01 October 2011

Twitter Misses Ad Targets - But Outlook Bullish

So Twitter is still struggling to get its revenue model off the ground but it is making headway. In the early days of Twitter I was highly critical of the value of the service. Now that it has matured and we have tools and processes to weed out the Twitterhea - I think the business is a useful tool.

eMarketer is reporting that their initial revenue projections for 2011 will be missed. However they remain upbeat on the future

Check out the article for a full analysis on where Twitter's revenue is going. Twitter has no where near the revenue potential of Facebook. And actually not getting spammed is one of the nice things about Twitter.

In my view - I believe that there is plenty of opportunity to MAKE money via the Twitter platform. Indeed way more than can be had through the restrictive practices of the big 3 F.A.G. gatekeepers.

That indeed counts for something


Mobile Maturing - Are You really Ready?

Is 2011 the year of Mobile? This is a question that so many people ask. I have to say I am not quite convinced on either side. In fact I think the question has become rather irrelevant.

Mobile and Social are already here. We are however still struggling to get good at both of them. And good we must get. There is a nice series in WIT drawn from a series of discussions between Siew Hoon and Gerry Samuels Doing it "Bloody Well" and understand who wins - Supplier or Intermediary - are great discussion pieces. If WIT is not on your regular reading list - you are missing a treat.

Getting good at Mobile is not a trivial exercise. There is a lot of infrastructure that is frankly not in place to make it easy. Therefore early providers are having to bootstrap solutions to get the end to end services running. Regulatory and service level functions are scant and frankly the performance of the networks and devices together SUCK. Publishers are complaining that they dont find it easy. For sure they are not adopting fast enough.

One key issue that is decidedly a constraint on Mobile Commerce are the payment systems. There is a plethora of options and the market is just beginning to pick up.  The battle for the mobile wallet is a royal one.

There is the huge battle going on between the OS systems on the small aperture devices.  You have Android split into Pure and Honeycomb. You have the Apple with its iOS. You have a bunch of also ran players - Microsoft, Nokia (now moving with MS), RIM (About to exit the tablet space by slashing the price of the Playbook), HP (not sure if they are in or out at the moment). Let's not forget the App vs Browser battle.  An  astonishing statistic is from HP who projects there will be 25 million apps by 2020.

Underneath it all there is a multi-billion dollar battle over patents. This is enough to make ones head spin.

But allow me to put a little perspective on things. While I think it is a bit premature to declare victory for mobile, there is a very interesting trend. The Gen Y/Millenials are not worrying about the problems of infrastructure. It either works or it doesn't. Unlike the Baby Boomers (like me!) who struggle with the small apperture of the devices concerned - they are quite comfortable in using their mobiles to do a wide number of things concurrently.

My conclusion on this? Mobile is darn hard. The traditional gatekeepers in travel commerce are nowhere near prepared for mobile. The suppliers need to break free and stop using traditional processes to address mobile solutions. AND most importantly you have to use every trick in the book to get the consumers to start pulling through adoption. Traditional ways of pushing products into the marketplace and hoping for the best frankly are useless. If I hear one more person scream that their investment in mobile has been wasted - I think I will eat my hat. It's the adoption not the features stupid!!!

Airlines to DoT - You Can't Count

The US airlines in general think that the US Dept of Transportation's bean counters are not that good.

A cabal of them - representing the Big 4 Network Carriers - US, UA/CO, DL, AA have filed a complaint with the DoT over the issues of the reporting of the Ancillary Revenues.

As reported in the Wall Street Journal the airlines say that the $150,000 figure for the whole industry in extra admin costs are way off what the airlines calculate will cost the average airline $1,000,000 per regulation per average airline. That would be a whopping cost. I bet that some of that is going to be charged by the GDSs!!!

I have to say whether I agree with the DoT or the airlines on the actual numbers. I can assure you that the admin costs that will be spread across the industry in additional costs will be significant. it will hit all sectors of the supply and distribution chain.

