Given the history of animosity between the two companies, it was a surprise to many in the industry when news broke this month that travel technology company Sabre Corporation is acquiring software company Farelogix, a specialist in airline fares and pricing. One executive stated that, “You-know-what just froze over.” Indeed, Farelogix’s blog still contains posts, like this one, penned by Jim Davidson, the CEO of Farelogix, about his legal interactions with Sabre.
For Sabre, this deal makes sense. Sabre has made a lot of promises about what it is going to do to enable IATA’s New Distribution Capability (NDC) connections. However, it appears to be the least prepared of the three main global distribution systems to accomplish this, and it seems the least innovative of the three systems as well. By acquiring Farelogix, which has built out a sizable NDC capability, Sabre arguably goes from last to first place in the NDC race.
For Farelogix, the acquisition provides a sizable exit ($360 million) in a market where there were few strategic acquirers, and market potential was limited by the presence and actions of the global distribution systems.
Sabre’s airline customers, some of whom have used Farelogix to bypass Sabre and other global distribution systems using direct connections, should be happy with this acquisition as well. The volume on those direct connects has been small, and the acquisition boosts confidence that Sabre can make good on its NDC promises in a reasonable time. That means airlines will be able to move large volumes onto NDC faster than if Sabre relied on purely in-house development. Every NDC booking means a new opportunity to merchandise and sell ancillary services for the airline.
The question now is, can Sabre successfully integrate a small, innovative company into its 10,000- person organization? This is not an acquisition that Sabre can leave to run on its own, like it did with PRISM. Sabre must integrate the Farelogix team and technology into its core products connecting airlines and travel agents. Several industry observers on the sidelines of the Phocuswright conference this week expressed some doubts on Sabre’s integration ability, as Sabre is seen as having a mixed record in this regard.
Overall, while questions remain about integration, this acquisition seems like a win for Sabre and Farelogix, and their airline customers.