UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 10‑K

 

(Mark One)

 

For the transition period from           to        

 

Commission File No. 001‑36640

 

Travelport Worldwide Limited

(Exact name of registrant as specified in its charter)

 

 

Axis One, Axis Park

Langley, Berkshire, SL3 8AG, United Kingdom

(Address of principal executive offices, including zip code)

 

+44‑1753‑288‑000

(Registrant’s telephone number, including area code)

 

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

 

 

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None.

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes ☒ No ☐

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes ☐ No ☒

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒ No ☐

 

Indicate by check whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10‑K or any amendment to this Form 10‑K.  ☒

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company" and "emerging growth company” in Rule 12b‑2 of the Exchange Act.

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act).  Yes ☐ No ☒

 

As of June 30, 2018, the aggregate market value of the Registrant’s common shares held by non-affiliates was $2,319,394,447 based on the closing pricing of its common shares on the New York Stock Exchange. Solely for the purpose of the foregoing calculation only, all directors and executive officers of the Registrant are assumed to be “affiliates” of the Registrant. As of February 21, 2019, there were 126,512,322 shares of the Registrant’s common shares, par value $0.0025 per share, outstanding.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

None

 

 

 

 

 

TABLE OF CONTENTS

 

 

 

FORWARD-LOOKING STATEMENTS

The forward-looking statements contained herein involve risks and uncertainties. Many of the statements appear, in particular, in the sections entitled “Business”, “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. Forward-looking statements identify prospective information. Important factors could cause actual results to differ, possibly materially, from those in the forward-looking statements. In some cases, you can identify forward-looking statements by words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “potential,” “should,” “will” and “would” or other similar words. You should read statements that contain these words carefully because they discuss our future priorities, goals, strategies, actions to improve business performance, market growth assumptions and expectations, new products, product pricing, changes to our business processes, future business opportunities, capital expenditures, financing needs, financial position and other information that is not historical information. References within this Annual Report on Form 10‑K to “we,” “our,” “us” or “Travelport” refer to Travelport Worldwide Limited, a Bermuda company, and its consolidated subsidiaries.

The following list represents some, but not necessarily all, of the factors that could cause actual results to differ from historical results of continuing operations or those anticipated or predicted by these forward-looking statements:

We caution you that the foregoing list of important factors may not contain all of the factors that are important to you. In addition, in light of these risks and uncertainties, the matters referred to in the forward-looking statements contained in this report may not in fact occur.

Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by which, such performance or results will be achieved. Forward-looking information is based on information available at the time and/or management’s good faith belief with respect to future events and is subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in the statements. The factors listed in the section captioned “Risk Factors” in this Annual report on Form 10‑K, provide examples of risks, uncertainties and events that may cause actual results to differ materially from the expectations described in the forward-looking statements. You should be aware that the occurrence of the events described in these risk factors and elsewhere in this report could have an adverse effect on our business, results of operations, financial position and cash flows.

Forward-looking statements speak only as of the date the statements are made. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information except to the extent required by applicable securities laws. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect thereto or with respect to other forward-looking statements. For any forward-looking statements contained in any document, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

PART I

ITEM 1. BUSINESS

Overview

Travelport is the technology company that makes the experience of buying and managing travel continually better. We operate a travel commerce platform providing distribution, technology, payment, mobile and other solutions for the global travel and tourism industry. We facilitate travel commerce by connecting the world’s leading travel providers, such as airlines, hotel chains and car rental companies, with online and offline travel buyers in a proprietary business-to-business (B2B) travel platform. Our travel buyers include travel agencies, including online travel agencies (“OTAs”), travel management companies (“TMCs”) and corporations. We have a focused strategy to enrich and broaden our content capabilities. We have a leadership position in airline merchandising with over 270 airlines fully implemented with high value-add merchandising capabilities out of a total airline roster of approximately 480 airlines.  We lead in low cost carrier (“LCC”) content with over 120 LCCs connected to our Travel Commerce Platform. Additionally, we believe we are one of the largest third-party distributors of hotel room nights globally and complement this with a strong focus on car rental, rail, tour operators and cruise-lines. We are firmly focused on mobile commerce, providing a wide range of services that allows airlines, hotels, corporate TMCs and travel agencies to engage with their customers through digital services, including apps, corporate booking tools and mobile messaging. In addition, we leveraged our domain expertise in the travel industry to design a unique and pioneering B2B payment solution that addresses the need of travel agencies to efficiently and securely make payments to travel providers globally. Our leading B2B travel payment solutions business experienced 63% annual net revenue growth in 2018. We also provide critical IT services to airlines such as shopping, ticketing, departure control, business intelligence and other solutions enabling them to focus on their core business competencies and reduce costs.

We operate at significant scale with approximately $89 billion of travel spending processed in 2018. With the rise of mobile and meta-search intermediaries, over 4 trillion messages passed over our networks in 2018, with an average of approximately 11 billion air shopping requests per month. Our data centers use approximately 19,000 physical and virtual servers, with a current total storage capacity of approximately 16 petabytes.

We have a broad geographic footprint in the travel distribution industry. In 2018, we generated $2,454 million in Travel Commerce Platform revenue, of which 76% is international (with 23% from Asia Pacific, 35% from Europe, 5% from Latin America and Canada and 13% from the Middle East and Africa) and 24% is from the United States. Our geographically dispersed footprint helps insulate us from particular country or regional instability, allows for optimal IT efficiency and enhances our value proposition not only to travel providers, travel agencies and corporations, but also to end travelers. We are well positioned to capture higher value business from travel providers operating in non-domestic, or ‘away’ markets, in addition to serving their domestic, or ‘home’ markets, which results in higher per transaction revenue for both us and the travel providers we serve. We operate in approximately 180 countries and territories through our extensive global network of approximately 50 sales and marketing offices (“SMOs”) and a diverse workforce of over 3,700 full-time employees as of December 31, 2018.

As customer needs and technologies evolve, we continue to invest in our Travel Commerce Platform, developing new solutions to better serve the industry. We have led innovation in electronic distribution and merchandising of airline core and ancillary products and extensively diversified our offerings to address the high-volume and growing transaction processing requirements for the evolving needs of the travel industry through our Travel Commerce Platform. Comprised of Air and Beyond Air, which includes our hotel and car, advertising, digital and payment offerings, our Travel Commerce Platform provides distribution and merchandising solutions for airline, hotel, car rental, rail, cruise-line and tour operators, B2B travel payment solutions, digital services, advertising and an array of additional platform services. We have acquired expertise in and are deploying machine learning, artificial intelligence and other leading-edge technology to support our customers. Our advanced search technology aggregates global travel content, filters it through sophisticated search algorithms and presents results via application programming interfaces (“APIs”) in an online travel world and via efficient workflow for travel agencies in the offline mobile travel world, enabling travel agencies to create and modify multi-content, modular and complex itineraries, issue travel documents, process millions of booking transactions and invoices and transfer secure, cost-effective and automated payments, all on a graphically rich, single user interface. We have

invested in our infrastructure and conveyance mechanisms, including APIs and our point of sale (“POS”) interface, to make them easier to code to, lighter to use in terms of system processing for our customers and able to handle personalization. The significant growth of OTAs and the online channel, through meta-searches, the proliferation of mobile devices and consumerization has driven continued growth in the volume of searches and shopping transactions processed by our platform. Since 2015, we have seen over five times average increase in shopping requests coming onto our platform. We have effectively seen shopping requests double every 18 months, and we expect this trend to continue for the foreseeable future. Our focused strategy in search technology ensures we are positioned to manage the continued growth in the industry within our existing operating cost structure.

Our focus on enhancing our platform’s performance, including speed of search, is not just about price and speed, but also relevance and bookability of search results, including branded fares and ancillaries. By leveraging cloud, machine learning, mobile-enabled APIs and data and analytics, we can ensure insights are available and translated into personalized and smarter responses for the customer. For Air, we have transformed beyond the traditional global distribution system (“GDS”) concept, which had very limited ancillary sales capabilities, into an open platform with extensible markup language (“XML”) connectivity and a graphically rich, single user interface to enable marketing and sales of not only full air content, but also full ancillary content. We are a leader in the field of airline distribution being the first GDS supplier to acquire the International Air Transport Association’s (“IATA”) highest certification for its new distribution capability technology (“IATA NDC”) and the first GDS to process a live IATA NDC ticket. For Beyond Air, in addition to chain hotel content, we have added independent hotel inventory, previously rarely booked through the intermediary channel, to a global network of travel agencies through our meta-search technology, which combines search results from multiple sources and have given hotels the ability to display their full range of rates and packages in a one-stop booking portal. By investing in robotics and artificial intelligence, we help our customers engage in more “no touch” booking processes to address the changing needs of the traveler and drive business efficiencies’ automation. Our digital strategy and value propositions focus on improving the end-to-end customer experience through the provision of innovative digital travel solutions to all of our customers, including through our mobile travel solutions for airlines, hotels, TMCs and travel agencies with Travelport Fusion and Travelport Trip Assist. Our Travel Commerce Platform creates synergies and network efficiencies that facilitate revenue growth across the travel value chain. The chart below demonstrates the ways in which our Travel Commerce Platform identifies, addresses and redefines key elements of the travel value chain that are fully or partially unaddressed by traditional GDS providers:

Our Travel Commerce Platform Addresses the Evolving Needs of Our Industry

Our next generation Travel Commerce Platform focuses on the trends, inefficiencies and unmet needs of all components of the travel value, including innovative mobile engagement solutions and digital offerings.

We provide air distribution services to approximately 480 airlines globally, including over 120 LCCs. We distribute ancillaries for over 80 airlines. In addition, we secure content from numerous Beyond Air travel providers, including approximately 650,000 hotel properties (of which over 500,000 are independent hotel properties), over 40,000 car rental locations, approximately 40 cruise-line and tour operators and over 20 rail networks worldwide. We aggregate travel content across approximately 65,000 travel agency locations representing approximately 220,000 online and offline travel agency terminals worldwide, which in turn serve millions of end consumers globally. In 2018, we handled over 335 million segments sold by travel agencies including segments representing approximately 67 million hotel room nights and over 107 million car rental days. Our Travel Commerce Platform provides real-time search, pricing, booking, change, payment and integrated itinerary creation for travelers who use the services of online and offline travel agencies for both leisure and business travel. Our access to business travelers, merchandising capabilities and ability to process complex itineraries attracted and allowed for the full integration of several fast-growing LCCs, such as easyJet, IndiGo and Ryanair, into our Travel Commerce Platform.

Through our digital solutions, we also provide innovative mobile engagement solutions for airlines, hotels, TMCs and travel agencies. Travelport Digital’s solutions are used worldwide to improve the end-to-end mobile travel experience and increase the value of customer interactions via sophisticated apps and mobile services across smartphones, tablets and wearables. In addition to industry-leading travel apps, Travelport Digital provides advanced mobile services, including real-time mobile messaging, day-of-travel solutions and ancillary upsell opportunities. Travelport Digital’s solutions also

enable airlines and travel companies to create new revenue opportunities through ancillary upsell and improved conversion rates as a result of high-end design and more personalized experiences via mobile.

In addition to hospitality, B2B travel payment solutions and digital services, we utilize the broad connections and extensive data managed by our Travel Commerce Platform to provide advertising solutions to approximately 3,500 advertisers that allow our travel providers to easily and cost-effectively promote upgrades, ancillary products or services, package deals and other offers. We also offer other platform services, including subscription services, processing services, business intelligence data services and marketing-oriented analytical tools to travel agencies, travel providers and other travel data users.

We further provide critical IT services to airlines, such as shopping, ticketing, departure control, business intelligence and other solutions, enabling them to focus on their core business competencies and reduce costs. We also host reservations, inventory management and other related critical systems for Delta Air Lines Inc. (“Delta”) and run the system infrastructure for the Delta platform in our Atlanta data center under a long-term agreement. We refer to these solutions and services as “Technology Services.” In addition, until April 2017, we owned 51% of IGT Solutions Private Ltd. (“IGTS”), a technology development services provider based in Gurgaon, India that was used for both internal and external software development. We divested our 51% interest in IGTS in April 2017.

We have a recurring, primarily transaction-based, revenue model. We do not take airline, hotel or other inventory risk, and we are not directly exposed to fuel price volatility or labor unions like our travel providers. Our recurring, transaction-based revenue model is primarily driven by discrete travel events such as Air or Beyond Air segments booked rather than the price of the booking, meaning we benefit from an increase in total global travel without being exposed to price changes. However, our results, like others in our industry, are dependent upon various levels of travel activity, particularly air travel, as well as our ability to obtain travel provider inventories, our ability to maintain existing relationships with travel agencies and our ability to deliver desired products and services.

Through eNett International (Jersey) Limited (“eNett”), our majority-owned subsidiary and an early adopter in automated payments, we redefined how travel agencies pay travel providers. We refer to this business as our Payment Solutions segment. When a consumer purchases an itinerary through a travel agency, the consumer pays using a variety of mechanisms, including cash, direct debit and credit card. Generally, the consumer makes one payment for the entire itinerary of flights, hotels and ground services, such as transfers. The travel agency then remits the individual payments to each travel provider. eNett’s core offering is a payment solution that automatically generates unique Mastercard numbers used to process payments globally. Before eNett, travel payments were primarily settled in cash and exposed payers to risks of fraud, delays and costly reconciliations. The Virtual Account Number (“VAN”) solution is integrated into all of our POS systems and exclusively utilizes the Mastercard network pursuant to a long-term agreement. eNett’s operations currently focus on Asia Pacific and Europe, and we believe the model is highly scalable. We have expanded beyond the core hospitality sector into air travel, including LCCs, with further opportunities for growth in other sectors of the travel industry.

Our ability to offer broad, high-quality and multi-product content on a single user interface encourages those booking travel to purchase additional products and services beyond the original Air or Beyond Air offerings. For example, for every 100 air tickets sold in 2018, 45 hospitality segments were sold. The merchandising of additional products and services increases our revenue per transaction, and, consequently, we measure performance primarily on the basis of increases in both Reported Segments and RevPas (including Air and Beyond Air segments). Our recurring, transaction-based revenue model combined with high-quality content availability (which encourages incremental services booked with each transaction), our investment in our distribution and B2B travel payment solutions technology and digital services, and our multi-year contracts with travel providers and travel agents enabled us to grow our RevPas in each of the last 24 quarters on a year-over-year basis. We increased our RevPas from $5.19 in the first quarter of 2012 to $7.61 in the fourth quarter of 2018.

Our operations are organized into two operating segments: (i) Travel Solutions and (ii) Payment Solutions. Travel Solutions comprise our Air, Beyond Air (excluding our B2B travel payment solutions) and Technology Services. Payment Solutions comprise our B2B travel payment solutions through eNett. In prior periods, we have reported our Payment Solutions business together with Travel Solutions as one reportable segment, as Payment Solutions was not considered to

be material to be disclosed separately as a reportable segment. We also monitor our revenue and related metrics based on performance, including geographical performance, of our Travel Commerce Platform, which includes our Air and Beyond Air (inclusive of Payment Solutions) and Technology Services.

Company History

On September 30, 2014, we completed our initial public offering, and our common shares are traded on the New York Stock Exchange (“NYSE”) under the symbol “TVPT.”

We were incorporated in 2006 in Bermuda. Our principal executive offices are located at Axis One, Axis Park, Langley, Berkshire SL3 8AG, United Kingdom and our telephone number is +44‑1753‑288‑000.

We continually explore, prepare for and evaluate possible transactions, including capital markets and debt transactions, acquisitions, divestitures, joint ventures and other arrangements, to ensure we have the most efficient and effective capital structure and/or to maximize the value of the enterprise. No assurance can be given with respect to the timing, likelihood or effect of any possible transactions.

Recent Developments

On December 9, 2018, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Toro Private Holdings III, Ltd. (“Parent”), and following the execution of the joinder agreement, dated December 11, 2018, Toro Private Holdings IV, Ltd. (“Merger Sub”), pursuant to which Merger Sub will merge with and into Travelport, with Travelport continuing as the surviving company and a wholly owned subsidiary of Parent (the “Merger”). Parent and Merger Sub are each affiliated with Siris Partners IV (Cayman) Main, L.P. and Siris Partners IV (Cayman) Parallel, L.P. (collectively, “Siris Cayman Fund IV”). Parent, Merger Sub and Siris Cayman Fund IV are each affiliated with Siris Capital Group, LLC (“Siris”). Siris is a private equity firm headquartered in New York, New York. Elliott Associates, L.P. and Elliott International, L.P. (collectively, the “Elliott Funds”) have agreed to invest alongside Siris Cayman Fund IV in the transactions contemplated by the Merger Agreement and are each affiliated with Evergreen Coast Capital Corp. (“Evergreen”). Evergreen is an affiliate of Elliott Management Corporation (“Elliott”) that is specifically focused on private equity investments.

