Orbitz 2010 Annual Report Download - page 45

generated since the elimination of booking fees in April 2009 on most flights booked through our Orbitz.com
and CheapTickets.com websites. The decrease in credit card processing costs was primarily due to a decline in
our merchant gross bookings and air booking fees.
During the year ended December 31, 2008, we had a higher level of charge-backs primarily due to
sharply higher fraudulent credit card usage at one of our international locations. To address this issue, we
installed new revenue protection software and instituted tighter security measures during the second quarter of
2008. As a result, we have experienced a significant decline in charge-backs since that time. Customer refunds
also decreased, primarily due to our efforts to improve the customer experience, which have reduced the
number of incidents in which customer refunds were required.
Ticketing and fulfillment costs decreased as the industry continues to move towards electronic ticketing to
meet the International Air Transport Association mandate to eliminate paper tickets.
Selling, General and Administrative
Our selling, general and administrative expense is primarily comprised of wages and benefits, contract
labor costs, and network communications, systems maintenance and equipment costs.
2009 2008
$
Change
%
Change(a)
Years Ended
December 31,
(in millions)
Selling, general and administrative
Wages and benefits(b) ................................ $160 $160 $ — —
Contract labor(b) . . .................................. 21 34 (13) (38)%
Network communications, systems maintenance and equipment . . 27 33 (6) (20)%
Other............................................. 49 45 4 11%
Total selling, general, and administrative ............... $257 $272 $(15) (5)%
(a) Percentages are calculated on unrounded numbers.
(b) The amounts presented above for wages and benefits and contract labor are net of amounts capitalized.
The decrease in selling, general and administrative expense was primarily driven by a $13 million
decrease in contract labor costs, a $6 million decrease in network communications, systems maintenance and
equipment costs, a $3 million decrease in travel expenses and a $2 million decrease in professional fees,
partially offset by the absence of $14 million of income recorded in 2008 as a result of the reduction in the
present value of our tax sharing liability following a reduction in our effective state income tax rate (see
Note 9 — Tax Sharing Liability of the Notes to Consolidated Financial Statements). The remaining decrease in
selling, general and administrative expense is due to decreases in foreign currency losses and other operating
expenses.
Our network communications, systems maintenance and equipment costs, our use of contract labor and
our travel costs decreased as a result of expense reductions we undertook to manage through the economic
recession and industry downturn. Professional fees decreased due to lower audit fees and lower tax consulting
costs as a result of completing the post-IPO transition to an in-house corporate tax department, partially offset
by higher legal fees.
Wages and benefits expense remained flat as the decrease in expense that resulted from global work force
reductions that we undertook was partially offset by total severance expense of $7 million and additional
equity-based compensation expense of $2 million that we incurred in 2009 in connection with these work
force reductions and the departure of the Company’s former Chief Executive Officer in January 2009 (see
Note 15 — Severance of the Notes to Consolidated Financial Statements). This decrease in wages and benefits
expense was further offset by an increase in the amount of employee incentive compensation expense incurred
in 2009.
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