Google Inc. signed a definitive agreement to acquire ITA Software Inc., the company that revolutionized air fare shopping, for $700 million in cash. The deal requires regulatory approval.
On a telephone call with analysts and reporters, Google chief executive Eric Schmidt said airline travel and search represent a “perfect opportunity for more innovation, more investment and more interesting products.”
But neither Schmidt nor Jeremy Wertheimer, ITA’s founder and chief executive officer, would be specific about their future plans.
Schmidt described online travel shopping as “frustrating,” with pricing and availability “changing all the time.” Users feeling the need to check multiple websites, he said.
“There’s clearly more room for competition,” he said. Google and ITA will develop “new tools that focus on end users” and that will “get you very quickly to a site where you can buy your ticket.”
He said with the combination of Google and ITA, “we think we can make a contribution and drive more traffic to airline and OTA websites.”
Schmidt’s description sounded like the plan was to build a better Kayak – a travel meta search company – but he quickly dismissed that notion. “It is unlikely that anything we do will look like what is out there today,” he said.
Missing from the discussion was the issue of the airline passenger services system that ITA Software worked on for three years. Air Canada was slated to be the launch customer for the system, which was to include reservations, inventory and departure control modules, but it shelved the project last year.
Since then, ITA has been looking for another launch customer.
A Google spokesman later responded to an e-mail query from TTU, saying, “We think res opens up very interesting possibilities in the travel space, and we look forward to talking to customers in the coming weeks to figure out how we might support this business going forward.”
In its “First View” analysis of the news, Burnham, U.K.-based Travel Technology Research Ltd. said, “We believe that Google will seek to recoup some of its $700 million by selling this business on.”
Henry Harteveldt, vice president and principal analyst at Forrester Research, said such a system “is certainly not core to what Google is about.”
Harteveldt also said Google will have to develop shopping tools that go beyond searching for flights by origin, destination and date. For example, a consumer might query a system with: “I live in San Francisco, I want to go someplace warm with a beach, I have this amount of money and this much time.”
He noted that Affinity Shopper, the first of Amadeus’ Extreme Search products, answers similar queries and is already in the marketplace.
“Google will have to keep raising the bar,” he said.
Rick Seaney, chief executive officer of FareCompare, a site that provides consumers with tools such as air fare alerts and low-fare calendars, believes it is too soon to speculate about Google’s intended direction. But, he added, “From the beginning, meta search has been a commodity, and ITA helped make it a commodity for the past decade. Google make turn it into more of a commodity.”
Noting that Schmidt had complained of constantly changing fares, he said that is a situation controlled by the airlines and is unlikely to change.
In addition, he said, one of the biggest challenges for air fare shoppers today is the growth of added fees for ancillary services. “Google is not going to solve that with ITA,” he said.
But Travel Technology Research’s analysis said that Google/ITA “will definitely impact airline business models in terms of the customer proposition in bundling and unbundling.” The difficulties in sorting out ancillary fees represent a great opportunity, it said, and the new collaboration “will want to make sure users will find precisely what they want.”