If the Merger is completed, our shareholders will be entitled to receive $15.75 in cash (the “Per Share Price”), less any applicable withholding taxes, for each common share of Travelport owned by them.  Further, our common shares will no longer be publicly traded and will be delisted from the NYSE. In addition, our common shares will be deregistered under the Securities Exchange Act of 1934, as amended, and we will no longer file periodic reports with the United States Securities and Exchange Commission.

The completion of the Merger is subject to the approval of Travelport’s shareholders, regulatory approvals and customary closing conditions. The Merger, if completed, will be accounted for as an acquisition of Travelport by Parent under the acquisition method of accounting in accordance with U.S. GAAP. Parent will be treated as the acquirer for accounting purposes.

Our Competitive Strengths

We believe that several aspects of our strategy fundamentally differentiate us from our competitors, including our focus on redefining travel distribution and commerce instead of investing in more capital and labor intensive airline and hospitality related IT solutions, our fast growing Beyond Air portfolio, including our automated B2B travel payment solutions and digital services with large addressable markets, and our emphasis on a value-based partnership approach with travel providers that allows us to increase revenue and profitability per Reported Segment. The following attributes describe in further detail how we differentiate ourselves from our competitors.

Large and Structurally Growing Travel Market with Significant Exposure to Fast Growing Regions

The travel and tourism industry has shown continued strength as one of the world’s largest industries, contributing $8.3 trillion, or 10.4%, of the global GDP in 2017, according to The World Travel & Tourism Council (the “WTTC”). The industry is comprised of travel suppliers and buyers around the world, including airlines, hotels, car rental companies, rail carriers, cruise-lines, tour operators, online and offline travel agencies, travel management companies and corporate travel departments.

The travel and tourism industry is forecast to grow by 3.8% per annum over the next 10 years to reach $12.5 trillion contributing 11.7% of the global GDP by 2028, according to the WTTC. Global air passengers carried, one of the key underlying indicators for the wider travel and tourism industry, has been consistently growing from 1.7 billion passengers in 2000 to 4.0 billion in 2017 with a compound annual growth rate of 5.2%, according to the World Bank, demonstrating very low volatility and high resilience to unpredictable shocks from terrorist attacks, political instability, health pandemics and natural disasters. IATA has forecasted air passenger demand to almost double over the next 20 years. Expected growth in air passenger demand is largely driven by increasing demand in the Asia Pacific, Latin America, Middle East and Africa regions, with total traffic expected to grow at compounded annual growth rates of 5.5%, 4.2%, 5.9% and 4.9%, respectively, from 2017 to 2037, according to Airbus.

Structural trends are largely driving, and are expected to continue to drive, growth in the travel and tourism industry. Emerging markets have contributed to a significant amount of the population growth around the globe and are forecasted to grow at a rate higher than developed nations through 2050, according to the Population Reference Bureau. Simultaneously, the middle class has expanded and increased consumption in emerging regions, with the gross national income per capita having grown at compound annual growth rates of between 4 – 9% from 2000 to 2017, according to the World Bank. These trends, combined with airlines increasing their capacity in away markets and growing business travel driven by globalization, support continued air market growth.

Coupled with these structural tailwinds, increased demand for digitalization and technological differentiation is driving change in the travel and tourism industry. Travel buyers demand faster, more relevant and more personalized travel content to help reach their target customers and drive higher revenue per seat, per room and per rental. Our use of technologies, such as APIs, cloud computing, data and analytics, machine learning and robotics allows us to ensure insights are available and translated into relevant, personalized and smarter responses, enabling travel buyers to realize efficiency gains and the ability to differentiate. Additionally, in the past, the travel industry has not met the need for a secure and efficient payment solutions using traditional means of payments as a primary means to settle transactions, but there has been increasing demand and usage of digital solutions to eliminate the associated risks.

We are well positioned to benefit from these favorable trends and the significant growth potential of the travel and tourism industry. Being a well-diversified global player, we have significant exposure to the fastest growing regions, including Asia Pacific, Middle East and Africa and Latin America and Canada, which, in 2018, contributed 23%, 13% and 5%, respectively, of our Travel Commerce Platform revenue. We have strategically invested over $1.3 billion in technology over the past 5 years to address the increasing importance of these market trends. These investments have enabled us to diversify further away from traditional GDS services to a leading global travel commerce platform, providing our customers with B2B travel payment solutions and other digital and technology services, in addition to the traditional GDS offering.

Leading and Differentiated Travel Commerce Platform Addressing the Evolving Needs of the Travel Industry

Travel providers need innovative platforms to distribute and merchandise their increasingly complex core products and broadening offerings of ancillary products and services. We offer them a portfolio of industry-leading, value-add tools to increase revenue, lower costs and efficiently reach travel buyers globally in every channel. Our global reach allows travel providers to display and sell products in approximately 180 countries and territories and across approximately 65,000 travel agency locations representing approximately 220,000 online and offline travel agency terminals worldwide. Our Travel Commerce Platform enables travel providers to (i) extend their distribution by broadening their geographic reach to away markets and connects them with higher value business travelers, (ii) access higher yielding ticket prices from long-

haul segments, room rates, complex itineraries and business travelers and (iii) encourage travelers to purchase ancillary services and/or upgrade or upsell travelers through our highly-differentiated merchandising capabilities.

Our Travelport Merchandising Suite, consisting of three distinct solutions—Travelport Aggregated Shopping, Travelport Ancillary Services and Travelport Rich Content and Branding— offers a range of sophisticated travel sales and marketing capabilities that allow airlines to promote their products and services to the right buyers, at the right time and in the right place. Travelport Aggregated Shopping allows travel agencies to efficiently and directly compare results from network carriers, who deliver data through the traditional industry standard, airline tariff publishing company (“ATPCO”), which regularly updates traditional GDSs, with those from LCCs and other carriers who use an API connection to deliver data directly and in real time to us. Travelport Ancillary Services allow travel agencies to sell airline ancillaries, such as checked baggage, premium seats and lounge passes, directly through their existing interface rather than needing to book separately on an airline’s website. Travelport Rich Content and Branding allows airlines to more effectively control how their flights and ancillaries are visually presented and described on travel agency screens, bringing the display more in line with the airlines’ own website. This is especially valuable to airlines given the increasing importance of ancillary revenue for profitability and allows travel agencies to sell more effectively. The benefits also are available to customers connected to our leading API solutions, including Travelport Universal API. This means that OTAs, corporate booking tool providers or other travel consultants, who are designing their own customized user interfaces, can still understand an airline’s full value proposition, including its branded fares and ancillaries, in the same way as a customer connected to Travelport’s POS solution, Travelport Smartpoint, would. Our ability to help travel providers and travel agencies increase their revenue reinforces the value proposition of our Travel Commerce Platform when compared to alternative distribution channels and is a key part of our strategy to shift the focus of our relationship with travel providers from priced-focused to value-focused.

Our leading access to global travel provider content helps attract more travel agencies, both online and offline, as well as corporations and self-serve travelers, onto our platform, which in turn drives greater value for the travel providers, increasing their addressable customer base. Our leading POS solutions, such as Travelport Smartpoint, along with Travelport Branded Fares and Ancillaries, provide travel agencies with greater choice and detailed information on key differences between the products and services offered by travel providers, allowing them to provide more valuable insights to their customers, higher levels of customer service and improved sales productivity. Travelport Smartpoint is Travelport’s innovative POS solution that allows travel consultants to more effectively advise their customers about the entire range of products, optional services and offers available from the travel providers Travelport distributes, with fully interactive, graphical screen displays and real-time booking. Travelport Smartpoint provides upselling and cross-selling opportunities through the integration of Travelport’s Rich Content and Branding merchandising solution for airlines. In addition, Travelport Smartpoint mirrors for travel agents the experience of consumers booking hotels and car rentals online by allowing them to access enhanced features, including pictures, comparisons and maps, all within the same workflow. This allows travelers to be better informed of the products available to them, the options that might exist, the cost of enhanced products and the ancillary products available to buy, which allows them to tailor their journey to their specific requirements. Utilization of our leading Travelport Smartpoint POS simplifies highly complex, high volume operations, freeing up more time for travel agencies to focus on the selling process.

In addition, our Travel Commerce Platform reduces operating costs for travel agencies by offering a single point of access to broad global travel content and by integrating critical data for back office, accounting and corporate customer reporting. Furthermore, our Travel Commerce Platform gives travelers a quick and easy way to compare a multitude of available travel options and obtain the true cost of a desired itinerary, buy ancillaries directly after the core booking has been made and provides greater control over itineraries through an option to add features at later stages in the travel process.

Stable, Resilient and Recurring Transaction-based Business Model with High Revenue Visibility and Strong Cash Flow Generation

Our operations are primarily founded on a transaction-based business model that ties our revenue to travel providers’ transaction volumes rather than the price paid by a consumer for airfare, hotel rooms or other travel products and services booked through our systems. Travel related businesses with volume-based revenue models have generally shown strong visibility, predictability and resilience across economic cycles because travel providers have historically sought to maintain traveler volumes by reducing prices in an economic downturn.

In general, our business is characterized by multi-year travel provider and travel agency contracts. Our base distribution agreements with travel providers are open-ended or rollover unless specifically terminated. In 2018, we had 50 planned airline contract renewals, and we successfully renewed substantially all such contracts. We currently have 73 and 81 planned airline contract renewals in 2019 and 2020, respectively, including contracts that roll on an annual basis. We also enter into contracts with travel buyers, such as travel agencies and corporate travel departments. A meaningful portion of our travel buyer agreements, representing approximately 15% of our booking fee revenue on average, are up for renewal in any given year. The length of our contracts, as well as the transaction-based and recurring nature of our revenue, provides high revenue visibility going forward. 

We generate strong cash flows on a consistent basis, with net cash provided by operating activities of $364 million and $318 million for the years ended December 31, 2018 and 2017, respectively. Drivers of our cash flows benefit from relatively modest capital expenditure requirements and an attractive working capital position. Furthermore, the diversity of our business provides us with multiple independent revenue streams from various markets and channels that lessen the impact of potential strategic and geographic shifts within the industry. These characteristics, combined with the contractual nature of our revenue and costs, our leading industry position and our long-standing customer relationships provide for a strong and predictable stream of cash flows.

Fast Growing Portfolio of Beyond Air Initiatives

Our Travel Commerce Platform provides us with a foundation to offer a fast-growing portfolio of additional products and services, which in turn results in additional revenue. Our Beyond Air portfolio includes distribution and merchandising solutions for hotel, car rental, rail, cruise-line and tour operators, Payment Solutions, digital services, advertising and other platform services.

Historically, independent hotels were largely unaddressed by the GDS industry. However, we integrate on one platform by combining the content from chain hotels captured by the traditional GDSs with independent hotel content our system accesses through our meta-search technology. Through our platform, we capture highly fragmented content in one interface (including approximately 650,000 hotel properties) by combining content from large global OTAs with that from aggregators specializing in a particular geographic area. This streamlined and efficient interface also enables travel agencies to more easily upsell hotel content in a single, consistent and efficient workflow and user experience.

Our ongoing strategy is to strengthen our hotel offering to both corporations and TMCs and make booking independent hotels easier for business travelers, including unmanaged travelers who do not use travel agencies. Many hotel bookings, especially for independent hotel properties, are still being booked direct by business travelers themselves. Through our platform, we provide both corporations and Travelport-connected travel agencies with a best-in-class booking tool with extensive independent hotel content, complementing the extensive hotel chain content that has been in our system for many years. In turn, this also enables corporations to more easily track their employees while on business travel as part of their duty of care responsibilities. We have invested in our technology and enhanced it with a user-friendly extranet that is uniquely positioned to capture independent hotels and privately negotiated corporate hotel rates that are provided to corporations.

We are an early adopter of automated B2B payments and are redefining payments from travel agencies to travel providers through our Payment Solutions business. We pioneered a new class of payments for the unmet needs of the travel industry that is focused on replacing cash and other payment methods with secure virtual pre-funded payment cards. eNett’s innovative, cost-efficient and secure travel payment solutions offer a strong value proposition to travel agencies and travel providers, including providing them with full flexibility, lower administrative cost due to significantly reduced time spent on reconciliation, rewards to travel agencies with incentive payments based on payment volumes and a lower spread for foreign currency payments. eNett exclusively utilizes Mastercard under a long-term arrangement, giving unparalleled access to the payment systems of virtually all the world’s travel providers who accept Mastercard as a form of payment. We believe the model is highly scalable as we expand beyond the core hospitality sector into air travel, including LCCs, as well as other sectors of the travel industry. We estimate that there is over $2.5 trillion of direct spending on travel annually, approximately $990 billion of which is booked through the indirect channel, and payment is made from travel agencies to travel providers.

Travelport Digital provides a mobile travel platform and digital product set that allows travel providers and travel agencies to engage with their customers through sophisticated, tailored mobile services, including apps, mobile web and intelligent mobile messaging. In response to increased demand for advanced mobile services at all stages of travel, Travelport has developed Travelport Fusion, a robust and rich mobile app solution for airlines of all sizes that can work across all host systems. Through Travelport Fusion, airlines can provide end-to-end trip engagement via mobile, allowing them to grow their revenues, streamline their operations and extend their digital engagement. For airlines that need highly customized mobile solutions adapted to their specific digital roadmap, Travelport Digital will continue to offer its unique and proven blend of market leading design, agile delivery and mobile customer engagement solutions. For travel agencies, we have developed Travelport Trip Assist, a mobile solution that brings the agency brand to the app store and a rich set of features directly into the end-traveler’s hands. This new mobile platform allows travel companies to better manage the travel experience through a powerful set of mobile tools available on iOS and Android, including a smart itinerary manager, a day-of-travel assistant, a push-notification engine, a real-time alert system and the ability to contact an agent from within the app.

In addition to hospitality, Payment Solutions and digital services, we utilize the broad connections and extensive data managed by our Travel Commerce Platform to provide advertising solutions to approximately 3,500 advertisers, which includes, among others, travel providers who use our advertising solutions to easily and cost-effectively promote upgrades, ancillary products or services, package deals and other offers and, as a result, more effectively merchandise their products and services to targeted customers. We give advertisers direct access to a captive professional audience across approximately 65,000 travel agency locations representing approximately 220,000 online and offline travel agency terminals worldwide, with a full-time focus on global travel bookings and cover all main domestic and international travel flows. In 2018, we generated approximately 9 billion advertising impressions. Our improved, graphically rich point-of-sale solutions provide increased capabilities and advertising space to display banner advertisements, add click through functionality and market ancillary products through our user interface.

Innovative, Flexible and Scalable Open Technology Platform Tailored to Meet Evolving Industry Needs

Through our industry-leading technology platform, we have been able to maintain our position at the forefront of innovation by meeting the global demands of our travel agents and travel providers for speed, flexibility and convergence. Our technology-enabled solutions offer rich content through multiple distribution channels, such as Travelport Smartpoint. To address unmet industry needs, we made significant strategic investments in innovative technology over the last five years, and we continue to invest in developing new technologies, platforms and ideas, all on an open and accessible platform that delivers expansive content, improved performance, empowered travel experience and intelligence. Our open connectivity approach allows for fully-flexible access to content and services across a range of delivery mechanisms, from the latest IATA NDC and XML protocols to more traditional industry sources such as ATPCO. Our open platform allows us to pull together content delivered from multiple sources into a cohesive display for the travel buyer, enabling search, comparison, reservation and payment across multiple providers. We deliver our content and functionality through state-of-the-art POS tools, mobile solutions for the traveler or via our own leading APIs, including Travelport Universal API, which enables the flexibility for travel agencies and intermediaries to design customized user interfaces. In 2018, a broad network of approximately 1,800 developers utilized our Travelport Universal API to create their own applications and increase the robustness of our systems. Our POS tools are device agnostic, allowing travel agents to access our platform via internet connection on a desktop or a variety of mobile devices, such as smartphones and tablets. Travel consultants connecting to the Travelport Universal API also can access the same rich product descriptions and graphics, branded fare and ancillary content available in Travelport Rich Content and Branding. In 2018, our systems processed over 11 billion travel related system messages per day with 99.991% core system uptime using approximately 19,000 physical and virtual servers and had total storage capacity of approximately 16 petabytes. In addition, we operate our own in-house primary data center supported by a secondary site.

