators and intermediaries, thus signalling a bit of a change in strategy for Farelogix.

Bang up to date in 2018, and Sabre has acquired Farelogix with lots of utterances about it being not only good for both companies but also good for the wider airline and distribution industry.

For Sabre, the deal will, it says, accelerate its NDC strategy across retailing, distribution and fulfilment.

Sabre vice president, NDC, Kathy Morgan says: “Farelogix is a recognized innovator in travel with advanced capabilities around offer management and many of the world’s airlines already use it.”

She also talks about the deal in terms of the “renaissance of Sabre” and its investment and focus on product and stability in the past year.

As well as accelerating Sabre’s NDC strategy, it enhances its offering by combining Farelogix's capabilities with those of the distribution giant including its Passenger Service technology and its distribution technology.

The company recently created its Travel Solutions division to bring airline solutions, distribution and data and analytics together.

It also launched its digital airline commercial platform, which brings together retail and distribution technology for carriers as well as offers yield and revenue management capabilities.

Wider benefits

Morgan says: “This is all about airline-controlled retailing and, combined with Sabre, there is tremendous opportunity in front of us. It’s about turbo-charging the ability to deliver retailing, distribution and fulfilment solutions regardless of PSS or GDS.”

She adds that for airlines, the benefits are clear, but there are also opportunities for the travel management community and the issues that go along with implementing NDC and its impact on corporate travel policy, compliance and duty of care.

“It gives the distribution side of the business a huge opportunity to open that pipe out into the agency channel.”

That means access to the retailing elements as well as personalization for corporate travelers going forward.

Not everyone in distribution will be enamoured with the idea of Sabre owning a retailing company that has always been GDS and PSS agnostic. Whereas before, rival distribution companies might have used Farelogix technology for connectivity, where does this now leave them?

Farelogix president and CEO Jim Davidson says he’s not worrying too much about what others are thinking.

He also says that the company needed to invest in scaling and increasing its presence globally but acknowledged it would not be easy “from scratch.”

Without such a deal, he says there were other ways to grow organically as well as thorough partners but that the deal was a “no brainer” in terms of common understanding and common customers. He declines to say whether their were other interested parties, but in all likelihood there were as there are less than a handful of airline retailing specialists out there.

Within the deal, Sabre also gets about 225 Farelogix employees, which Morgan says are mostly engineers.

One remaining question for the distribution giant is whether to build a retailing system in-house or buy existing technology. Morgan says:

“We have been very focused on driving our roadmap, and some of the capabilities we have released are some of the biggest in a long time, so building ourselves was one of the options, but we also had to look at opportunities across the space and it became obvious that this was the right route.”