Those who argued long and hard for this as a way to put a break on the Airlines revenue aspirations may be happy. But those who thought that this was a way for the GDSs to win a battle in their war with the airlines may rue the day. The legacy GDSs have now been handed a carte blanche ability to charge the airlines an extra set of fees for compliance. And poor travel agents will be picking up much of this tab in both extra costs (through lower incentives) and for sure extra work.

As I say frequently - be careful what you wish for... you just might get it.


The Professor's 2300 Posts

Dear Readers - Just a BIG thank you for keeping us going. We have just passed 2300 posts and counting.

I had a wander through some of the prognostications and predictions I have made over the past 5 years. There is a heck of a lot of content here. So I encourage you to read through some of my thoughts. There is a lot of entertainment. Laugh, cry and be entertained but mostly be better informed. I have a lot of opinions on a lot of subjects but I hope that you will see that I try to do this with honesty and thought. If I fail let me know.

Every week hundreds of you come and visit this little site. Thank you and thank you again for doing that.

I know that I am not the world's best writer and also have a strong propensity to typos and some really bad grammar.

However I get loads of emails from you and comments. It takes a lot to keep this site going (no I am not appealing for money) but I will continue to do this as long as you come and read it.

Please do spread the word. And  again a very big...


Don;t Be Blue At A Failed Relationship

Most breakups are lets face it less than amicable. People don't just wake up one morning and say "Rationalizing our relationship is not working let's just be friends"

I understand that breakups can now be handled by a wide variety of media. Text (there is even a lame website called TextBreakup), Tweets, and of course the true sign you have been ditched is when your paramour changes her/his status on facebook back to SINGLE AND LOOKING.

In business some of the best laid plans of a business relationship can just fall afoul of the realities of the business environment.

Germany's biggest airline, Deutsche Lufthansa AG, in December 2007 paid $300 million for a 19 percent stake in JetBlue Airways Corp. There were big plans for feeding via JFK and the other points where the 2 airlines intersect. For the smaller airline it was a precursor to a number of deals that have seen them also tie up with some time rival American Airlines who also is in a rival Alliance. 

But to be frank there has been little execution of the grand vision and Lufthansa seems to be pulling in its horns across the board. The German airline's plans for world domination included at the time expansion into the German speaking market and a bold run at different markets like USA (JetBlue), UK (British Midland) and the oft rumoured but never consummated take over of SAS.  With a few bad quarters under their belts - and a general softening of traffic in the markets where its most heavily vested - LH seems to be pulling back. Its put the for sale sign out at Castle Donnington (the English Chateau that doubles as the HQ for BD), now the The Wall Street Journal  is reporting that LH is looking to exit out of its relationship with JetBlue. 

JetBlue and Alaska are the largest unaligned airlines (Southwest should be excluded from this list). Both of them have resisted combining with other larger airlines. AS has a slew of partnerships and has a strong feed as a result while shoring up a fortress on the North South Routes. Effectively AS has conquered the West Coast markets and solved that perennial problem of Mexico vs Hawaii by straddling both effectively.  JutBlue has built a series of very nice hubs in Boston and JFK as well as a number of smaller ones across the country. 

Perhaps what we are seeing is the precursor to a merger between these two feisty and mostly profitable strong regional airlines.

Now there's a thought.


What Happens When Exclusivity Clauses Collide. The Impact of Exclusivity Clauses on Competition and Consumers

This is a musing on the impact of the Air Asia and Malaysian Airlines agreement with an extension into the overall issue of exclusivity clauses and the impact on the consumer.

Air Asia and Malaysian Air System (MAS) have entered into a cross shareholding agreement. In this agreement - the two airlines will cooperate essentially to carve up the market for Malaysian based traffic. IE traffic INTO and OUT of Malaysia. Effectively the airlines will avoid direct competition where feasible. This will result in a certain reduction in competitive services for consumers. Thus prices will undoubtedly rise in certain thinner markets. 