In recognition of the advantages provided by our open platform, we were the first among our competitors to offer Delta Air Lines’ full range of seating products. In addition, starting in 2013, we offered Travelport Aggregated Shopping through XML connectivity to airline content, which has enabled and encouraged leading LCCs such as easyJet, IndiGo and Ryanair to join our fully integrated Travel Commerce Platform. In 2013, we launched our innovative Travelport Merchandising Suite to enhance user experience and focus on the sale of ancillary products and services, which are

becoming increasingly important for airlines’ profitability. In the hospitality industry, we were the first GDS to our knowledge to offer a one-stop portal for hotel content distribution powered by “meta-search” technology.

Balanced Global Footprint with Diversified Customer Base and Longstanding Relationships

We have a broad geographic footprint in the travel distribution industry. In 2018, we generated $2,454 million in Travel Commerce Platform revenue, of which 76% is international (with 23% from Asia Pacific, 35% from Europe, 5% from Latin America and Canada and 13% from the Middle East and Africa), and 24% is from the United States. Our geographically dispersed footprint helps insulate us from particular country or regional instability, allows for optimal IT efficiency and enhances our value proposition to travel providers. We are well positioned to capture higher value business from travel providers operating in away markets, which results in higher per transaction revenue for both us and the travel providers we serve. This strategically diversified geographic footprint allows us to focus on higher value transactions in the international travel segment. Our balanced network positions us well to benefit from global industry growth, while lessening the impact of potential geographic shifts within the industry. Our footprint also positions us as the challenger to the industry leader for air segments processed in each geographic region and provides us opportunities to grow our share.

We also have highly diversified, strong, long-standing relationships with both our travel providers and travel buyers. None of our travel buyers or travel providers accounted for more than 10% of our net revenue for the year ended December 31, 2018. Our top 15 travel providers (by 2018 net revenue) have been with us for more than ten years on average.

Proven and Motivated Management Team with Strong Track Record and Deep Travel and Technology Industry Expertise

Our management team has extensive travel and technology industry experience and is committed to improving and maintaining operational excellence by utilizing their in-depth knowledge of these industries. Their dedication and excellence has been demonstrated by improving our key business metrics and our capital structure improvements. Our management team’s compensation structure directly incentivizes them to improve business performance and profitability, and more than half of the compensation opportunity for our executive officers is equity-based in order to properly align the interests of our executive officers and shareholders.

Our management team is supported by a skilled, diverse, motivated and global workforce, comprised of over 3,700 full-time employees as of December 31, 2018. By investing in training and skills development for our employees, we seek to develop leaders with broad knowledge of our business, the industry, technology and customer-specific needs. We also hire externally as needed to bring in new expertise. Our combination of deep industry and company experience combined with the fresh perspective and insight of new hires across our management team creates a solid foundation for driving our business to success, profitability and industry leadership.

Our Growth Strategies

We believe we are well positioned for future growth. Our balanced geographic footprint aligns us with anticipated industry growth across geographies, and we expect trends such as the increasing importance of ancillary revenue, the need of travel providers to personalize their offers to travelers, expansion by LCCs into the business travel industry, continued penetration by GDSs into hospitality distribution and growth of B2B travel advertising to further underpin our growth. We continue to make significant strategic investments in innovative technology, platforms and ideas, all on an open and accessible multi-source platform that delivers expansive content, improved performance, empowered travel experiences and intelligence and improved service. Our focused strategy in search technology, including speed of search and relevance and bookability of search results, ensures we are positioned to manage the continued growth in the industry, particularly through mobile customer engagement, while maintaining a low cost to serve. By leveraging cloud, machine learning, mobile-enabled APIs and data and analytics, we can ensure insights are available and translated into personalized and smarter responses for the customer. We continue to leverage our domain expertise and relationships with travel providers to grow eNett and Travelport Digital. We will continue to evaluate and pursue strategic acquisition opportunities that enhance our Travel Commerce Platform. Our strategic capital investments, current product portfolio and strategic

positioning enable us to benefit from industry trends, and we intend to capitalize further on these industry trends by focusing on the following initiatives:

Driving Beyond Air Innovation and Growth

Our fast-growing Beyond Air portfolio includes hospitality, Payment Solutions, digital services, advertising and other platform services. Given growth rates and the underpenetrated nature of these areas, we believe we can grow our Beyond Air portfolio at a multiple to overall travel industry growth by continuing to strategically invest in the development of state-of-the-art capabilities to achieve a leading industry position.

Hospitality: Through our leading meta-search capabilities, we are increasing our presence among independent hotels. In addition, we provide superior chain hotel content to OTAs relative to our competitors by providing direct XML connectivity. Our strategy to grow in hospitality distribution is also focused on delivering corporate access to aggregated hotel content, including both chain and independent hotels through a single point of sale. This streamlined and efficient interface also enables travel agencies to more easily upsell hotel content in a single, consistent and efficient workflow and user experience.

Our strategy is to continue to build on our extensive car rental content offering for travel agencies. Our travel agencies have access to more choice of car content, as well as the ability to search and book content from smaller regional car rental companies.

Payment Solutions: Our strategy for eNett is to continue growing the scale of the business through further investment in operational capabilities, new payments products, sales and marketing and targeted geographic expansion. We plan to further capitalize on our early adopter advantage to address the travel industry’s previously unmet needs for a secure and efficient payment solution. Our Travel Commerce Platform allows us to leverage our extensive network of travel agencies to grow the penetration rate for eNett payments.

Digital Services: We have a strong focus on mobile commerce, providing a wide range of services that allows airlines, hotels, corporate TMCs and travel agencies to engage with their customers through digital services, including apps, corporate booking tools and mobile messaging. We develop robust and rich mobile app solutions for airlines of all sizes that can provide end-to-end trip engagement and a mobile solution for travel agencies that allows travel companies to better manage the end-user travel experience through a powerful set of mobile tools available on iOS and Android, including a smart itinerary manager, a day-of-travel assistant, a push-notification engine, a real-time alert system and the ability to contact an agent from within the app. We offer a corporate travel platform that empowers travel managers to drive change and achieve program efficiencies. It is more than an online booking tool and provides a range of app-powered workflows that consolidate the entire travel lifecycle.

Advertising: Our strategy is to focus on the B2B advertising opportunity by targeting travel agencies. Hotel advertising will remain our core offering, but other advertising categories (especially air) also represent areas for growth, which we believe we are well positioned to capitalize on through our Travel Commerce Platform.

Other Platform Services: Our strategy is to develop new insights into travel behaviors that will allow us to improve our other platform services including subscription services, processing services, business intelligence, data services and marketing-oriented analytical tools to travel agencies, travel providers and other travel data users.

Expand Platform Capabilities and Reach

We are well positioned in both the high-value, complex segment of air travel distribution, as well as the growing LCC segment, which is characterized by its larger number of business travelers, complex itineraries and international bookings. Our strategy to grow our platform focuses on providing state-of-the-art solutions to address the changing way airlines, hotel chains and car rental companies are positioning and selling their products and services. Our Travel Commerce Platform provides us the foundation to offer a wide-ranging and expanding portfolio of differentiated products and services.

We intend to focus on the following strategies to drive growth across our Travel Commerce Platform:

Growth through Retailing, Personalization and Merchandising Capabilities: In order to address the growing importance for travel providers of flexible systems to distribute and merchandise their increasingly sophisticated core products and broadening offerings of ancillary products, we have heavily invested in our Travelport Merchandising Suite to more effectively market and sell products and services. The Travelport Merchandising Suite, which includes our Rich Content and Branding airline merchandising solutions, integrates XML content with traditional content in a graphically rich, single user interface and, together with our sourced travel content, including air, hotel and car rental options, is fully accessible to all customers and channels. These customers include our global network of offline travel agencies, as well as OTAs, corporate travelers who prefer to self-serve and use corporate booking tools and developers who are part of our developer community. The online channel is able to connect to this content and functionality via our leading APIs, including our Travelport Universal API.

Our Rich Content and Branding airline merchandising solutions allow for more flexible and effective distribution and merchandising of both core travel content and ancillary products and services, resulting in a higher value proposition for both network carriers and LCCs, while facilitating travel agencies to upsell more content efficiently. As of December 31, 2018, we have over 270 airlines utilizing our Rich Content and Branding solution with approximately 20 more contracted. We will continue to target additional airlines with this solution suite. In addition, increasing the sale of ancillaries through our platform not only results in additional transaction revenue, but also helps us attract new content from carriers. We intend to continuously invest in our retailing and ancillary merchandising capabilities and grow by partnering with both traditional carriers and LCCs.

Growth through Technologies that Enhance Performance: Artificial intelligence, machine learning and more sophisticated API-connected platforms are powering better speed, relevance and accuracy of search and automating services across all touchpoints of the traveler journey, allowing travel providers and buyers to connect with customers more efficiently. We continue to invest in these technologies to address the needs of travel buyers. Our continued investment in our search capabilities, data analytics, state-of-the-art mobile interfaces, robotics and automation will drive greater customer conversion and business efficiency.

LCC Participation Growth: As LCCs continue to evolve and look for further growth opportunities, they seek to expand their offering to higher yield customers, mainly business travelers. Our access to business travelers, merchandising capabilities and ability to process complex itineraries have attracted and allowed for the full integration of several fast-growing LCCs such as easyJet, IndiGo and Ryanair into our Travel Commerce Platform. We view the expansion of LCCs into the business travel segment as a significant growth opportunity for us, and we will continue building our offering to win their business.

Targeted Geographic Expansion: Because the ability to increase away segments provides more revenue to airlines, away segments attract a premium to home segments, a dynamic that will benefit our performance as this trend continues. Furthermore, due to our balanced global footprint, we are well placed to benefit from global airline capacity shifts and increased LCC participation. We will continue to grow our international business and will focus on expanding into new emerging regions such as Africa, Latin America and Eastern Europe.

Business Travel Growth: Our strategy to grow in the business travel space is focused on investing in products that distribute travel technology solutions directly to corporations, allowing them to easily access and book travel content that incorporates their travel management policies directly through our platform. The demographic make-up of corporate travelers is changing rapidly, with many now preferring to self-serve and use their mobile devices rather than booking travel through more traditional methods. We intend to be at the forefront of these changes as we deploy our content and digital technology assets to address them. Our investments to support the growth and changes we are seeing in the business travel sector include hotel distribution technology focused on corporates, which has made booking independent hotels and accessing privately negotiated corporate hotel rates more efficient for business travelers. We are focused on empowering corporate travelers through an improved mobile user experience. We will continue to develop our offering in the business travel space, as well as strengthening our partnerships with TMCs and we will look at new opportunities to invest in products that distribute travel technology solutions directly to corporations.

Expanded Mobile Engagement: Travelers increasingly expect brands and businesses to meet their expectations of “connectedness”. This means to be present, active, useful and available at every stage of the travel journey. Through Travelport Digital, which we believe to be the world’s leading provider of innovative mobile apps development and digital services in the travel industry, we design, build and power the mobile experience for many of the world’s leading travel brands, including BCD Travel, easyJet and Etihad. We will continue to invest in developing innovative mobile technologies that allow travel providers and travel agencies to engage with their customers through sophisticated, tailored mobile services, including apps, mobile web and intelligent mobile messaging.

Focus on Distribution Technology Leadership and Differentiated Products

Achieving growth in our Travel Commerce Platform is predicated on our continued investment in developing advanced technologies and differentiated products to maintain our competitive position. We intend to continue our strong commitment to product innovation and technological excellence to maintain our state-of-the-art product portfolio and preserve our early adopter advantage in several key growth areas, such as the sale of ancillaries, B2B travel payments solutions, digital services, hospitality merchandising and advertising. We plan to continue offering rich travel content and empowered selling experiences on an open platform with service-oriented architecture and industry leading APIs, and plan to continue to focus on developing a diverse application set to consistently increase the value of our Travel Commerce Platform to our customers. We are exploring new adjacencies that will allow us to improve our products and data offerings to our customers and develop insights into travel behaviors. We have chosen not to focus our resources on more capital and labor intensive airline and hospitality related hosting solutions. Instead, we focus on distribution products, payment related solutions and digital services. Our ability to offer differentiated, high value products and services allows us to shift the focus of our dialogue with travel providers from price to value, leading to higher RevPas.

In February 2017, we named Tata Consultancy Services (“TCS”), part of the Tata Group and a leading global IT services, consulting and business solutions organization, as our primary technology partner. TCS was selected in recognition of its strengths in the global travel industry and its ability to work alongside us and provide scale in application engineering and assurance services. Through this appointment, we have rationalized the number of third-party IT development companies with whom we work. At the same time, we have consolidated our U.S. technology hubs into two centers in Atlanta and Denver. Our increased investment in technology forms an integral part of our overall growth plan and long-term strategy.

Travel Providers

Our relationships with travel providers extend to airlines, hotels, car rental companies, rail networks, cruise-line and tour operators. Travel providers are offered varying levels of services and functionality at which they can participate in our Travel Commerce Platform. These levels of functionality generally depend upon the travel provider’s preference as well as the type of communications and real-time access allowed with respect to the particular travel provider’s host reservations and other systems.

We provide air distribution services to approximately 480 airlines globally, including over 120 LCCs. We distribute ancillaries for over 80 airlines. We have relationships with approximately 310 hotel chains, representing approximately 145,000 hotel properties, which provide us with live availability and instant confirmation for bookings, in addition to approximately 15 hotel aggregators resulting in an aggregate of approximately 650,000 hotel properties bookable through our platform. In addition, we serve over 40,000 car rental locations, approximately 40 cruise-lines and tour operators and over 20 rail networks worldwide.

The table below lists alphabetically our largest airline providers in the regions presented for the year ended December 31, 2018, based on revenue:

 

 

A majority of our agreements remain in effect each year, with exceptions usually linked to airline mergers or insolvencies. In 2018, we had 50 planned airline contract renewals, and we successfully renewed substantially all such contracts. We currently have 73 and 81 planned airline contract renewals in 2019 and 2020, respectively, including contracts which roll on an annual basis. Our top 15 travel providers as measured by net revenue for the year ended December 31, 2018, all of which are airlines, have been customers on average for more than ten years. For the year ended December 31, 2018, our top ten travel providers represented approximately 23% of net revenue, and no single provider accounted for more than 10% of net revenue.

We have entered into a number of specific-term agreements with airlines across the globe to secure all of the airlines’ public content. These content agreements allow our travel agencies to have access to the full range of our airline providers’ public content, including the ability to book the last available seat, as well as other functionalities. We have secured full-content or distribution parity agreements with approximately 160 airlines, including LCCs. Revenue attributable to these agreements comprised 82% of Air revenue in the year ended December 31, 2018. Certain full-content agreements expire, or may be terminated, during 2019.

We have over 120 airlines that we classify as LCCs participating in our Travel Commerce Platform around the world, including easyJet, IndiGo and Ryanair. Revenue from LCCs accounted for less than 5% of our total Air revenue in 2018.

Our top hotel providers for the year ended December 31, 2018 were Hilton, Intercontinental Hotels Group and Marriott Hotels.

Our top car rental company providers by brand for the year ended December 31, 2018 were Avis, Enterprise and Hertz. We provide electronic ticket distribution to over 20 international and national rail networks, including Amtrak (United States), Deutsche Bahn (Germany) and Eurostar Group (United Kingdom/France).

Travel Agencies

As of December 31, 2018, approximately 65,000 travel agency locations representing approximately 220,000 online and offline travel agency terminals worldwide use us for travel information, booking and ticketing capabilities, travel purchases, workflow automation and management tools for travel information and travel agency operations. Access to our Travel Commerce Platform enables travel agencies to electronically search travel related data such as schedules, availability, services and prices offered by travel providers and to book travel for end customers.

Our Travel Commerce Platform also facilitates travel agencies’ internal business processes such as quality control, operations and financial information management. Increasingly, this includes the integration of products and services from independent parties that complement our core product and service offerings, including a wide array of mid- and back-office service providers. We also provide technical support, training and other assistance to travel agencies, including numerous customized access options, productivity tools, automation, training and customer support focusing on process automation, back-office efficiency, aggregation of content at the desktop and online booking solutions. In addition, we provide business intelligence and data solutions to our travel agencies.

Our relationships with travel agencies typically are non-exclusive, meaning they subscribe to and have the ability to use more than one GDS but may require a substantial portion to be booked through our Travel Commerce Platform. We  

pay travel agencies a commission for segments booked on our Travel Commerce Platform and, in order to encourage greater use of our Travel Commerce Platform, we may pay an increased commission based on negotiated segment volume thresholds. Travel agencies or other customers in some cases pay a fee for access to our Travel Commerce Platform or to access specific services or travel content. Our travel agencies comprise online, offline, corporate and leisure travel agencies. For the year ended December 31, 2018, our top ten travel agencies represented approximately 19% of net revenue, and no single travel agency accounted for more than 10% of net revenue. Travel agency contracts representing approximately 23%, 10% and 67% of 2018 revenue are up for renewal in 2019, 2020 and beyond, respectively.

