Orbitz 2011 Annual Report Download - page 88

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ORBITZ WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
88
The Travelport GDS Service Agreement also requires that ebookers use the Travelport GDSs exclusively in certain
countries for segments processed through GDSs in Europe. Our failure to process at least 95% of these segments through the
Travelport GDSs would result in a shortfall payment of $1.25 per segment for each segment processed through an alternative
GDS provider. We failed to meet this minimum segment requirement during each of the years ended December 31, 2011, 2010
and 2009, and as a result, we were required to make shortfall payments of $0.4 million to Travelport related to each of these
years, respectively.
A significant portion of our GDS services are provided through the Travelport GDS Service Agreement. For the years
ended December 31, 2011, 2010 and 2009, we recognized $111.5 million, $113.3 million and $111.6 million of incentive
revenue for segments processed through Galileo and Worldspan, respectively, which accounted for more than 10% of our total
net revenue.
Hotel Sourcing and Franchise Agreement
We entered into a Master Supply and Services Agreement (the “GTA Agreement”) with GTA, a wholly-owned subsidiary
of Travelport, which became effective on January 1, 2008. Under the GTA Agreement, we pay GTA a contract rate for hotel and
destination services inventory it makes available to us for booking on our websites. The contract rate exceeds the prices at
which suppliers make their inventory available to GTA for distribution and is based on a percentage of the rates GTA makes
such inventory available to its other customers. We are also subject to additional fees if we exceed certain specified booking
levels. The initial term of the GTA Agreement expired on December 31, 2010. GTA was no longer a related party as of
December 31, 2011.
Corporate Travel Agreement
We provide corporate travel management services to Travelport and its subsidiaries. We believe that this agreement was
executed on terms comparable to those of unrelated third parties.
Letter Agreement
In February 2011, we entered into a Letter Agreement with Travelport, which was amended in March 2011 (the “Letter
Agreement”). The Letter Agreement amended and clarified certain terms set forth in agreements that we had previously entered
into with Travelport and provided certain benefits to us so long as certain conditions were met.
The Letter Agreement contained a provision relating to the absence of ticketing authority on AA. Under this agreement,
our segment incentives payable from Travelport under the parties’ Travelport GDS Service Agreement were increased effective
December 22, 2010 until the earliest of August 31, 2011, the reinstatement of ticketing authority by AA for our Orbitz.com
website, the consummation of a direct connect relationship with AA, or the determination by our Audit Committee of the Board
of Directors (the “Audit Committee”) that we were engaged in a discussion with AA that is reasonably likely to result in a
direct connect relationship between us and AA. On June 1, 2011, the Illinois Circuit Court of Cook County ruled in favor of
Travelport’s request for injunctive relief against AA in Travelport, LP v. American Airlines, Inc. As a result of this ruling,
ticketing authority by AA was immediately reinstated on our Orbitz.com website resulting in the expiration on June 1, 2011 of
the increased segment incentives payable from Travelport pursuant to the Letter Agreement. While AA immediately made its
full schedule of flights available on both our Orbitz.com and Orbitz for Business websites as a result of this ruling, it was only
required to do so through August 31, 2011, the date on which its distribution agreement with Travelport expired. In July 2011,
we entered into a Letter Agreement with AA which extends the period over which AA is prohibited from removing its content
from our websites to March 31, 2012.
The Letter Agreement also contained an amendment to the Travelport GDS Service Agreement. This amendment
established a higher threshold at which potential decreases in Travelport's segment incentive payments to us could take effect
and reduced the percentage impact of the potential decreases. We are entitled to receive these benefits as long as our Audit
Committee does not determine that we are engaged in a discussion with any airline that is reasonably likely to result in a direct
connect relationship and we have not consummated a direct connect relationship with any airline.
The Letter Agreement also clarified that we were permitted to proceed with an arrangement with ITA that provides for
our use of ITA’s airfare search solution after December 31, 2011. In addition, we agreed to the circumstances under which we
will use e-Pricing for searches on our websites through December 31, 2014.