This is to be expected and will cause a number of people to complain and moan about it. Fair enough. But there is ANOTHER agreement that has some serious impact on the consumer. That is the exclusive agreement between Expedia and the Air Asia Group. In this agreement Expedia and the JVs between Air Asia and Expedia are the EXCLUSIVE distributors of content from these two parent organizations.For intermediaries who may have happily been distributing MAS product in some cases for many many years and in others exclusively, all of a sudden their product has been pulled out from under them when MAS abandons routes in favour of Air Asia. And they will lose their rights.

I raise this issue because JVs and exclusivity has become a new staple of the airline and GDS worlds. Thus creating restrictions on open commercial agreements. So let's dive into that a bit deeper.

Full Content (FCA) GDS agreements are very restrictive. As such FCA contracts will have an overriding pressure to raise prices and reduce consumer choice. An airline who signs the standard FCA agreements will find that it cannot distribute its own content when and where it pleases. This is a relatively new consideration and that has only just started to dawn on the airlines who have signed these agreements. While the original intent of the FCA agreements was to prevent competitors from entering the market for GDS type services - what we are now seeing is an unintended consequence - at least from the airlines sides. The ultimate loser in all of this is the consumer. Less choice = less competition = higher prices. As the legacy GDSs love to trumpet to the vendor community -the highest yielding channels are the GDS based ones. Now perhaps it should dawn on everyone concerned that this results in higher prices for the consumer.

That normally should be positive for the airlines and hotels. However as they have seen the real end result is that they have not only delegated their pricing capability but now also delegated channel management control to the GDSs. And in whose interest do the GDS operate?

Think about it, I wonder if the regulators have been thinking about this problem. What started out as an equal agreement to reduce cost of distribution and ensure wide distribution of airline content has in fact has an opposite effect.

Good or Bad? that depends. Today it means that scaling the fortress tower is going to be that much harder. Believe me when I tell you that this is not a happy realization for a whole host of parties.


30 September 2011

Travelport Gets A Get Out of Jail Free Card. Probation May Be Rather Costly

Travelport at the 11th hour managed to avoid a pre-packaged Chapter 11 restructuring by getting the approval of all of its Lien Holders on its PIK to allow the $715 million PIK to be repaid by December 2016 instead of March 2012.

However the price is going to be very high. A quick flip through the issues now confronting Travelport Holdings (Parent company to Travelport Inc) are as follows:

1. There is a large group of unhappy bondholders.  A group representing 25% of the bond holders filed on September 23rd a formal complaint to the company which was then submitted in regulatory filings to the SEC.
2. Travelport is now paying a 2011 record interest rate of approx 13% to the lien holders for the revised debt swap however this is a somewhat fictitious amount as the agreement allows the company to use debt rather than cash to pay the dividends.
3. Travelport's ability to raise funds for new activities will now be limited.
4. Travelport may have restructured its immediate debt but it is still creaking under a very heavy debt burden that would discourage any IPO offering.

The level of machinations required to complete the transaction is almost mind-boggling. I have waded through the SEC filings along with analysts briefing on the topic. In my view the long term financial health of the company will be in doubt irrespective of its actual performance. It still has to restructure the overall debt to remain in compliance with the obligations of the different forms of the debt. It has already sounded warning bells of the loss of the United Airlines (Apollo) Hosting contract that must end before April 2012. There are other issues that face the company.

It seems I am not alone in my concern about the [parent company's (Travelport Holdings) health.

The unhappy note holders representing 25% of the outstanding PIK hired Dewey & LeBoeuf to denounce the restructuring. In their September 22nd letter to the company they stated  “The noteholders demand that Holdings (parent company) and its affiliates (presumably including Blackstone)  cease and desist from taking any steps to document or consummate the restructuring,”Their efforts failed. So highly likely there was some smoky backroom deal was made but the resentment is still there. This letter found its way to filings to the SEC the following day.

The initial PIK loan, from the early days of March 2007, was used to finance a dividend to Blackstone and affiliated equity owners, according to the September 22nd letter.  And this has been a pattern all along for Blackstone to cover its own position preferentially at the expense of the other debt holders. Remember that when the original deal to acquire Cendant was done in 2006 - Blackstone was a private company. Today following its IPO it falls under a much tighter regulatory environment.