Competition

Travel Commerce Platform

The marketplace for travel distribution is large, multi-faceted and highly competitive. We compete with a number of travel distributors, including:

While many of the products and services offered by non-GDSs offer some of the functionality and integration provided by our Travel Commerce Platform, we believe none of them offer the full functionality and integration we offer, including serving the end consumer who desires to explore all booking options. Among industry participants with a traditional GDS, we believe our Travel Commerce Platform differentiates us from our competitors. We believe that competition in the industry is based on the following criteria:

GDS Transacted Air Segments: According to our view of the GDS air market, which is based on all air-related transactions processed on GDS platforms as reported by Marketing Information Data Tapes (“MIDT”), our share for the years ended December 31, 2018 and 2017 amounted to 21% and 22%, respectively.

Payment Solutions

While we believe eNett redefined payments from travel agencies to travel providers, there are currently multiple ways to settle travel payments from travel agencies to travel providers. Traditional methods of settling travel payments include:

In addition to the traditional methods to settle travel payments, eNett’s principal competitor is WEX Inc.

Technology Services

The technology services sector of the travel industry is highly fragmented by service offering, including hosting solutions, such as internal reservation system services, as well as flight operations technology services and software development services. For example, sector participants include Amadeus, HP Enterprise Services, Sabre, SITA and Google, as well as airlines that provide the services and support for their own internal reservation system services and also host external airlines.

Sales and Marketing

Our SMOs and national distribution companies who act as third-party operators (“Operators”) are organized by country or region and are typically divided between the new account teams, which seek to add new travel agencies to our Travel Commerce Platform, and account management teams, which service and expand existing business. Our SMOs are wholly-owned and represented approximately 65% of our Travel Commerce Platform revenue in 2018. We continue to utilize Operators in certain regions where our appointed distributor either provides specialized expertise in the technology or in the countries or local regions in which they operate for us. We also contract with new Operators in countries and regions where doing so would be more cost-effective than establishing an SMO. Our top ten Operators generated approximately 12% of our net revenue in 2018, and no Operator accounted for more than 10% of net revenue.

We have dedicated teams that cover sales, marketing, product and application development for travel partners and agency commerce. eNett and Travelport Digital work closely with the Travel Commerce Platform SMOs to realize cross-sale opportunities.

Technology

Achieving growth for our Travel Commerce Platform is predicated on our continued investment in developing advanced technologies and differentiated products to maintain our competitive position. We intend to continue our commitment to product innovation and technological excellence to maintain our product portfolio and preserve our early adopter advantage in several key growth areas, such as the sale of ancillaries, digital services, hospitality merchandising, advertising and Payment Solutions. We plan to continue offering rich travel content on an open platform with service-oriented architecture and an industry leading API, and are also focused on developing a diverse application set to consistently keep increasing the value of our Travel Commerce Platform to our customers. We are developing new insights into travel behaviors that will allow us to improve our products and data offerings to our customers. We have chosen not to focus our resources on more capital- and labor-intensive airline and hospitality related IT solutions. Instead, we focus on distribution products, digital services, technology services and B2B travel payment solutions. For example, we offer Travelport Aggregated Shopping through XML connectivity to airline content, which has enabled and encouraged leading LCCs such as easyJet, IndiGo and Ryanair to join our fully integrated Travel Commerce Platform, and have focused on

providing superior chain hotel content to OTAs relative to our competitors by directly connecting via XML to key hotel chains. Our ability to offer differentiated, high value products and services allows us to shift the focus of our dialogue with travel providers from price to value, leading to higher revenue per transaction.

Our operations for both Travel Solutions and Payment Solutions are supported from two data centers in the Atlanta, Georgia metropolitan area: a primary facility south and a second site north of Atlanta. The primary data center environment offers customers one of the industry’s most powerful, reliable and responsive travel distribution and hosting platforms and is supported by the secondary site, which provides backup data storage and additional processing resources. Continued modernization of both technical environments is an integral part of our aim to support growth by efficiently delivering distribution systems to our customers. We believe that our data centers are state-of-the-art facilities that have completed comprehensive technology upgrades to current network, processing and storage platforms. The facilities feature technology platforms that we believe lead the industry in terms of functionality, performance, reliability and security. The existing systems are certified compliant with the Payment Card Industry Data Security Standard (“PCI-DSS”), an information security standard for organizations that handle branded credit cards from the major credit card schemes, offering a secure environment for operations and have operated at a 99.991% core systems uptime. In 2018, our systems processed over 4 trillion messages and over 11 billion travel related system messages per day. Our data centers use approximately 19,000 physical and virtual servers and have total storage capacity of approximately 16 petabytes.

Intellectual Property

We regard our technology and other intellectual property as critical components and assets of our business. We protect our intellectual property rights through a combination of copyright, trademark and patent laws, and trade secret and confidentiality laws and procedures, as well as database rights, where applicable. We own and seek protection of key technology and business processes and rely on trade secret and copyright laws to protect proprietary software and processes. We also use confidentiality procedures and non-disclosure and other contractual provisions to protect our intellectual property assets. We rely on appropriate laws to protect the ownership of our data and databases.

Where appropriate, we seek statutory and common law protection of our material trade and service marks. The laws of some foreign jurisdictions, however, vary and offer less protection than other jurisdictions for our proprietary rights. Unauthorized use of our intellectual property could have a material adverse effect on us, and there is no assurance that our legal remedies would adequately compensate us for the damages caused by such unauthorized use.

We rely on technology that we license or obtain from third parties to operate our business. Vendors that support our core GDS technology include IBM, CA, Inc., SAS Group, Inc., Cisco Systems, Inc., EMC Corporation and Red Hat, Inc. In 2010, we obtained licenses to our Transaction Processing Facility operating system from IBM. Associated software, maintenance and support are available through December 31, 2019 under an agreement with IBM, and we expect such services will continue to be available to us after December 31, 2019. Additionally, in 2018 we entered into a new agreement for upgrading the IBM Mainframes and our Transaction Processing Facility.  The associated maintenance and support contract for the hardware is available for four years through June 30, 2022.

Employees

As of December 31, 2018, we had over 3,700 full-time employees. None of our employees in the United States are subject to collective bargaining agreements governing employment with us. In certain of the European countries in which we operate, we are subject to, and comply with, local law requirements in relation to the establishment of work councils. In addition, due to our presence across Europe and pursuant to an E.U. Directive, we have a Travelport European Works Council in which we address E.U. and enterprise-wide issues. We believe that our employee relations are good.

Seasonality

Our business experiences seasonal fluctuations, reflecting seasonal demand trends for the products and services we offer. These trends generally cause our revenue to be higher in the first and second quarters as compared to the third and fourth quarters of the calendar year. Revenue typically peaks during the first two quarters of the year as travelers plan and purchase their upcoming spring and summer travel.

Government Regulation

In the countries in which we operate, we are subject to or affected by international, federal, state and local laws, regulations and policies, including anti-bribery rules, trade sanctions, data privacy requirements, labor laws and anti-competition regulations, which are constantly subject to change. In addition, certain government trade sanctions affect our ability to operate in Cuba, Iran, Syria and Crimea. The descriptions of the laws, regulations and policies that follow are summaries and should be read in conjunction with the texts of the laws and regulations. The descriptions do not purport to describe all present and proposed laws, regulations and policies that affect our businesses.

We believe that we are in material compliance with these laws, regulations and policies. Although we cannot predict the effect of changes to the existing laws, regulations and policies or of the proposed laws, regulations and policies that are described below, we are not aware of proposed changes or proposed new laws, regulations and policies that will have a material adverse effect on our business.

Industry Regulations

Our business is subject to GDS industry-specific regulations, including, but not limited to, relevant regulations in the E.U., India and China. Additionally, eNett operates in the highly regulated financial services industry.

Historically, regulations were adopted in the E.U. to guarantee consumers access to competitive information by Computer Reservation Systems (“CRSs”) (then owned by individual airlines) and to provide travel agencies with unbiased displays and rankings of flights. Under the current E.U. CRS Regulations, GDSs and airlines are free to negotiate booking fees charged by GDSs and the information content provided by the airlines. The E.U. CRS Regulations include provisions to ensure a neutral and non-discriminatory presentation of travel options in the GDS displays and to prohibit the identification of travel agencies in MIDT data without their consent. The E.U. CRS Regulations also require GDSs to display rail or rail/air alternatives to air travel on the first screen of their principal displays in certain circumstances. In addition, to prevent parent carriers of GDSs from hindering competition from other GDSs, parent carriers will continue to be required to provide other GDSs with the same information on their transport services and to accept bookings from another GDS.

Although most GDS regulations in the United States (which only covered airline distribution) expired as of July 2004, the U.S. Department of Transportation, or DOT, continues to regulate GDSs with regard to certain practices that the DOT has identified as “unfair or deceptive” practices relating to airfare display.

In 2010, new Civil Aviation Requirements were issued by the Government of India to regulate CRSs operating in India for the purpose of displaying or selling air services, to promote fair competition in the airline sector and to ensure that consumers do not receive inaccurate or misleading information on airline services.

On October 1, 2012, the Interim Regulations on Administering the Permit of Direct Access to and Use of Foreign Computer Reservation System by Foreign Airlines’ Agents in China were published by the Civil Aviation Administration of China, or CAAC, and became effective on that date. The key element of the new regulations is the introduction of a permit scheme whereby foreign airlines are able to apply to CAAC for approval to allow Chinese-based travel agencies to access their nominated foreign CRS provider’s system for the purpose of making international bookings.

Because eNett operates an innovative payments solution, the regulatory environment for eNett products and services varies from country to country. In November 2013, eNett was granted a financial services license in Australia by the Australian Securities and Investments Commission. In January 2016, eNett was granted a money service operator services license in Hong Kong by the Customs and Excise Department of Hong Kong. The E.U. has enhanced its regulatory framework with the second Payment Services Directive and national implementing legislation, much of which has come into force in January 2018. In the E.U, eNett partners with its banking service provider and minority joint venture partner, Optal Financial Limited (“Optal”), and other regulated entities to limit its obligation to be regulated as a financial services provider with regard to its management of client funds. In jurisdictions where eNett’s operations are regulated, the regulations generally require licensing, insurance, systems and controls, client identification checks, and/or compliance

staffing. Any violation of these regulatory requirements could compromise licenses and lead to financial penalties, imposed changes to systems and controls, closer monitoring, and detailed regulatory reviews.

We are also subject to regulations affecting issues such as international trade.

Privacy and Data Protection Regulations

Privacy regulations continue to evolve and on occasion may be inconsistent from one jurisdiction to another. Most states in the United States have enacted laws that provide for penalties for failure to notify customers when security is breached, even by third parties.

Many countries have enacted or are considering legislation to regulate the protection of private information of consumers. In the United States, significant legislation is pending at the federal level. We cannot predict whether any of the proposed privacy legislation currently pending will be enacted and what effect, if any, it would have on our business.

In Europe, the E.U. Data Protection Directive 95/46/EC of the European Parliament and Council (October 24, 1995), or the E.U. Data Protection Directive, was repealed and replaced with the General Data Protection Regulation (“GDPR”) on May 25, 2018. The GDPR is intended to unify and elaborate upon the requirements for handling the personal data of E.U. data subjects and requires companies doing business in E.U. member states to comply with its standards. Similar to the E.U. Data Protection Directive, the GDPR provides for, among other things, specific regulations requiring all non-E.U. countries doing business with E.U. member states to provide adequate data privacy protection when processing personal data from any of the E.U. member states. The E.U. has enabled several means for U.S.-based companies to comply with the E.U. requirements, including a set of standard form contractual clauses for the transfer of personal data outside of Europe. We completed a multi-functional GDPR program to review, achieve and document compliance with GDPR’s operational requirements by the regulations’ effectiveness in May 2018.

We rely upon model contracts as one legal mechanism for the transfer of personal data to our U.S. data centers. These contracts originally were published by the European Commission with an adequacy finding and have been executed between our European affiliates and our U.S. data processing companies.

The CRS Regulations in force in Europe also incorporate personal data protection provisions that, among other things, classify GDSs as data controllers under the E.U. Data Protection Directive. The data protection provisions contained in the CRS Regulations are complementary to E.U. national and international data protection and privacy laws.

Many other countries have adopted data protection regimes. We monitor further legal developments and enforcement practices by data protection authorities.

Iran Sanctions Disclosure

As part of our global business in the travel industry, we provide certain passenger travel related Travel Commerce Platform and Technology Services to Iran Air. We also provide certain Technology Services to Iran Air Tours. All of these services are either exempt from applicable sanctions prohibitions pursuant to a statutory exemption permitting transactions ordinarily incident to travel or, to the extent not otherwise exempt, specifically licensed by the U.S. Office of Foreign Assets Control. Subject to any changes in the exempt/licensed status of such activities, we intend to continue these business activities, which are directly related to and promote the arrangement of travel for individuals.

The gross revenue and net profit attributable to these activities for the year ended December 31, 2018 were approximately $182,000 and $101,000, respectively, and $482,000 and $344,000 for the year ended December 31, 2017, respectively.

 

Company Information

Our principal executive office is located at Axis One, Axis Park, Langley, Berkshire SL3 8AG, United Kingdom, and our telephone number is +44-1753-288-000. We file electronically with the Securities and Exchange Commission (the “SEC”) required reports on Form 8-K, Form 10-Q and Form 10-K, proxy materials, ownership reports for insiders as required by Section 16 of the Securities Exchange Act of 1934, registration statements and other forms or reports as required. Certain of our officers and directors also file statements of changes in beneficial ownership on Form 4 with the SEC. The SEC maintains an internet site (http://www.sec.gov) that contains our reports, proxy and information statements, and other information that we file electronically with the SEC. We maintain a website (www.travelport.com), and copies of our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, Section 16 reports, proxy materials and any amendments to these reports filed or furnished with the SEC are available free of charge in the Investor Relations section of our website, as soon as reasonably practicable after filing with the SEC. Copies of our Board committee charters, Codes of Conduct and Ethics, Corporate Governance Guidelines and other corporate governance information are also available on our website. If we decide to amend any of our Board committee charters, Codes of Conduct and Ethics or other corporate governance document, copies of such amendments will be made available to the public through our website. Investors and others should note that we announce material financial information to our investors using our investor relations website (http://ir.travelport.com), SEC filings, press releases, public conference calls and webcasts. We use these channels, as well as social media, to communicate with our shareholders and the public about our company, our services and products and other issues. It is possible that the information we post on social media could be deemed to be material information. Therefore, we encourage investors, the media, and others interested in our company to review the information we post on these various channels. The information contained on our website or social media is not included in, or incorporated by reference into, this Annual Report on Form 10-K.

ITEM 1A. RISK FACTORS

The following is a cautionary discussion of the most significant risks, uncertainties and assumptions that we believe are significant to our business and should be considered carefully in conjunction with all of the other information set forth in this Annual Report on Form 10‑K. If any of the risks described below actually occur, our business, financial condition and results of operations could be materially adversely affected. Based on the information currently known to us, we believe that the following information identifies the most significant risk factors affecting us in each of these categories of risk. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business, financial condition and results of operations. Achievement of future results is subject to risks, uncertainties and potentially inaccurate assumptions. Past financial performance may not be a reliable indicator of future performance and historical trends should not be used to anticipate results or trends in future periods.

Risks Relating to Our Business

Market and Industry Risks

Our revenue is derived from the global travel industry and a prolonged or substantial decrease in global travel volume, particularly air travel, as well as other industry trends, could adversely affect us.

Our revenue is derived from the global travel industry. As a result, our revenue is directly related to the overall level of travel activity, particularly air travel volume, and is therefore significantly impacted by declines in, or disruptions to, travel in any region due to factors entirely outside of our control. Such factors include:

If there were to be a prolonged substantial decrease in travel volume, particularly air travel volume, for these or any other reason, it would have an adverse impact on our business, financial condition and results of operations.

The travel industry is highly competitive, and we are subject to risks relating to competition that may adversely affect our performance.

Our business operates in highly competitive industries. If we cannot compete effectively, we may lose share to our competitors, which may adversely affect our financial performance. Our continued success depends, to a large extent, upon our ability to compete effectively in industries that contain numerous competitors, some of which may have significantly greater financial, marketing, personnel and other resources than us.

