U.S. government sues to block Farelogix sale to Sabre

Sabre dared regulators last week to block its $360 million acquisition of Farelogix - and now the U.S. government has taken up the challenge.

The Department of Justice is suing the travel distribution and technology giant through a civil antitrust lawsuit filed today.

In it, the DoJ says the deal (originally announced during The Phocuswright Conference 2018 in Los Angeles) will eliminate competition that has, so far, "substantially benefited airlines and consumers."

In effect, Sabre's deal to buy Farelogix allows it to "to eliminate a disruptive competitor that has introduced new technology to the travel industry and is poised to grow significantly," the DoJ argues.

It claims the integration of Farelogix into the Sabre family of services would "likely result in higher prices, reduced quality and less innovation for airlines."

Sabre, in response, says it will fight the lawsuit and believes that the deal will be completed. It also believes the suit's claims "lack a basis in reality and reflect a fundamental misunderstanding of the industry."

Sean Menke, president and CEO of Sabre, says in a statement: "Over the past two years, Sabre has embarked upon a strategy with an entirely new executive management team focused on evolving the underlying technology of the travel ecosystem we support.

"To meet travelers’ changing expectations while increasing profitability, airlines need a technology partner that is ready to deliver tomorrow’s technological solutions today.

"Together, Sabre and Farelogix will drive faster innovation in the dynamic, highly competitive airline technology space, helping airlines accelerate their growth and profitability while better serving travelers."

A long road behind and head

The DoJ claims Farelogix has "stepped in to address the needs of airlines" all the while Sabre has operated outdated technology and resisted innovation.

In other words, Farelogix, one of the champions of IATA's New Distribution Capability project, was catching the eye of airlines that wanted to move forward.

Buying the company would give Sabre an opportunity to leap-frog the development stage of its own technology around NDC.

At the time of the acquisition, Sabre's NDC chief, Kathy Morgan, said: "This is all about airline-controlled retailing and, combined with Sabre, there is tremendous opportunity in front of us. It’s about turbo-charging the ability to deliver retailing, distribution and fulfilment solutions regardless of PSS or GDS.”

She added that for airlines, the benefits were clear, but there were also opportunities for the travel management community and the issues that go along with implementing NDC and its impact on corporate travel policy, compliance and duty of care.

The DoJ alleges Sabre’s chief sales officer (presumably the unnamed Greg Gilchrist, who is CSO for Airline Solutions), on the day of the acquisition, texted a colleague that one major U.S. airline would “hate” it.

The colleague is alleged to have replied that the deal would allow Sabre to take out a "strong competitor vs. continued competition and price pressure."

Sabre and Farelogix had already extended the termination date of their acquisition agreement to April 30, 2020, they said, allowing time to resolve the challenge by the DoJ.

In its statement released shortly after the DoJ announced the filing of the suit, Sabre says: "Sabre and Farelogix offer complementary services, and this transaction is the continuation of an already successful collaboration between the two companies.

"The airline technology sector is highly competitive, with many companies – even airlines themselves – competing to deliver next-gen retailing solutions. Sabre looks forward to showing the court how dynamic this industry is and having airlines and travel agencies explain how the industry actually works."

Sabre will file its formal written response to the DOJ’s lawsuit "at the appropriate time."

* Check this interview with Davidson and United's director of distribution, Tye Radcliffe, recorded at the Los Angeles event in November 2018.