Travelport Holdings bond values have been falling for some time. Since August the value of the bonds has plummeted over 40 %. Two of the debt rating agencies downgraded the debt first Moody's on 16th August then S&P earlier this month on 13th Sept. This came after the first warning was fired by S&P in February of this year with a caution. By September 23rd the yield on the bonds was 39%, The company’s $247.2 million of 11.875 percent senior unsecured bonds due September 2016 rose 3 cents to 42.5 cents on the dollar that morning and has been very volatile since then. When trading starts again this morning with the immediate debt crisis over - the bonds will likely settle down. That discount shows just how far the debt value has fallen since the notes were first issued in 2007. There is a large amount of this debt out there in the market. There has been a significant amount of trading going on in this debt especially during the last 9 months. 

Long term - this is unhealthy.


NOTE Thanks to Bloomberg and the Debt agencies for the information in this story. Thank goodness we have EDGAR to help us navigate the maze of SEC filings.

29 September 2011

How Many Is Too Many Apps?

OK Own up... how many Apps on your smartphone or Tablet.

Full disclosure I have way too many devices. I have 2 smartphones, an iTouch and an iPad. The most is on my iPad - 136. I have only paid for 2 of them BTW, looking at my usage. The WSJ, Tetris, Spider Solitaire and Skype are the most frequently used apps. Add in the Settings page and the broswer and that comprises about 98% of all my usage.

And are there any definitive statistics on the Apps use on tablets? Yes there is - our old friends at eMarketer have put out a compendium of surveys on the topic. 

How one finds Apps is also interesting. I talk to a lot of users about their iPad usage. I want to know who has the best apps.

At the moment I am seriously considering how to do presentations from my iPad and also how to use the iPad as an external screen for my laptop. (Just to deal with my ADHD!). I love how all the images of the iPad today only show a few apps on the screen. Mine is just like my desktop on my PC - chock full of icons. "Just in case I might need them".

With more and more Apps coming - I love the quote from HP that there will be 25 MILLION apps in a few years. We can only wonder how we are going to cope with the ability to select and manage them


Yes There Is A Slowdown In Passenger Traffic

There is a general view that when cargo goes soft - so does passenger traffic in about 4-6 months immediately following.

I don't want to be a doomsday person but I believe we are going to see a reduction in passenger traffic particularly in TC1, TC2 and between the two coming shortly. Further among the other areas of robust growth I believe we are going to see moderation of that in GCC and Latam traffic.The only area where I believe we will see a continuing growth will be in Asia Pacific. But don't take my word for it. Check out these learned folks:

The latest IATA numbers have revised upwards the airline profitability. BUT I tend to look at the transactions (e.g. number of passengers and number of flights rather than the financials.

Folks you have been warned. Tighten your belts. The airlines have already started to do this by cutting surgically flights from their schedules. Unlike the traditional slash and burn we have seen in the past these cuts are much more subtle. Less nonstops. Axing of daily frequencies in favour of only several times a week (particularly in International flights). And of course more codeshares.

What is rather interesting is that the DoT should be looking more carefully at the results of its allowance of the JV Alliances and to see what the economic impact has been on the markets. The fundemental question of whether the Alliances benefited the travelling public through lower fares deserves full analysis.


Shhhhh! GDS Incentives Are Headed South

While I missed The Beat Live this year - there were still about 130 people who showed up to debate the current market situation.

Writing in Travel Market Report Michele McDonald (who also publishes TTU) has tackled the thorny subject of  the future state of GDS incentive fees. There remains a pervasive view that the battle between the GDSs and the airlines will have consequences. Almost everyone focuses on the issue of cost.