Our Travel Commerce Platform has two different primary categories of customers, namely travel providers, which provide travel content, and travel agencies, which shop for and book that content on behalf of end customers. The inter-dependence of effectively serving these customer groups, and the resulting network effects, may impact our ability to attract customers. If we are unable to attract a sufficient number of travel providers to provide comprehensive travel content, our ability to service travel agencies will be adversely impacted. Conversely, if we are unable to attract or retain a sufficient number of travel agencies, our ability to maintain our large base of travel providers and attract new travel providers will be impaired.

In addition to supplying sufficient content, the ability of our Travel Commerce Platform to attract travel agencies is dependent on the development of new products to enhance our Travel Commerce Platform and on the provision of adequate commissions to travel agencies. Competition to attract travel agencies is particularly intense as travel agencies, particularly larger ones, have the ability to access content from a variety of sources, including subscribing to more than one GDS at any given time. We also have had to, and expect that it will continue in certain circumstances to be necessary to, increase commissions to travel agencies in connection with renewals of their contracts, which may in the future reduce margins. If travel agencies are dissatisfied with our Travel Commerce Platform or we do not pay adequate commissions or provide other incentives to travel agencies to remain competitive, our Travel Commerce Platform may lose a number of travel agencies.

Our Travel Commerce Platform competes against traditional GDSs operated by Amadeus and Sabre, as well as against local distribution systems and alternative distribution technologies. Our Travel Commerce Platform also competes against direct distribution of travel content by travel providers, such as airlines, hotels and car rental companies, many of which distribute all or part of their inventory directly through their own travel distribution websites. In addition, our Travel Commerce Platform competes against travel providers that supply content directly to travel agencies as well as new companies in the industry that are developing distribution systems without the large technology investment and network costs of a traditional GDS. The revolutionary emergence of mobile applications that link directly to providers may create a vigorous source of new competition that bypasses GDSs.

Increased competition may result in reduced operating margins, as well as loss of share and brand recognition. We may not be able to compete successfully against current and future competitors, and competitive pressures we face could have a material adverse effect on our business, financial condition or results of operations.

In addition, our customers may not be able to compete successfully against current and future competitors such as search engines and meta-search products, and competitive pressures could result in, among other things, reduced operating margins, loss of share and brand recognition. Such potential negative impacts on our customers could adversely affect our business, financial condition or results of operations.

If we fail to develop and deliver new innovative products or enhance our existing products and services in a timely and cost-effective manner in response to rapid technological change and customer demands, our business will suffer.

Our industry is subject to constant and rapid technological change and product obsolescence as customers and competitors create new and innovative products and technologies. Products or technologies developed by our competitors may render our products or technologies obsolete or noncompetitive. We must develop innovative products and services and enhance our existing products and services to meet rapidly evolving demands to attract travel agencies. The development process to design leading, sustainable and desirable products to generate new revenue streams and profits requires us to accurately anticipate technological changes and business trends. Developing and enhancing these products is uncertain and can be time-consuming, costly and complex. For example, we may not be successful in developing products or integrating and distributing multi-source content obtained through traditional sources and new distribution capabilities promoted by our largest airline customers. If we do not continue to develop innovative products that are in demand by our customers, we may be unable to maintain existing customers or attract new customers. Customer and business requirements can change during the development process. There is a risk that these developments and enhancements will be late, fail to meet customer or business specifications, not be competitive with products or services from our competitors that offer comparable or superior performance and functionality or fail to generate new revenue streams and profits. Our business will suffer if we fail to develop and introduce new innovative products and services or product and service enhancements on a timely and cost-effective basis.

Trends in pricing and other terms of agreements among airlines and travel agencies have become less favorable to us, and a further deterioration or a failure to renew these agreements may occur in the future, which could reduce our revenue and margins.

A significant portion of our revenue is derived from fees paid by airlines for bookings made through our Travel Commerce Platform. Airlines have sought to reduce or eliminate these fees in an effort to reduce distribution costs. One manner in which they have done so is to develop their own offerings tailored to our travel agencies, often using new distribution capabilities promoted by IATA, in an attempt to drive business to their direct channels. This tactic has been accompanied by surcharges that certain suppliers have imposed on GDS channel bookings. We have negotiated new agreements containing revised business models and price points with surcharging carriers while procuring the content available from these carriers, resulting in increased airline booking fees for surcharged bookings. Another manner is to differentiate the content, in this case, the fares and inventory, that they provide to us and to our competitors from the content that they distribute directly themselves, whether through their website, direct connections with travel agencies or other mechanism to bypass us and our competitors. In these cases, airlines may provide some of their content to us and our competitors, while withholding other content, such as lower cost fares, for distribution via other channels unless we agree to significant discounts. Certain airlines have withdrawn, and other airlines have threatened to withdraw, content, in whole or in part, from us or our competitors as a means of obtaining lower booking fees or, alternatively, have charged, or threatened to charge, to access their lower cost fares or charge travel agencies or consumers for bookings generated in our Travel Commerce Platform. There also has been an increase in the number of airlines that seek to sell optional ancillary services, such as fees for checked baggage or premium seats, only through their direct distribution channels, which threaten to further fragment content and disadvantage us and our competitors by making it more difficult to deliver a platform that allows travel agencies to shop for a single, “all-inclusive” price for travel. Increased use by airlines of new distribution capabilities to direct travel agencies to their own websites or direct connections with travel agencies and/or the imposition of surcharges by airlines could reduce the content available on, and transactions booked in, our Travel Commerce Platform.

We have entered into content agreements with most major carriers in the Americas and Europe, and a growing number of carriers in the Middle East and Africa, which provides us with access to the near-complete scope of public fares and inventory which the carriers generally make available through direct channels, such as their own websites, with a contract duration usually ranging from three to ten years. In addition, we have entered into agreements with most major carriers in Asia Pacific, which provide us with access to varying levels of their content. We may not be able to renew these agreements on a commercially reasonable basis or at all. If we are unable to renew these agreements, our financial results will be adversely impacted and we may be disadvantaged compared to our competitors. The content agreements have required us to make price concessions to the participating airlines. If we are required to make additional concessions to renew or extend the agreements, it could have a material adverse effect on our business, financial condition or results of operations.

Moreover, as existing content agreements come up for renewal, there is no guarantee that the participating airlines will continue to provide their content to us to the same extent or on the same terms as they do now. For example, our content agreements with airlines representing approximately 20% of Travel Commerce Platform revenue for the year ended December 31, 2018 are up for renewal or are potentially terminable by such airlines in 2019. In addition, certain content agreements may be terminated earlier pursuant to the specific terms of each agreement. A substantial reduction in the amount of content received from the participating airlines or changes in pricing options will also negatively affect our competitive positioning, revenue and financial condition. Although we continue to have participation agreements with these airline providers, in which they have agreed to participate in our Travel Commerce Platform, a material adverse impact on our business may occur if these agreements are terminated and we are unable to reach agreement with such carriers regarding new content agreements or alternative distribution arrangements employing new technologies. There is a risk that travel providers may seek to disrupt the traditional distribution model and try to obtain significant price concessions.

In addition, we have implemented, in some countries, an alternative business and financial model, generally referred to as the “opt-in” model, for travel agencies. Under the “opt-in” model, travel agencies are offered the opportunity to pay a fee to us or to agree to a reduction in the financial incentives to be paid to them in order to be assured of having access to all the content provided to us by the participating airlines or to avoid an airline-imposed surcharge on bookings made through our Travel Commerce Platform. There is pressure on us to provide highly competitive terms for such “opt-in” models as many travel agencies have the ability to access content from a variety of sources, including our competitors. The “opt-in” model has been introduced in a number of situations in parallel with content agreements between us and certain airlines to recoup certain fees from travel agencies and to offset some of the discounts provided to airlines in return for guaranteed access to content. The rate of adoption by travel agencies, where “opt-in” has been implemented, has been very high. If airlines require further discounts in connection with guaranteeing access to full content and in response thereto, and the “opt-in” model becomes widely adopted, we could receive lower fees from the airlines. These lower fees are likely to be only partially offset by new fees paid by travel agencies and/or reduced incentives or loyalty payments to travel agencies, which would adversely affect our results of operations. In addition, if travel agencies choose not to opt in, such travel agencies would not receive access to all the content available through us without making further payment, which could have an adverse effect on the number of segments booked through our Travel Commerce Platform. Larger online and multinational travel agencies have negotiated their own content and financial arrangements with some carriers. These agreements, to which we are not a party, have been structured such that the fees we are able to obtain from airlines are reduced.

The level of fees and commissions we pay to travel agencies is subject to continuous competitive pressure as we renew our agreements with them. If we are required to pay higher rates of commissions, it will adversely affect our margins.

We depend on our relationships with travel providers, and adverse changes in these relationships or our inability to enter into new relationships could negatively affect our access to travel offerings and reduce our revenue.

We rely significantly on our relationships with airlines, hotels, car rental companies and other travel providers to enable us to offer our travel agencies comprehensive access to travel services and products. A majority of our agreements remain in effect each year, with exceptions usually linked to mergers or insolvencies. Adverse changes in any of our relationships with travel providers or the inability to enter into new relationships with travel providers could reduce the volume or variety of content that we are able to offer through our Travel Commerce Platform and could negatively impact our results of operations and the availability and competitiveness of travel products we offer. Our arrangements with travel providers may not remain in effect on current or similar terms, and the net impact of future pricing options may adversely impact revenue. Our top ten providers by net revenue, combined, accounted for approximately 23% of our net revenue for the year ended December 31, 2018, and no single provider accounted for more than 10% of net revenue. In 2018, we had 50 planned airline contract renewals, and we successfully renewed substantially all such contracts. We currently have 73 and 81 planned airline contract renewals in 2019 and 2020, respectively, including contracts which roll on an annual basis.

Travel providers are increasingly focused on driving online demand to their own websites and may cease to supply us with the same level of access to travel inventory in the future. In addition, some LCCs historically have not distributed content through us or other third-party intermediaries. If the airline industry continues to shift from a full-service carrier

model to a low-cost one, this trend may result in more carriers moving ticket distribution systems in-house and a decrease in the demand for our products.

We are in continuous dialogue with our major hotel providers about the nature and extent of their participation in our Travel Commerce Platform. If hotel occupancy rates improve to the point that our hotel providers no longer place the same value on our Travel Commerce Platform, such providers may reduce the amount of inventory they make available through our Travel Commerce Platform or the amount we are able to earn in connection with hotel transactions. A significant reduction on the part of any of our major hotel providers of their participation in our Travel Commerce Platform for a sustained period or a provider’s complete withdrawal could have a material adverse effect on our business, financial condition or results of operations. In addition, if we are not successful in maintaining the number of hotels participating in our system, the growth of our business may be restrained.

We are subject to a certain degree of revenue concentration among a portion of our travel agency base.

Our top ten travel agencies accounted for approximately 19% of our net revenue for the year ended December 31, 2018, and no single travel agency accounted for more than 10% of net revenue. Travel agency contracts representing approximately 23%, 10% and 67% of 2018 revenue are up for renewal in 2019, 2020 and beyond, respectively. Our arrangements with our travel agencies may not remain in effect on current or similar terms.

In the event any substantial travel agency terminates its relationship with us, moves a portion of its business into direct channels so that bookings are made through airlines’ channels or such travel agency’s business is materially impacted for any reason, such as a travel provider withholding content from a travel agency, and, as a result, such travel agency loses, moves or fails to generate, a substantial amount of bookings that would otherwise be processed through our Travel Commerce Platform, our business and results of operations would be adversely affected.

Our ability to retain travel provider and travel agent relationships can adversely impact our business.

We believe our customer mix is broadly diversified, supporting our stable and recurring business model with high revenue visibility. We provide air distribution services to approximately 480 airlines globally, including over 120 LCCs. In addition, we serve numerous Beyond Air travel providers, including approximately 650,000 hotel properties (of which over 500,000 are independent hotel properties), over 40,000 car rental locations, approximately 40 cruise-line and tour operators and over 20 rail networks worldwide. We aggregate travel content across approximately 65,000 travel agency locations representing approximately 220,000 online and offline travel agency terminals worldwide, which in turn serves millions of end customers globally. None of our travel buyers or travel providers accounted for more than 10% of our net revenue for the year ended December 31, 2018.

In general, our business is characterized by multi-year travel provider and travel agency contracts, with a portion of our contracts up for renewal each year. Our ability to obtain inventory from travel providers, such as airlines, hotels, car rental companies, cruise-lines and other travel providers, and our ability to maintain existing relationships with travel agencies and enter into new relationships on acceptable financial and other terms impact our financial results. Our relationships with travel agencies typically are non-exclusive, meaning the travel agencies subscribe to, and have the ability to use, more than one GDS. As a result, travel agency strategies, including consolidation or changes in allocation of travel agency bookings among the GDSs, have impacted, and will continue to impact, our revenue and travel distribution costs. In addition, a travel agency's business may be materially impacted for any reason and generate less than the anticipated volume of bookings, which, in turn, will affect our results of operations. For the year ended December 31, 2018, our results of operations were adversely impacted by the loss of a large Pacific-based travel agency, the termination of our agreement with a European OTA due to its contract breach that resulted in a $10 million impairment of our customer loyalty payments and other specific travel agency headwinds. Our results of operations in future periods will be adversely impacted in the event of the termination, non-renewal or reduction in volume of bookings from customers or travel agencies should we be unable to offset any such losses with new business and/or volume increases in bookings from existing customers and travel agencies.

Travel providers are seeking alternative distribution models, including those involving direct access to travelers, which may adversely affect our results of operations.

Travel providers are seeking to decrease their reliance on third-party distributors, including us and our GDS competitors, for distribution of their content. For example, some travel providers have created or expanded efforts to establish commercial relationships with online and traditional travel agencies to book travel with those providers directly, rather than through an intermediary. Many airlines, hotels, car rental companies and cruise operators have also established or improved their own websites and mobile offerings, and may offer incentives such as bonus miles or loyalty points, lower or no transaction or processing fees, priority waitlist clearance or e-ticketing for sales through these channels. In addition, metasearch travel websites facilitate access to websites by aggregating the content of those websites. Due to the combined impact of direct bookings with travel provider websites and other non-GDS distribution channels, the percentage of bookings made without the use of us or our GDS competitors at any stage in the chain between providers and end-customers may continue to increase. In addition, efforts by travel providers to encourage our travel agencies to book directly rather than through our Travel Commerce Platform could adversely affect our results of operations. A recent trend in certain regions outside of the U.S. has seen some travel providers elect not to renew their content agreements and move towards a GDS surcharging model to cover all or some of their distribution costs. This, together with wider adoption and implementation of the IATA NDC standard for API connectivity, means that some travel providers are actively promoting to, and engaging with, travel agencies to adopt a direct connection with the quid pro quo of unsurcharged content.

Furthermore, recent trends towards disintermediation in the global travel industry could adversely affect our Travel Commerce Platform. For example, airlines have made some of their offerings unavailable to unrelated distributors or made them available only in exchange for lower distribution fees. Some LCCs continue to distribute exclusively through direct channels, bypassing us and other third-party distributors completely and, as a whole, have increased their share of bookings in recent years, particularly in short-haul travel. In addition, several travel providers have formed joint ventures or alliances that offer multi-provider travel distribution websites. Finally, some airlines are exploring alternative global distribution methods developed by new entrants to the global distribution marketplace. Such new entrants propose technology that is purported to be efficient, which they claim enables the distribution of airline tickets in a manner that is more cost-effective to the airline provider because no or lower incentive or loyalty payments are paid to travel agencies. If these trends lead to lower participation by airlines and other travel providers in our Travel Commerce Platform, then our business, financial condition or results of operations could be materially adversely affected.

We rely on third-party Operators to market our Travel Commerce Platform services in certain regions, which exposes us to risks associated with the lack of direct management control.

We utilize third-party, independently owned and managed distributors, or Operators, to market our products and distribute and provide services in certain countries, including India, Indonesia, Kuwait, Lebanon, Pakistan, Syria, Turkey, Kazakhstan and Yemen, as well as many countries in Africa and Asia. We rely on our Operators and the manner in which they operate their business to develop and promote our global business. Our top ten Operators generated approximately 12% of net revenue in 2018, and no single Operator accounted for more than 10% of net revenue. We pay each of our Operators a commission relative to the number of segments booked by travel agencies with which the Operators has a relationship. The Operators are independent of us, are not our employees and we do not exercise management control over their day-to-day operations. We provide training and support to the Operators, but the success of their marketing efforts and the quality of the services they provide is beyond our control. If they do not meet our standards for distribution, our image and reputation may suffer materially, and sales in those regions could decline significantly. In addition, any interruption in these third-party services or deterioration in their performance could have a material adverse effect on our business, financial condition or results of operations.

