T2RL - Delta Airlines buys Travelport out to control their destiny for PSS

Delta Airlines buys Travelport out to control their destiny for PSS

Delta Airlines have agreed to buy back the intellectual property for their passenger servicing systems (PSS) from Travelport and take on some 175 staff that work on the Deltamatic system transferred to Travelport (Worldspan) some years ago. Delta, like a small number of other airlines are signalling their intention to reverse the market trend for purchase of market based community solutions. Delta are unique however with over 168 million passengers boarded in 2013 including franchise carrier volumes.

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Published: 22/05/2014

Delta Air Lines Inc. DAL reached a deal with technology provider Travelport LP to acquire the data and intellectual-property rights underpinning its passenger-service and flight operations systems, a move by the airline to develop stronger in-house technology and to lower costs.

The Atlanta-based airline, the nation's third-largest by traffic, said on Wednesday that it will hire 175 Travelport technology professionals, effective July 1, as part of the deal. Financial terms weren't disclosed but, Delta said almost no money changed hands.

"We need to own, control and operate the data around our operations system," Delta Chief Executive Richard Anderson said in an interview. "We'll be able to make investments more quickly. We won't be on a shared software model." By having a proprietary system, Delta also will be able to help its smaller airline partners profit from its technology advancements, he said.

Delta said Atlanta-based Travelport will continue to run the system infrastructure for the Delta technology platform, and Delta affirmed its existing, separate agreement with Travelport to provide global distribution of Delta tickets and other services.

The Travelport technology has its roots in Delta, which developed a system called Worldspan in the early 1990s with Northwest Airlines and Trans World Airlines. It was sold to investors in 2003. Mr. Anderson, a Northwest executive at the time, said he led the negotiations for the sale "and I've wanted it back every day since."

Closely held Travelport bought Worldspan in 2007. Delta said it is buying back from Travelport the intellectual property and data behind the passenger-service and flight-operations systems. Those systems currently interact with about 180 proprietary Delta technology applications that control the airline's ticketing, website, flight check-in, crew scheduling and more. The systems also interact with other applications such as Delta's SkyMiles frequent-flier database and its aircraft-maintenance system.

"By having both its reservations and operational systems under its own roof, Delta should have a better ability to evolve these as they want, possibly on a faster timeline than if they continued to rely on Travelport," said Henry Harteveldt, a travel industry analyst for Atmosphere Research Group. "No other major U.S. airline can bring their core systems back in-house like Delta," he said.

Mr. Anderson said the move will help give Delta by far the lowest reservation costs in the industry. Its one aim is to make the ticketing process smoother for passengers, so they can change flights, get refunds and perform all their transactions on Delta's mobile app, he said, mirroring the ways consumers now interact with other companies that aren't saddled with legacy technology.

Delta spends about $250 million a year on information technology. After it acquired Northwest in 2008, Delta migrated Northwest to Delta's version of the passenger-service system, called Deltamatic. Northwest had been using a variant, maintained by Travelport, called Pars.

Having assisted Delta through the transition, "it is a natural next step to move this activity back under Delta," Travelport CEO Gordon Wilson said in a statement Wednesday.

Corrections & Amplifications Delta Air Lines Inc. agreed to purchase from Travelport LP only the data and intellectual property rights associated with its passenger-service and flight-operation systems. An earlier version of this story incorrectly said Delta also would acquire 180 proprietary technology applications that run on those systems. Delta already owns those.

Source: http://online.wsj.com/