There is a split in the ranks of the intermediaries. Some Agencies advocate pure transparency and provide the information on the incentive fees  to their clients. Others regard it as a perk of the business. However in looking at the holistic view of how much money is paid out - then we have to look at the total significant amounts paid out. My consulting firm has assessed the situation from publicly available documents and we believe that the total amount paid out in direct and indirect incentives by the GDS is a very large amount. $3billion is what we are projecting for 2011. That powers a lot of agencies' revenues. However this largesse is not spread spread equally. The squeaky wheel syndrome favours larger agencies. Further there are clearly geographic differences where highly competitive markets garner higher incentives than other markets where only one GDS may dominate.

There are some dirty little secrets that some agency owners and players tend to ignore. One of which is that legacy GDSs squarely compete with their customers - in more ways than one. We know that all of the GDSs have an interest in one or more agency outlets. EG Travelocity for Business, Travelport and its partners controlling Orbitz, and yes even Amadeus can still be said to have an interest despite having sold its outlet Opodo to a Franco-Spanish combine. One way that they compete in corporate travel is where the GDS contracts directly with the agency customers and passes the fees onto the customer directly.

And interestingly some of the largest incentive fees go from the GDS to (drum roll please) their own subsidiaries/affiliates. One of the lawsuit arguments between AA and Travelport is that the latter (and there is documentation in Travelport filings that illustrate this) is paying a "super" incentive to Orbitz in which there is effective control (by Blackstone companies) of 55%. You can be sure that if the incentives are to be slashed - then these subsidiaries and affiliates will be among the last to feel the cut. Which means that the regular agencies will feel the chill first.  And this is already happening. In several markets today - GDSs cannot pay full incentive fees on all carriers equally. Some airlines simply tack on the GDS fee to the cost of the ticket. Others either prohibit or significantly reduce the payment of incentives in their home markets. Some airlines and GDS contracts have specific clauses in which the payment of fees is expressly prohibited.

In my view there is an inevitability of the axing of GDS inventive fees by the legacy players. However there are broader and bigger issues which are starting to separate the traditional GDSs. The amount of pure R&D is making a difference. Those who are investing will likely see benefits. The cash paid out in incentives is a double edged sword. It has become a drug for quite a few agencies who in turn have to work harder to make the GDSs work for them at a time when the investment in real new technology has declined across the board. The agencies are having to pay more and more for "ameliorating" technology to cover these inadequacies.

The demand for new services are being driven by three factors
  • by the needs of the suppliers 
  • the emergence of new technologies particularly in mobile and social - and of course big data
  • and of course by the changing generational dynamics of the consumers
These changes make functionality and personalization critical. That is not something that these "bribes" (NOTE this is my term and no one else's) can cover.


28 September 2011

If You Want To Survive An Air Accident - Read This

I fly a lot of miles every year. Typically more than 200,000 actual flown miles. I hear the safety announcements on average 2-4 times a week. Frankly having heard them all - I am pretty blase about them.

Well we should all be better prepared. AND know what to do with the real emergency.

Scott McCartney of the Wall Street Journal's Middle Seat Column did a GREAT piece on a British Airways program. There are many things we can do in the case of a crash.
Here are some REALLY scary stats

Let's do the best we can to be a victim. We can survive an accident.


Small Screens Present Less Challenges for Gen Y

One of the things that challenges tired old eyes like mine is that the screens are too small and I struggle with glasses and  what I perseve to be bad lighting to squint and read things on a small screen.

Not so it would appear Gen Y. According to eMarketer they are embracing the use of video on a small screen. OK so this has impact for conventional media but it also has a big implication for the apps we are putting out there. Gen X and Boomers prefer large screens and are more comfortable with large screen formats (aka a PC). But Gen Y don't care.

Thus the adoption of apps on a small screen is very natural for this class.

In my view this will have big impact on the use of devices. Thus the battle of the OS on the small screen is taking on more importance. For Travel based Apps - this means in my view that we can pack more onto those small screens. So less data traffic and more data packed on a small screen is better.