Consolidation in the travel industry may result in lost bookings and reduced revenue.

Consolidation among travel providers, including airline mergers and alliances, may increase competition from distribution channels related to those travel providers and place more negotiating leverage in the hands of those travel providers to attempt to lower booking fees further and to lower commissions. Examples include the merger of United Airlines and Continental Airlines, the merger of American Airlines and US Airways, the acquisition of AirTran Airways by Southwest Airlines, the merger of British Airways and Iberia and subsequent acquisitions of Aer Lingus and Vueling

and the acquisition of Virgin America by Alaska Air Group. In addition, cooperation has increased within the Oneworld, SkyTeam and Star Alliances. Changes in ownership of travel providers may also cause them to direct less business towards us. If we are unable to compete effectively, competitors could divert travel providers away from our travel distribution channels, which could adversely affect our results of operations. Mergers and acquisitions of airlines may also result in a reduction in total flights and overall passenger capacity and higher fares, which may adversely affect the ability of our business to generate revenue.

Consolidation among travel agencies and competition for travel agencies may also adversely affect our results of operations, since we compete to attract and retain travel agencies. For example, in 2018, American Express Global Business Travel acquired Hogg Robinson Group. Reductions in commissions paid by some travel providers, such as airlines, to travel agencies contribute to travel agencies having a greater dependency on traveler-paid service fees and incentive or loyalty payments paid by us and our competitors and may contribute to travel agencies consolidating. Consolidation of travel agencies increases competition for these travel agencies and increases the ability of those travel agencies to negotiate higher incentives or loyalty payments from us. Changes in ownership of travel agencies may also cause them to direct less business towards our Travel Commerce Platform. In addition, a decision by airlines to surcharge the channel represented by travel agencies, for example, by surcharging fares booked through travel agencies or passing on charges to travel agencies, could have an adverse impact on our business, particularly in regions in which our Travel Commerce Platform is a significant source of bookings for an airline choosing to impose such surcharges. To compete effectively, we may need to increase incentives or loyalty payments, pre-pay incentives, discount or waive product or service fees or increase spending on marketing or product development.

Our business is exposed to customer credit risk and fraudulent booking activity, against which we may not be able to protect ourselves fully.

Our business is subject to the risks of non-payment and non-performance by travel providers, which may fail to make payments according to the terms of their agreements with us. For example, a small number of airlines that do not settle payment through IATA billing and settlement provider have, from time to time, not made timely payments for bookings made through our Travel Commerce Platform. We manage our exposure to credit risk through credit analysis and monitoring procedures, and sometimes use credit agreements, prepayments, security deposits and bank guarantees. However, these procedures and policies cannot fully eliminate customer credit risk, and to the extent our policies and procedures prove to be inadequate, our business, financial condition or results of operations may be adversely affected.

In addition, we are exposed to risk and potential liability from travel agency fraudulent booking activity resulting from travel agencies’ use of our Travel Commerce Platform for fraudulent purposes. We contractually disclaim all liability for any such loss, but periodically incur claims from travel providers who allege that we should have more responsibility for any third-party fraud.

Some of our travel agencies, Operators and travel providers may be highly leveraged, not well capitalized and subject to their own operating, legal and regulatory risks and, even if our credit review and analysis mechanisms work properly, we may experience financial losses in our dealings with such parties. A lack of liquidity in the capital markets or the continued weak performance in the economy may cause our customers to increase the time they take to pay or to default on their payment obligations, which could negatively affect our results. In addition, continued weakness in the economy could cause some of our customers to become illiquid, delay payments, or could adversely affect collection on their accounts, which could result in a higher level of bad debt expense.

Economic conditions in the global travel industry could impact our business and results of operations.

As a participant in the global travel industry, our business and operating results are impacted by global economic conditions, including a general reduction in net disposable income as a result of fiscal measures adopted by countries to address high levels of budgetary indebtedness, which may adversely affect our business, results of operations and financial condition. In our industry, the past financial crisis and global recession resulted in higher unemployment, a decline in consumer confidence, large-scale business failures and tightened credit markets. As a result, the global travel industry, which historically has grown at a rate in excess of global GDP growth during economic expansions, has experienced cyclical downturns in the past. Future adverse economic developments in areas such as employment levels, business

conditions, interest rates, tax rates, fuel and energy costs and other matters could reduce discretionary spending and cause the travel industry to contract. In addition, if there are adverse global economic conditions, consumer spending on leisure travel and business spending on business travel may decrease, which could adversely affect our business, financial condition or results of operations.

Operational Risks

We rely on information technology to operate our business and maintain our competitiveness, and any failure to adapt to technological developments or industry trends could harm our business.

We depend upon the use of sophisticated information technologies and systems, including technologies and systems utilized for reservation systems, communications, procurement and administrative systems. As our operations grow in both size and scope, we continuously need to improve and upgrade our systems and infrastructure to offer an increasing number of customers and travel providers enhanced products, services, features and functionality, while maintaining the reliability and integrity of our systems and infrastructure. Our future success also depends on our ability to adapt to rapidly changing technologies in our industry, particularly the increasing use of internet-based products and services, to change our services and infrastructure so they address evolving industry standards, including PCI-DSS, and to improve the performance, features and reliability of our services in response to competitive service and product offerings and the evolving demands of the marketplace. In recent years, we introduced a number of products and services, such as Travelport Smartpoint and the Travelport Merchandising Suite, including Travelport Rich Content and Branding, and are developing products and services reliant on state-of-the-art cloud computing capabilities. If there are technological impediments to introducing or maintaining these or other products and services, or if these products and services do not meet the requirements of our customers or applicable industry standards, our business, financial condition or results of operations may be adversely affected.

In addition, cloud computing, the continued growth of alternative platforms and mobile computing devices, the emergence of niche competitors who may be able to optimize products, services or strategies that use cloud computing, as well as other technological changes and developing technologies, such as machine learning and artificial intelligence, have, and will continue to require, new and costly investments. We have acquired expertise in and are deploying machine learning, artificial intelligence and other leading-edge technology to support our customers. However, transitioning to these new technologies may be disruptive to resources and the services we provide, and may increase our reliance on third party service providers. We may not be successful, or may be less successful than our current or new competitors, in developing technology that operates effectively across multiple devices and platforms and that is appealing to our customers, either of which would negatively impact our business and financial performance.

It is possible that, if we are not able to maintain existing systems, obtain new technologies and systems, or replace or introduce new technologies and systems as quickly as our competitors or in a cost-effective manner, our business and operations could be materially adversely affected. Also, we may not achieve the benefits anticipated or required from any new technology or system, or be able to devote financial resources to new technologies and systems in the future.

We rely primarily on a single data center location to conduct our business.

Our business, which utilizes a significant amount of our information technology, and the financial business systems rely on computer infrastructure primarily housed in our data center near Atlanta, Georgia, U.S. to conduct its business. In the event the operations of this data center suffer any significant interruptions or the data center becomes significantly inoperable, such event would have a material adverse effect on our business and reputation and could result in a loss of customers. Although we have taken steps to strengthen physical and information security, add redundancy to this facility and provide services from other facilities, including a second data center that provides backup data storage and additional processing resources, the primary data center could be exposed to damage or interruption from fire, natural disaster, power loss, war, acts of terrorism, plane crashes, telecommunications failure, computer malfunctions, unauthorized entry, IT hacking and computer viruses. The steps we have taken and continue to take to prevent system failure and unauthorized transaction activity may not be successful. Our use of backup and disaster recovery systems may not allow us to recover from a system failure fully, or on a timely basis, and our property and business insurance may not be adequate to compensate us for all losses that may occur.

eNett depends on critical service providers and may face pricing pressure and changes in its business model, be subject to regulatory requirements and experience conflicts.

eNett, our Payment Solutions business, is exposed to operational, regulatory and governance risks. eNett is enabled to provide its virtual card solution pursuant to virtual card issuers licensed by Mastercard and, in particular, has a material relationship with Optal, a European-based issuer licensed by Mastercard. An extended service failure by Optal, eNett’s primary issuer, or Mastercard would greatly harm eNett’s current business and growth opportunities. In addition, changes in the business and competitive dynamics in the payments industry, including the ability of travel agencies to negotiate higher rebates and changes in interchange fees over time may impair eNett’s business model and its ability to offer competitive rebates to its customers, which could result in the potential loss of customers and affect eNett’s profitability. In addition, while eNett’s business model currently is not predicated on providing credit to its customers, in order to retain and attract customers, eNett may need to adapt its business model to provide credit to its customers in the future.

Due to its innovative solutions, the regulatory environment for eNett may be modified or adopted in ways that may impact how eNett’s solutions are provided, including an increase in costs to eNett to provide such solutions. Financial services regulators in any of the jurisdictions of the eNett customer base may construe potentially applicable requirements in a manner that results in eNett loss of business, slower growth, financial penalties and operational burdens. In addition, Optal, as the minority shareholder of eNett, may have economic or business interests or goals that are inconsistent with ours, take actions contrary to our objectives, undergo a change of control or be unable or unwilling to fulfill its obligations in support of eNett, which may affect eNett’s and our financial condition or results of operations.

System interruptions, defects and slowdowns may cause us to lose customers or business opportunities or to incur liabilities.

If we are unable to maintain and improve our IT systems and infrastructure, this might result in system interruptions, defects and slowdowns. In the event of system interruptions and/or slow delivery times, prolonged or frequent service outages or insufficient capacity which impedes us from efficiently providing services to our customers, we may lose customers and revenue or incur liabilities. We rely on our employees and internal systems to enable transactions to be processed on our platforms. In addition, our information technologies and systems are vulnerable to damage, interruption or fraudulent activity from various causes, including:

We may have inadequate insurance coverage or insurance limits to compensate for losses from a major interruption, and remediation may be costly and have a material adverse effect on our operating results and financial condition. Any extended interruption or degradation in our technologies or systems, or any substantial loss of data, could significantly curtail our ability to conduct our business and generate revenue. We could incur financial liability from fraudulent activity perpetrated on our systems.

Cybersecurity attacks or security breaches could adversely affect our ability to operate, could result in sensitive personal information being misappropriated and may cause us to be held liable or possibly have a material adverse effect on our reputation and business.

The secure transmission of confidential information over the internet is essential in maintaining travel provider and travel agency confidence in our services. Substantial or ongoing data security breaches or cyber attacks, whether instigated internally or externally on our system or other internet-based systems, could significantly harm our business. Our travel providers currently require end customers to pay for their transactions with their credit card online. We rely on licensed encryption and authentication technology to effect secure transmission of confidential end customer information, including credit card numbers. It is possible that advances in computer capabilities, new discoveries or other developments could result in a cyber-attack or a compromise or breach of the technology that we use to protect customer transaction data.

We incur substantial expense to protect against cyber attacks or security breaches and their consequences. However, our security measures may not prevent cyber attacks or data security breaches. We may be unsuccessful in implementing remediation plans to address potential exposures. A party (whether internal, external, an affiliate or unrelated third party) that is able to circumvent our data security systems or indulge in cyber attacks could also obtain proprietary information or cause significant interruptions in our operations. Cyber attacks or security breaches could also damage our reputation and expose us to a risk of loss or litigation and possible liability. Cyber attacks or security breaches could also cause our current and potential travel providers and travel agencies to lose confidence in our data security, which would have a negative effect on the demand for our products and services.

We have been the target of data and cyber security attacks and may experience attacks in the future. Although we have managed to substantially counter these attacks and minimize our exposure, there can be no assurances that we will be able to successfully counter and limit any such attacks in the future.

We provide IT services to travel providers, primarily airlines, and any adverse changes in these relationships could adversely affect our business.

We provide hosting solutions and IT subscription services to airlines and the technology companies that support them. We host the reservations systems for Delta Air Lines, and provide IT subscription services for critical applications in fares, pricing and e-ticketing, directly and indirectly, for approximately 190 airlines and airline ground handlers. Adverse changes in our relationships with our IT and hosting customers or our inability to enter into new relationships with other customers could affect our business, financial condition and results of operations. Our arrangements with our customers may not remain in effect on current or similar terms and this may negatively affect our business, financial condition or results of operations. In addition, if any of our key customers enters bankruptcy, liquidates or does not emerge from bankruptcy, our business, financial condition or results of operations may be adversely affected.

We are dependent upon software, equipment and services provided by third parties.

We are dependent upon software, equipment and services provided and/or managed by third parties in the operation of our business. In the event that the performance of such software, equipment or services provided and/or managed by third parties deteriorates or our arrangements with any of these third parties related to the provision and/or management of software, equipment or services are terminated, we may not be able to find alternative services, equipment or software on a timely basis or on commercially reasonable terms, or at all, or be able to do so without significant cost or disruptions to our business, and our relationships with our customers may be adversely impacted. We have experienced occasional system outages arising from services that were provided by one of our key third-party providers. Our failure to secure agreements with such third parties, or the failure of such third parties to perform under such agreements, may have a material adverse effect on our business, financial condition or results of operations.

We are subject to additional risks as a result of having global operations.

We have a presence in approximately 180 countries and territories. As a result of having global operations, we are subject to numerous risks. At any given time, one or more of the following principal risks may apply to any or all of the countries in which our services are provided:

In addition, we have significant operations in Europe that may be adversely affected by the economic and political conditions in the eurozone, which could have an adverse impact on our business.

Our ability to identify, hire and retain senior management and other qualified personnel is critical to our results of operations and future growth.

We depend significantly on the continued services and performance of our senior management, particularly our professionals with experience in the travel industry. Any of these individuals may choose to terminate their employment with us at any time. If unexpected leadership turnover occurs without adequate succession plans, the loss of the services of any of these individuals, or any negative perceptions of our business as a result of those losses, could damage our brand image and our business. The specialized skills we require are difficult and time-consuming to acquire and, as a result, such skills are and are expected to remain in limited supply. It requires a long time to hire and train replacement personnel. An inability to hire, train and retain a sufficient number of qualified employees or ensure effective succession plans for critical positions could materially hinder our business by, for example, delaying our ability to bring new products and services to market or impairing the success of our operations. Even if we are able to maintain our employee base, the resources needed to attract and retain such employees may adversely affect our business, financial condition or results of operations.

We may not effectively integrate or realize anticipated benefits from future acquisitions.

In the future, we may acquire, enter into joint ventures or make investments, including investments in Operators, based on assumptions with respect to operations, profitability and other matters that could subsequently prove to be incorrect. Furthermore, we may fail to successfully integrate any acquired businesses or joint ventures into our operations.

If future acquisitions, significant investments or joint ventures do not perform in accordance with our expectations or are not effectively integrated, our business, operations or financial performance could be adversely affected.

Financial and Taxation Risks

We have a substantial level of indebtedness that may have an adverse impact on us.

As of December 31, 2018, our total principal amount of indebtedness, excluding capital leases and other indebtedness, was $1,385 million under our senior secured credit agreement dated as of March 16, 2018 (“2018 Credit Agreement”) and $745 million of senior secured notes. If our term loans due in March 2025 or our senior secured notes due in March 2026 or any revolving credit borrowings due in September 2022 are not repaid or refinanced prior to their maturity dates, we may not have the funds necessary, or otherwise be able, to repay the debt when it becomes due.

As of December 31, 2018, we had $146 million available for borrowing under our revolving credit facility, net of letters of credit that have been issued under the revolving credit facility and that are outstanding on such date. In addition, we may incur obligations that do not constitute indebtedness such as entering into operating lease arrangements and commitments to purchase goods and services from specific suppliers related to information technology as disclosed further in the footnotes to our consolidated financial statements included elsewhere in this document. To the extent we incur any of such obligations, the risks associated with our substantial level of indebtedness would increase, which could further limit our financial and operational flexibility.

Our substantial level of indebtedness and obligations could have important consequences for us, including the following:

The above factors could limit our financial and operational flexibility, and as a result could have a material adverse effect on our business, financial condition and results of operations. In addition, please see “Business – Recent Developments” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financing Arrangements” for additional information on the potential impact of the Merger on our outstanding indebtedness.

Our 2018 Credit Agreement and Indenture governing our senior secured notes contain restrictions that may limit our flexibility in operating our business.

