Thursday, September 21, 2006

Travelport Results - the billion dollar black hole that has finally disappeared (maybe)

I am going to have to renounce all attempts to blog less about Cendant/Travelport. Every time I try - a new story emerges. There is no way I can ignore the recent Q2 06 results announcement, especially as it (how's this for a mixed metaphor) brings back to life the billion plus dollar elephant in the room that has been haunting the halls of Travelport since it's emergence from the ashes of Cendant.

The Good news is gross bookings up a healthy 32% versus prior year and cash flow from operations is $221mm up $35mm.

The Bad news is that revenues are up only 5% to $693mm. A 5% increase in a business heavy in great online brands such as Orbitz, HotelClub and RatesToGo is hard to swallow. With ebooker's profitability and turn around years away by their own admission there is a lot more pressure on these three brands to compensate. This also places even more pressure on the Galileo GDS business which has to face declining yields every year as airlines push, bite, shove and kick to reduce segment fees. It also strengthens the incentive for Blackstone to cut free the faster growing business from the poor performers to unlock the value (as they say in the private equity world).

The awful news is the $1.2billion dollar write-off. A carry over of the turning of $7bil into $4.3bil when Travelport was sold to Blackstone. I am running out of ways to express my sadness that there are so many great people from ebookers, Orbitz, HotelClub and RatesToGo that paid for that overspend with disruption, dissatisfaction and sometimes their jobs. At least the monkey is now off their back and the elephant can be put to bed (today is a day for mixed metaphors).

We also received word on another to add to our "where are they now" list with CFO Darly Raiford to depart.

5 comments:

Anonymous said...

You need to put things into perspective and look at how your frineds in a close paralell are travelling. Did you know that major, LCCs, and regional airlines have collectively lost $54 billion (net earnings) between 2001 and 2005. Airline industry revenue is $20 billion or so less – based upon pre 9-11 yields - for the industry because the high yield business traveler traffic is approximately 50% of what it was prior to 9-11. In response, labor costs have been cut significantly with higher productivity and slashed wages and benefits. The majors have shed some 160,000 jobs (35%) since 2001. As an example, and utilizing just one metric, in 2001, United Airlines’ company-wide labor costs reflected 170 employees per aircraft compared with approximately 120 today. Savings from lower labor and non-fuel costs have been wiped out by higher fuel costs, which are 3.5 times higher than the average of the previous 20 years (through 2003).
So whats a billion or so amongst a couple of dots..........

Tim Hughes said...

Absolutely agree - nothing compares to the debacle of cost overruns and inefficiencies that have beset the major European and US airlines. Travelport's results have upsides that many airlines pray for - the company is generating positive cash flows, has some of the best B2B and B2C travel brands and despite huge losses still has some incredibly smart people. However what makes me sad here is the missed/lost promise of early 2005 when the last of the Cendant TDS acquisitions were made. Compare those days to now when the last of the lost billion disappears in red ink and you cannot help but think nostalgically about an enormous missed opportunity and most critically about the pain that smart people have gone through.

Anonymous said...

THe Cry of frustrationed passionate people versus the greed of corporate wall street

Anonymous said...

http://www.boeing.com/commercial/cmo/pdf/CMO_06.pdf
new news for those in the know

oli said...
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