Think about it


27 September 2011

Apology to my readers

I am experimenting with the new Blogger Interface. Its a tad tough getting used to it. I will however persevere. Please forgive the types etc

Branson Opposes Parting Out of BMI

Ever since Sir Michael Bishop exercised his put option and made Lufthansa purchase the majority shares stake in BMI - the UK carrier has been headed down hill. It has lost market share and pulled back.  The crown jewels remain its footprint at LHR. As the #3 airline at LHR - the valuable slots are idling there.

There was some hope that LH would use the BD footprint to build a base in the market out of Heathrow for the Star alliance family but in truth the carrier continues its down sizing.

It announced a 50% reduction at Manchester and now comes news of the sale of 6 slot pairs at LHR to - of all people IAG's British Airways unit. Based on the last major transaction at LHR a slot pair is typically worth around $50 million each. Therefore 6 slots would be worth approx $300 million.  This latest transaction will boost IAG's slots at LHR to close to 50%. Interestingly enough that still keeps IAG share of the slots at its home market less than that of its closest rivals - AF - CDG, LH, FRA and MUC.

In steps Sir Richard Branson - who is himself competing to purchase the company for the Virgin group - predominantly Virgin Atlantic. He had a nicer term for it... Salami Slicing. he contends the company should be kept intact and sold as such.

Either way the once proud and feisty airline that could is unlikely to survive in its current form. The 3 divisions - Mainline - largely based at LHR with an HQ in the Midlands, Regional - operating commuter aircraft based in Aberdeen and the upstart BMI Baby also based in the Midlands as a LCC type operator will likely be dismembered and sold..


Big Brother Facebook IS Watching You - Just Like Google

I used to think that Google was Big Brother.  But in recent months I have started to see that both Apple and Facebook are doing the same to me.

There seems to be an open season on my privacy that Google, Apple and Facebook (F.A.G.) believe that I have to modify my behaviour to opt out of their control. The FAG Triumvirate seem to believe that they and  they alone - are the the new domain rulers of the universe - known and unknown

In my view this level of control and intrusion into my privacy should not be an automatic opt in but an automatic opt out.

The issues of Like and Unlike and how users are interacting with them and this is modifying human behaviour online - and presumeably off line as well - is important to our whole social intercourse. Have a look at this article in eMarketer for some statistics.

Apple understands now my taste in music and this is a surrogate for my persona. Google knows so much about me its scary. But now Facebook is doing the same. If you would like to see an example - read this blog: http://nikcub.appspot.com/logging-out-of-facebook-is-not-enough

Nik's supposition is born in fact. Interestingly Facebook's response was to determine that there was a bug that he had found. If you are a suspcious type like me - you have to think why did they not before? And I think that comes down to the crux of the matter. They are not looking because they dont want to look.

My point is that now these entities are so big and so important to our daily lives that they have a moral responsibility to address these sorts of issues.  Google's advertising revenues are now projected to massively increase. When they don't then they are failing the standard of care. A standard that should be held in the same regard as say product safety.

So let me know what you think


LH's Loss Equals EK's Gain

When Thierry Antinori announced he wasn't going to take the top slot at Austrian Airways - there was shock across the Lufthansa hierarchy.

A senior manager not filling his anointed role. But darn it the guy was a Frenchman... Sacre Blue!

Now the true nature is revealed. Thierry a savvy airline man - will be joining Emirates as one of the rapidly expanding airline's top management. His formal position will be Head of Sales. Lufthansa will be the loser for letting a canny manager who has proved his stripes go.

For those who are expecting business as usual from Emirates - I can assure you that EK will not be following anyone's path.

Consider that fair warning.  Take notice here folks


Online Travel Drags Down ARC August Numbers

Oh dear... after recovering strongly from the depths of the 1st quarter when Expedia and Orbitz suffered without the AA content, the post summer blues seem to have hit the US market for Online Travel Agency sales.