Our 2018 Credit Agreement and Indenture governing senior secured notes contain various covenants that limit our ability to engage in specified types of transactions. These covenants limit our ability to, among other things:

In addition, under certain circumstances, under the 2018 Credit Agreement, we are required to satisfy a first lien net leverage ratio. A breach of any of these covenants could result in a default under the 2018 Credit Agreement and Indenture. Upon the occurrence of such an event of default, the lenders could elect to declare all amounts outstanding under our 2018 Credit Agreement and/or our senior secured notes to be immediately due and payable and terminate all commitments to extend further credit under the 2018 Credit Agreement. If we are unable to repay those amounts, the lenders under the 2018 Credit Agreement and Indenture could take action or exercise remedies, including proceedings against the collateral granted to them to secure that indebtedness. We have pledged a significant portion of our assets as collateral under the 2018 Credit Agreement and Indenture. If the lenders under the 2018 Credit Agreement and Indenture accelerate the repayment of borrowings, we may not have sufficient assets to repay amounts outstanding under the 2018 Credit Agreement and Indenture, as well as our other indebtedness.

Our pension and post-retirement benefit plans are underfunded and will require future cash contributions, which could be higher than we expect and could have a material adverse effect on our financial condition and liquidity.

We sponsor pension and post-retirement benefit plans in and outside of the U.S. As of December 31, 2018, our U.S. and non-U.S. pension and post-retirement benefit plans were net underfunded by an aggregate of $133 million. We are required to make cash contributions to these plans in the future, and those cash contributions could be significant. In 2019, we expect to make cash contributions of approximately $13 million in aggregate to our U.S. and non-U.S. pension and post-retirement benefit plans, which we believe will be sufficient to meet the minimum funding requirements. However, our future funding obligations for our pension and post-retirement benefit plans depend on the levels of benefits provided for by these plans, the future performance of assets set aside for these plans, the rates of interest used to determine funding levels, actuarial data and experience and any changes in applicable laws and regulations. Accordingly, our future funding requirements for our pension and post-retirement benefit plans could be higher than expected, which could have a material adverse effect on our financial condition and liquidity.

In addition, our pension plans hold investments in equity securities and mutual funds. If the market values of these securities decline, our pension expense and funding requirements will increase. Any decrease in interest rates and asset returns, if and to the extent not offset by contributions, could increase our obligations under our pension plans. If the performance of assets held in these pension plans does not meet our expectations, our cash contributions for these plans could be higher than we expect, which could have a material adverse effect on our financial condition and liquidity.

Government regulation could impose taxes or other burdens on us, which could increase our costs or decrease demand for our products.

We rely upon generally accepted interpretations of tax laws and regulations in the countries in which we have customers and for which we provide travel inventory. We cannot be certain that these interpretations are accurate or that the responsible taxing authority is in agreement with our views. The imposition of additional taxes could cause us to have to pay taxes that we currently do not pay or collect on behalf of authorities and increase the costs of our products or services, which would increase our costs of operations.

Changes in tax laws or interpretations thereof may result in an increase in our effective tax rate.

We have operations in various countries that have differing tax laws and tax rates. A significant portion of our revenue and income is earned in countries with corporate tax rates lower than the U.S. federal tax rates. Our income tax reporting is subject to audit by domestic and foreign authorities. Our effective tax rate may change from year to year based on changes in the mix of activities and income allocated or earned among various jurisdictions, tax laws in these jurisdictions, tax treaties between countries, our eligibility for benefits under those tax treaties and the estimated values of deferred tax assets and liabilities. Such changes, which, among other reasons, may arise from ongoing inter-governmental and Organization for Economic Cooperation and Development (“OECD”)-led proposals on international corporate taxation and proposals on the taxation of digital services could result in an increase in the effective tax rate applicable to all or a portion of our income, which would adversely affect our financial performance.

We may become subject to taxes in Bermuda after March 31, 2035, which may have a material adverse effect on our results of operations and your investment.

The Bermuda Minister of Finance, under the Exempted Undertakings Tax Protection Act 1966 of Bermuda, as amended, has given us an assurance that if any legislation is enacted in Bermuda that would impose tax computed on profits or income, or computed on any capital asset, gain or appreciation, or any tax in the nature of estate duty or inheritance tax, then the imposition of any such tax will not be applicable to us or any of our operations, shares, debentures or other obligations until March 31, 2035, except insofar as such tax applies to persons ordinarily resident in Bermuda or to any taxes payable by us in respect of real property owned or leased by us in Bermuda. Given the limited duration of the Bermuda Minister of Finance’s assurance, we cannot assure you that we will not be subject to any Bermuda tax after March 31, 2035.

Fluctuations in the exchange rate of the U.S. dollar and other currencies may adversely impact our results of operations.

Our results of operations are reported in U.S. dollars. While most of our revenue is denominated in U.S. dollars, a portion of our revenue and costs is denominated in other currencies, such as the British pound, the Euro and the Australian dollar. As a result, we face exposure to adverse movements in currency exchange rates. The results of our operations and our operating expenses are exposed to foreign exchange rate fluctuations as the financial results of those operations are translated from local currency into U.S. dollars upon consolidation. If the U.S. dollar weakens against the local currency, the translation of these foreign currency-based local operations will result in increased operating expenses. Similarly, our local currency-based operating expenses will decrease if the U.S. dollar strengthens against local currency. Additionally, transactions denominated in currencies other than the functional currency may result in gains and losses that may adversely impact our results of operations.

The decision of the United Kingdom to withdraw from the European Union may have a negative effect on global economic conditions, financial markets and our business.

In June 2016, a majority of voters in the U.K. elected to withdraw from the E.U. in a national referendum. In March 2017, the U.K. government formally initiated a withdrawal process, the terms of which are subject to ongoing negotiations through the initial two-year period ending in March 2019. The decision has created significant uncertainties and instability in financial and trade markets. As an E.U. member state, the U.K. and U.K.-based businesses have access to strong financial and trade relationships, including the E.U. Single Market. Given the lack of precedent, it is unclear how

the withdrawal of the U.K. from the E.U. would affect the U.K.’s access to the E.U. Single Market and other important financial and trade relationships and how it would affect us. The withdrawal could, among other outcomes, disrupt the free movement of goods, services and people between the U.K. and the E.U., which could adversely impact our ability to attract and retain talent in the U.K., undermine bilateral cooperation in key policy areas and significantly disrupt trade between the U.K. and the E.U. Under current E.U. rules, following a withdrawal, the U.K. would not be able to negotiate bilateral trade agreements with member countries of the E.U. In addition, the withdrawal of the U.K. from the E.U. could significantly affect the fiscal, monetary and regulatory landscape within the U.K., including licensing in respect of our Payments Solutions business. Furthermore, there is uncertainty as to the operation and application of relevant tax laws in the context of the withdrawal agreement scenarios, which may create additional direct and indirect tax implications for our business. Although it is not possible to predict fully the effects of the withdrawal of the U.K. from the E.U., it could have a material adverse effect on our business.

Material modifications of U.S. laws and regulations and existing trade agreements could adversely affect global economic conditions, financial markets and our business, financial condition and results of operations.

Significant changes in U.S. laws and regulations and existing international trade agreements could affect a wide variety of industries and businesses, including our business. Such changes could cause a decline in travel volume and have an adverse impact on the travel industry and, as a result, our business, financial condition and results of operations could be adversely affected.

Legal and Regulatory Risks

We may not be able to protect our technology and intellectual property effectively, which would allow competitors to duplicate our products and services and could make it more difficult for us to compete with them.

Our success and ability to compete depend, in part, upon our technology and other intellectual property, including our brands. Among our significant assets are our software and other proprietary information and intellectual property rights. We rely on a combination of copyright, trademark and patent laws, trade secrets, confidentiality procedures and contractual provisions to protect these assets. Our software and related documentation are protected principally under trade secret and copyright laws, which afford only limited protection. Unauthorized use and misuse of our technology and other intellectual property could have a material adverse effect on our business, financial condition or results of operations, and there can be no assurance that our legal remedies would adequately compensate us for the damage caused by unauthorized use.

Intellectual property challenges have been increasingly brought against members of the travel industry. We have in the past, and may in the future, need to take legal action to enforce our intellectual property rights, to protect our intellectual property or to determine the validity and scope of the proprietary rights of others. Any future legal action might result in substantial costs and diversion of resources and the attention of our management.

Third parties may claim that we have infringed their intellectual property rights, which could expose us to substantial damages and restrict our operations.

We have faced and in the future could face claims that we have infringed the patents, copyrights, trademarks or other intellectual property rights of others. In addition, we may be required to indemnify travel providers for claims made against them. Any claims against us or such providers could require us to spend significant time and money in litigation or pay damages. Such claims could also delay or prohibit the use of existing, or the release of new, products, services or processes, and the development of new intellectual property. We could be required to obtain licenses to the intellectual property that is the subject of the infringement claims, and resolution of these matters may not be available on acceptable terms or at all. Intellectual property claims against us could have a material adverse effect on our business, financial condition and results of operations, and such claims may result in a loss of intellectual property protections that relate to certain parts of our business.

Our processing, storage, use and disclosure of personal data could give rise to liabilities or business loss as a result of governmental regulation, conflicting legal requirements, evolving security standards, differing views of personal privacy rights or security breaches.

In the processing of our travel transactions, we receive and store a large volume of personally identifiable information. This information is increasingly subject to legislation and regulations in numerous jurisdictions around the world, typically intended to protect the privacy and security of personal information. It is also subject to evolving security standards for credit card and personal information that is collected, processed and transmitted.

We could be adversely affected if legislation or regulations are expanded to require changes in our business practices or if governing jurisdictions interpret or implement their legislation or regulations in ways that negatively affect our business. For example, in 2015, the Court of Justice of the E.U. invalidated the European Commission’s finding that the Safe Harbor program, in which we previously participated, provided adequate data protection according to E.U. standards. Travel businesses have also been subjected to investigations, lawsuits and adverse publicity due to allegedly improper disclosure of passenger information. As privacy and data protection have become more sensitive and politicized issues, we may also become exposed to potential liabilities in relation to our handling, use and disclosure of travel related data, as it pertains to individuals, as a result of differing views on the privacy of such data. Our business could be affected by public concerns in some parts of the world about U.S.-based data processing following revelations of National Security Agency surveillance activities, even though these revelations and activities did not involve Travelport. Our business could receive increased scrutiny upon the effectiveness of the GDPR in the E.U. and its heightened privacy requirements. In addition, we could fail to maintain or adapt to industry standards applicable to our operations, including PCI-DSS. These and other privacy concerns, including security breaches, could adversely impact our business, financial condition and results of operations.

Our business is regulated, and any failure to comply with such regulations or any changes in such regulations could adversely affect us.

We operate in a regulated industry. Our business, financial condition and results of operations could be adversely affected by unfavorable changes in or the enactment of new laws, rules and/or regulations applicable to us, which could decrease demand for products and services, increase costs or subject us to additional liabilities. Moreover, regulatory authorities have relatively broad discretion to grant, renew and revoke licenses and approvals and to implement regulations. Accordingly, such regulatory authorities could prevent or temporarily suspend us from carrying on some or all of our activities or otherwise penalize us if our practices were found not to comply with the then current regulatory or licensing requirements or any interpretation of such requirements by the regulatory authority. Our failure to comply with any of these requirements or interpretations could have a material adverse effect on our operations.

We store a large volume of personally identifiable information which is subject to legislation and regulation in numerous jurisdictions around the world, including in the U.S. and in Europe.

In Europe, computerized reservation systems, or CRS, regulations or interpretations of them may increase our cost of doing business or lower our revenue, limit our ability to sell marketing data, impact relationships with travel agencies, airlines, rail companies, or others, impair the enforceability of existing agreements with travel agencies and other users of our system, prohibit or limit us from offering services or products, or limit our ability to establish or change fees.

The CRS regulations require a GDS to display a rail or rail/air alternative to air travel on the first screen of their principal displays in certain circumstances. We currently have few rail participants in our GDS. We can display direct point to point rail services in our GDS principal displays, for those rail operators that participate in our GDS. Given the lack of standardization in the rail industry, displaying rail connections in a similar way to airline connections is extremely complex, particularly in relation to journey planning, fare quotation, ticketing and booking systems. We are working towards a solution that will include functionality to search, shop and book connected rail alternatives at such time as the rail industry in Europe agrees on and provides a standard framework to do so.

Continued regulation of GDSs in the E.U. and elsewhere could also create the operational challenge of supporting different products, services and business practices to conform to the different regulatory regimes.

Enhanced regulation by the E.U. through its newly updated Payment Services Directive may affect eNett and the payment-related services conducted through our Travel Commerce Platform.

Our failure to comply with these laws and regulations may subject us to fines, penalties and potential criminal violations. Any changes to these laws or regulations or any new laws or regulations may make it more difficult for us to operate our business and may have a material adverse effect on our operations. We do not currently maintain a central database of regulatory requirements affecting our worldwide operations and, as a result, the risk of non-compliance with the laws and regulations described above is heightened.

We may be classified as a passive foreign investment company, which could result in adverse United States federal income tax consequences to United States Holders of our common shares.

Based on the current and anticipated value of our assets and the composition of our income and assets, we do not expect to be treated as a passive foreign investment company (“PFIC”) for United States federal income tax purposes for our current taxable year ended December 31, 2018. However, the application of the PFIC rules is subject to uncertainty in several respects, and we cannot assure the shareholders that the United States Internal Revenue Service will not take a contrary position. A non-United States corporation will be a PFIC for any taxable year if either (i) at least 75% of its gross income for such year is passive income or (ii) at least 50% of the value of its assets (based on an average of the quarterly value of the assets) during such year is attributable to assets that produce passive income or are held for the production of passive income. A separate determination must be made after the close of each taxable year as to whether we were a PFIC for that year. Because the value of our assets for purposes of the PFIC test generally will be determined by reference to the market price of our common shares, a significant decrease in the market price of our common shares may cause us to become a PFIC. If we are a PFIC for any taxable year during which a United States Holder holds a common share, certain adverse United States federal income tax consequences could apply to such United States Holder.

From time to time, we may be involved in legal proceedings and may experience unfavorable outcomes.

We are, and in the future may be, subject to material legal proceedings in the course of our business, including, but not limited to, actions relating to contract disputes, business practices, intellectual property and other commercial and tax matters. Such legal proceedings may involve claims for substantial amounts of money or for other relief or might necessitate changes to our business or operations, and the defense of such actions may be both time consuming and expensive. Further, if any such proceedings were to result in an unfavorable outcome, it could have a material adverse effect on our business, financial position and results of operations.

Risks Related to the Merger

The announcement and pendency of the Merger may have an adverse effect on our business, financial condition, operating results and cash flows.

Uncertainty about the effect of the proposed Merger on our employees, partners, travel providers, travel agency customers and other third parties may disrupt our sales and marketing or other key business activities and may have a material adverse effect on our business, financial condition, operating results and cash flows. Current and prospective employees may experience uncertainty about their roles following the Merger. We may not be able to attract and retain key talent, including senior leaders, to the same extent that we have previously been able to attract and retain employees. Any loss or distraction of such employees could have a material adverse effect on our business, financial condition and operating results. In addition, we have diverted, and will continue to divert, significant management resources towards the completion of the Merger, which could materially adversely affect our business, financial condition, operating results and cash flows. Parties with which we have business relationships may experience uncertainty as to the future of such relationships and may delay or defer certain business decisions, seek alternative relationships with third parties or seek to alter their present business relationships with us.  Parties with whom we otherwise may have sought to establish business relationships may seek alternative relationships with third parties.

The Merger Agreement generally requires us to operate our business in the ordinary course pending consummation of the proposed Merger and restricts us, without the consent of Siris and Elliott, from taking certain specified actions until

the Merger is completed. These restrictions may affect our ability to execute our business strategies, to respond effectively to competitive pressures and industry developments, and to attain our financial and other goals and may otherwise harm our business, financial condition, operating results and cash flows.

The consummation of the Merger is subject to a number of conditions, including regulatory approvals, and if these conditions are not satisfied, the Merger will not be consummated.

Pursuant to the Merger Agreement, consummation of the Merger is subject to a number of conditions that must be satisfied prior to the consummation of the Merger and may not occur, even if we obtain shareholder approval. The closing conditions under the Merger Agreement include, among others:

These regulatory and governmental entities may impose conditions on the granting of such approvals and, if such regulatory and governmental entities seek to impose such conditions, lengthy negotiations may ensue among such regulatory or governmental entities, Siris, Elliott and us. Such conditions and the process of obtaining regulatory approvals could have the effect of delaying completion of the Merger, and such conditions may not be satisfied for an extended period of time.

The obligation to consummate the Merger is also subject to the accuracy of representations and warranties, and the satisfaction of performance of obligations, in each case as set forth in the Merger Agreement, subject to specified materiality exceptions. The obligations of Siris and Elliott to close are also subject to the absence of any material adverse effect on us. As a result of the above-mentioned conditions and the other conditions described in the Merger Agreement, there can be no assurance that the Merger will be consummated, even if shareholder approval of the Merger is obtained.