While the $$$ numbers still look good - the transactions of the OTAs are down This is starting to look like the market is going soft. While traffic growth was modest for the earlier part of the year - the GDS powered ARC transactions were down in totality. I believe we are in for a soft late 3rd and all of 4th Quarter. Next year will start soft for sure. With fuel still stubbornly high despite the significant drop in the price of oil. So hold onto your seats everyone - we are going to hit turbulence. Airlines are cutting flights. Cheers

25 September 2011

Travelport Exposes Its Financial Weakness

In announcing the restructuring of its upcoming PIK loans – Travelport looked like it had dodged a bullet. In many of these sort of arrangements the loading of junk debt that has been the staple of VCs. In general it has a natural set of consequences IE the VC or PE firm tries to make its money early. That concept has been predicated on the exit of the VC before the big debts become due. Well Travelport was not able to complete its IPO after several attempts and any such future attempt looks like it could be a long way off.

However debt doesn’t just disappear. Someone has to get paid. While in general the stock market's volatility has seen shareholders have their values plummet during crises such as the GFC. Bond holders too have had their fair share of ups and downs.

Bloomberg in reporting the Travelport PIK restructuring headlined with the fact that this was the highest premium being paid thus far in 2011. In the very week when the Federal Reserve Bank moved to lower interest rates Blackstone (ultimate owner of the Travelport businesses) was going the other way. Indeed the debt swap rate has been set at 13% which was certainly an eye opener for many.

At the same time Blackstone made it clear that it would be quite prepared to bankrupt one of the entities probably Travelport Holdings. Blackstone’s complex ownership in Travelport and Orbitz provides effective control funded by the junk bonds and other high risk financial securities. Of course Blackstone itself has minimal risk as it has already withdrawn its own financial outlays in effect meaning that the VC is playing with OPM (Other People’s Money). I want to point out that this is normal behaviour in Wall Street. The formal filing with the SEC can be found here.

In the document the company cited two major reasons for the loss of Market share. The loss of the Expedia business from Worldspan and the loss of the Arab Carrier NDC business that went to Amadeus. Yet in examining the gradual decline in market share – these drops were single one off events. What we actually see is a consistent reduction in transactions Y/Y over the entire period from 2006 through till today. Market share has fallen by 5 points but transactions are now off by nearly one third during this time period according to my analysis of the Travelport filings.

While CEO of the Travelport operating business was gushing in his position and gratitude for the loan restructuring – there is no doubt this will have a long term impact on the company. The glory days of the unlimited cashflow based on minimal investment in R&D are clearly over. Travelport faces significant obstacles at a time when its direct competitors are spending heavily.

The company now has to contend with the fact that they are still supporting 3 core systems – Apollo, Galileo and Worldspan. The cost savings from the merger between Galileo and Worldspan have now effectively ended. Thus there are strong cost pressures as well as revenue pressures.

The company’s direct market share has continued to fall at a time when general GDS global market share as a category is also falling. At the end of the first quarter 2012, United Airlines is scheduled to exit leaving Travelport with no major airline hosting business. Thus a number of synergies will be lost. The roll out of their hoped for blockbuster product - the “almost ready” Universal Desktop is stalled.

Perhaps somewhat interesting is that the company faces a conundrum over its battle in Direct Connect. It has two airline distribution deals that would seem to be supporting the Direct Connect model. Southwest in the USA market and Air Canada in the Canadian market where Travelport connects to the Air Canada host via the Farelogix system. At the same time it is embroiled in a lengthy legal battle with American Airlines (it recently won another round in retaining AA's participation in Orbitz) and is subject - as is Sabre - to a formal investigation by the US Dept of Justice.

With its ability to raise money at all this has to attract funds for hard development. This means that development efforts will be impacted even curtailed as a result of the debt restructuring. Travelport will therefore continue to struggle for the foreseeable future. Something that has not gone unnoticed by Travelport’s competitors and of course their airline suppliers. Travelport’s options don’t look as rosy as they did 5 years ago when the company was effectively formed from the ashes of the now defunct Cendant.

The extent of Travelport's financial weakness comes at a bad time for the company when demands for change and attention to the sea change that Technology is driving are rising rapidly.

These are testing times for the legacy GDS model.