Should the Merger fail to close for any reason, our business, financial condition, operating results, or cash flows may be materially adversely affected.

The failure to complete the Merger in a timely manner or at all could negatively impact the market price of our common shares, as well as adversely affect our business, financial condition, operating results and cash flows.

Completion of the Merger is subject to several conditions beyond our control that may prevent, delay or otherwise adversely affect its completion in a material way, including the approval of our shareholders, the expiration or termination of applicable waiting periods under antitrust and competition laws and similar competition approvals or consents that must be obtained from regulatory entities. The Merger cannot be completed until the conditions to closing are satisfied or (if permissible under applicable law) waived. We cannot guarantee that the closing conditions set forth in the Merger Agreement will be satisfied or, even if satisfied, that no event of termination will take place. In the event that the Merger is not completed for any reason, the holders of our common shares will not receive any payment for their common shares in connection with the proposed Merger. Instead, we will remain an independent public company, and the holders of our common shares will continue to own their common shares.

If the Merger is not completed, our common share price may drop to the extent that the current market price of our common shares reflects an assumption that a transaction will be completed. In addition, under circumstances specified in the Merger Agreement, we may be required to pay a termination fee of $62.3 million in the event the Merger is not consummated.  Also, in connection with completing the Merger, we may incur substantial transaction fees and costs. 

Further, a failure to complete the Merger may result in a negative perception of us in the financial markets and investment community and negative responses from customers, partners and other third parties. Any disruption to our business resulting from the announcement and pendency of the Merger and from intensifying competition from our competitors, including any adverse changes in our relationships with our employees, partners, customers and other third parties, could continue or accelerate in the event of a failure to complete the Merger. Our business, financial condition, operating results and cash flows may be adversely affected, as compared to the condition prior to the announcement of the Merger, if the Merger is not consummated.

The Merger Agreement contains provisions that could discourage or deter a potential competing acquirer that might be willing to pay more to effect an alternative transaction with us.

Subject to limited exceptions, the Merger Agreement contains restrictions on our ability to pursue other alternatives to the Merger and, in specified circumstances, could require us to pay a termination fee of $62.3 million. Such restrictions may discourage or deter a third party that may be willing to pay more than Siris and Elliott for our common shares from considering or proposing an alternative transaction with us. Notwithstanding the foregoing, in no event will the termination fee be paid to Siris and Elliott more than once. Additional information regarding these restrictions is provided in the definitive proxy statement on Schedule 14A we filed with the SEC on February 13, 2019.

Risks Related to Our Common Shares

The market price and trading volume of our common shares may be volatile, which could result in rapid and substantial losses for our shareholders.

The market price of our common shares may be highly volatile and could be subject to wide fluctuations. During 2018, the price of our common shares, as reported by NYSE, ranged from a low of $12.43 on February 9, 2018 to a high of $20.14 on July 9, 2018. In addition, the trading volume in our common shares may fluctuate and cause significant price variations to occur. If the market price of our common shares declines significantly, shareholders may be unable to sell their common shares at or above the purchase price, if at all. The market price of our common shares may fluctuate or decline significantly in the future. Some of the factors that could negatively affect the price of our common shares or result in fluctuations in the price or trading volume of our common shares include: variations in our quarterly operating results; failure to meet our earnings estimates; publication of research reports about us or the travel industry or the failure of securities analysts to cover our common shares; additions or departures of our executive officers and other key management personnel; adverse market reaction to any indebtedness we may incur or securities we may issue in the future; actions by shareholders; changes in market valuations of similar companies; speculation in the press or investment community; changes or proposed changes in laws or regulations or differing interpretations thereof affecting our business or enforcement of these laws and regulations, or announcements relating to these matters; adverse publicity about the travel industry generally or individual scandals, specifically, and general market and economic conditions.

If we do not pay additional cash dividends in the foreseeable future, the price of our common shares may be depressed.

The declaration and payment of all future dividends, if any, will be at the discretion of our Board and will depend upon our financial condition, earnings, contractual conditions, restrictions imposed by our senior secured credit agreement, any future indebtedness or preferred securities or applicable laws and other factors that our Board may deem relevant. In addition, pursuant to Bermuda law and our bye-laws, no dividends may be declared or paid if there are reasonable grounds for believing that: (i) we are, or would after the payment be, unable to pay our liabilities as they become due or (ii) that the realizable value of our assets would thereby be less than our liabilities. As a result, shareholders may not receive any return on an investment in our common shares unless such common shares are sold for a price greater than that for which shareholders paid. Pursuant to the terms of the Merger Agreement, our Board of Directors has suspended the declaration and payment of any future dividends.

Anti-takeover provisions in our bye-laws may delay, discourage or prevent a change in control.

Our bye-laws contain provisions that may delay, discourage or prevent a merger or acquisition that a shareholder may consider favorable. Such provisions include, but are not limited to, shareholder advance notice and the issuance of preference shares. As a result, shareholders may be limited in their ability to obtain a premium for their common shares.

We are a Bermuda company, and it may be difficult for shareholders to enforce judgments against us or certain of our directors or officers.

We are a Bermuda limited liability exempted company. We have been advised by our Bermuda counsel that there is no treaty in force between the United States and Bermuda providing for the reciprocal recognition and enforcement of judgments in civil and commercial matters. As a result, whether a U.S. judgment would be enforceable in Bermuda depends on whether the U.S. court that entered the judgment is recognized by a Bermuda court as having jurisdiction over it, as determined by reference to Bermuda conflict of law rules. The courts of Bermuda would recognize as a valid judgment, a final and conclusive judgment in personam obtained in a U.S. court pursuant to which a sum of money is payable (other than a sum of money payable in respect of multiple damages, taxes or other charges of a like nature or in respect of a fine or other penalty). The courts of Bermuda would recognize such a U.S. judgment as long as (1) the U.S. court had proper jurisdiction over the parties subject to the judgment, (2) the U.S. court did not contravene the rules of natural justice of Bermuda, (3) the U.S. judgment was not obtained by fraud, (4) the enforcement of the U.S. judgment would not be contrary to the public policy of Bermuda, (5) no new admissible evidence relevant to the action is submitted prior to the rendering of the judgment by the courts of Bermuda and (6) there is due compliance with the correct procedures under the laws of Bermuda.

In addition to and irrespective of jurisdictional issues, Bermuda courts will not enforce a provision of the United States federal securities law that is either penal in nature or contrary to public policy. It is the advice of our Bermuda counsel that an action brought pursuant to a public or penal law, the purpose of which is the enforcement of a sanction, power or right at the instance of the state in its sovereign capacity, is unlikely to be entertained by Bermuda courts. Specified remedies available under the laws of U.S. jurisdictions, including specified remedies under United States federal securities laws, would not be available under Bermuda law or enforceable in a Bermuda court, as they are likely to be contrary to Bermuda public policy. Further, no claim may be brought in Bermuda in the first instance for a violation of United States federal securities laws because these laws have no extraterritorial application under Bermuda law and do not have force of law in Bermuda.

Our bye-laws require that derivative actions brought in our name, actions against directors, officers and employees for breach of fiduciary duty and other similar actions may be brought only in Bermuda as the exclusive forum for such actions, which could limit our shareholders’ ability to obtain a favorable judicial forum for disputes with us.

Our bye-laws require, to the fullest extent permitted by law, that derivative actions brought in the name of the Company, actions against directors, officers and employees for breach of fiduciary duty and other similar actions may be brought only in Bermuda, and if brought outside of Bermuda, the shareholder bringing the suit will be deemed to have consented to service of process on such shareholder’s counsel. The choice of forum provision in our bye-laws may limit our shareholders’ ability to obtain a favorable judicial forum for disputes with us and have the effect of discouraging lawsuits against our directors and officers. Alternatively, if a court were to find these provisions of bye-laws inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business and financial condition.

Persons who own our common shares may have more difficulty in protecting their interests than persons who are shareholders of a U.S. corporation.

The Companies Act 1981, as amended, of Bermuda, which applies to us, differs in certain material respects from laws generally applicable to U.S. corporations and their shareholders. As a result, persons who own our common shares may have more difficulty in protecting their interests than persons who are shareholders of a U.S. corporation.

If we are unable to maintain effective internal control over financial reporting in the future, shareholders may lose confidence in the accuracy and completeness of our financial reports and the trading price of our common shares may be negatively affected.

We are subject to Section 404 of the Sarbanes-Oxley Act (“SOX”), which requires us to maintain internal controls over financial reporting and to report any material weaknesses in such internal controls. We have consumed and will continue to consume management resources and incur expenses for SOX compliance on an ongoing basis. If we identify material weaknesses in our internal control over financial reporting, or if we are unable to comply with the requirements of Section 404 in a timely manner or assert that our internal control over financial reporting is effective, investors may lose confidence in the accuracy and completeness of our financial reports, and the trading price of our common shares could be negatively affected, and we could become subject to investigations by the NYSE, the SEC or other regulatory authorities, which could require additional financial and management resources.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Headquarters and Corporate Offices

Our principal executive office is located in Langley in the United Kingdom, under a lease that expires in June 2027. We also have an office in Atlanta, Georgia, U.S., under a lease that expires in December 2024.

Operations

Our operational business global headquarters are located in Langley, U.K. Our operational business U.S. headquarters are located in Atlanta, Georgia.

In addition, we have leased facilities in 45 countries that function as call centers or fulfillment or sales offices. Our product development centers are located in Atlanta, Georgia and leased offices in Denver, Colorado under a lease expiring in November 2025.

The table below provides a summary of our key facilities, all of which are leased:

 

 

Data Center

We operate an in-house data center out of leased facilities in Atlanta, Georgia, U.S., pursuant to a lease that expires in August 2022, and provide services from other facilities, including a secondary site in Atlanta, Georgia. Our data center powers our Travel Commerce Platform and provides access 24 hours a day, seven days a week and 365 days a year. The facility is a hardened building housing two data centers: one used by us and the other used by Delta Air Lines. We and Delta Air Lines each have equal space and infrastructure at the Atlanta facility. Our Atlanta data center comprises 94,000 square feet of raised floor space, 27,000 square feet of office space and 39,000 square feet of facilities support area.

We believe that our properties are sufficient to meet our present needs, and we do not anticipate any difficulty in securing additional space, as needed, on acceptable terms.

ITEM 3. LEGAL PROCEEDINGS

DOJ

On May 19, 2011, we received a Civil Investigative Demand (“CID”) from the United States Department of Justice, which seeks our documents and data in connection with an investigation into whether there have been “horizontal and vertical restraints of trade by global distribution systems.” We have complied with the CID, and the investigation remains open.

Other

In addition, we are a party to various litigation matters incidental to the conduct of our business. We do not believe that the outcome of any of the matters in which we are currently involved will have a material adverse effect on our financial condition, results of our operations or our liquidity position.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

PART II

ITEM 5.  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common shares are currently traded on the NYSE under the symbol “TVPT”. At February 20, 2019, the number of shareholders of record was 25.

Dividend Policy

We paid dividends on our common shares of $0.075 per common share in each of the four quarters of 2017 and in each of the first three quarters of 2018. However, pursuant to the terms of the Merger Agreement, our Board of Directors has suspended the declaration and payment of any future dividends, and, as a result, no dividends were declared for the fourth quarter of 2018.

Recent Sales of Unregistered Securities

From January 1, 2016 to December 31, 2018, we granted 177,006 restricted share units (“RSUs”) without registration under the Securities Act of 1933 under our equity compensation plans.

We deemed these grants as exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933 or in reliance on Rule 701 of the Securities Act of 1933 as offers and sales of securities under compensatory benefit plans and contracts relating to compensation in compliance with Rule 701. Each of the recipients of securities in any transaction exempt from registration either received or had adequate access, through employment, business or other relationships, to information about us.

Purchases of Equity Securities By the Issuer and Affiliated Purchases

The following is a summary of our repurchases of common shares by month for the year ended December 31, 2018:

 

Performance Graph

The following graph and table show the cumulative total shareholder return of our common shares against the cumulative total returns of the Russell 2000 Index and the Dow Jones U.S. Travel & Leisure Index from September 25, 2014, the date of our initial public offering, and ending December 31, 2018. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe, and the Dow Jones U.S. Travel & Leisure Index measures the performance of U.S. stocks in the travel and leisure sector. The graph and the table depict the result of an investment on September 25, 2014 of $100 in our common shares, the Russell 2000 Index and the Dow Jones U.S.

Travel & Leisure Index, including investment of dividends. Historic share performance is not necessarily indicative of future share price performance.

 

 

 

ITEM 6. SELECTED FINANCIAL DATA

The following table sets forth our selected consolidated historical financial information and other data as of the dates and for the periods indicated as set out below:

In May 2011, we completed the sale of our Gullivers Travel Associates (“GTA”) business to Kuoni Travel Holdings Ltd. (“Kuoni”), which qualified to be reported as discontinued operations. The gain from the disposal of the GTA business and the results of operations of the GTA business were presented as discontinued operations in our consolidated statements of operations and consolidated statements of cash flows. In connection with this sale, we agreed to indemnify Kuoni through January 2018 for certain potential liabilities relating to the pre-sale period. An estimate of our obligations under such indemnity is included within our liabilities on our consolidated balance sheets for the years 2014 to 2017. During the years ended December 31, 2018 and 2017, we either settled certain of our obligations under such indemnity and/or determined that the liabilities would not be payable due to the expiration of the statute of limitations and realized a gain that was included within “Income from discontinued operations, net of tax” in our consolidated statements of operations.

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The following selected consolidated historical financial and other data are qualified in their entirety by reference to, and should be read in conjunction with, our consolidated financial statements and the related notes thereto and the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this Annual Report on Form 10‑K.

Consolidated Statements of Operations Data

 

 

 

Consolidated Balance Sheets Data

 

Consolidated Statements of Cash Flows Data

 

 

Selected Quarterly Consolidated Financial Data—Unaudited

Provided below is selected unaudited quarterly financial data for 2018 and 2017:

 

 

 

 

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our results of operations and financial condition for each of the years ended December 31, 2018, 2017 and 2016 should be read in conjunction with our consolidated financial statements and accompanying notes reported in accordance with U.S. GAAP and included in this Annual Report on Form 10‑K. The following discussion and analysis includes forward-looking statements that reflect the current view of management and involve risks and uncertainties. Our actual results may differ materially from those contained in any forward-looking statements as a result of factors discussed below and in this Annual Report on Form 10‑K, particularly under the headings “Item 1A: Risk Factors” and “Forward-Looking Statements.”

Overview

We are a leading travel commerce platform providing distribution, technology, payment, mobile and other solutions for the global travel and tourism industry. We facilitate travel commerce by connecting the world’s leading travel providers, such as airlines, hotel chains and car rental companies, with online and offline travel buyers in our proprietary B2B travel commerce platform. In 2018, we processed approximately $89 billion of travel spending. We continue to strategically invest in products with a focus on redefining our Travel Commerce Platform to address the trends, inefficiencies and unmet needs of all components of the travel value chain.

Our operations are organized into two operating segments: (i) Travel Solutions and (ii) Payment Solutions. Travel Solutions comprise our Air, Beyond Air (excluding our B2B travel payment solutions) and Technology Services. Payment Solutions comprise our B2B travel payment solutions through eNett. In prior periods, we reported our Payment Solutions business together with Travel Solutions as one reportable segment as Payment Solutions was not considered to be material to be disclosed separately as a reportable segment. For the year ended December 31, 2018, Travel Solutions and Payment Solutions represented approximately 88% and 12%, respectively, of our net revenue. We also monitor our revenue and related metrics based on performance, including geographical performance, of our Travel Commerce Platform. Within Travel Commerce Platform, Air and Beyond Air (inclusive of Payment Solutions) represented approximately 70% and 30%, respectively, of our Travel Commerce Platform revenue for the year ended December 31, 2018.

Travel Commerce Platform

Our Travel Commerce Platform combines state-of-the-art technology with features, functionality and innovative solutions to address the high-volume and growing transaction processing requirements for the evolving needs of the travel industry.

Air

We provide comprehensive real-time search, pricing, booking, change, payment and integrated itinerary creation for travelers who use the services of online and offline travel agencies for both leisure and business travel. We provide such services to approximately 480 airlines globally, including over 120 LCCs. Our access to business travelers, merchandising capabilities and ability to process complex itineraries have attracted and allowed for the full integration of several fast-growing LCCs such as easyJet, IndiGo and Ryanair into our Travel Commerce Platform.

Beyond Air

We have expanded our Travel Commerce Platform with a fast-growing portfolio of Beyond Air initiatives. Our Beyond Air portfolio includes hospitality, Payment Solutions, digital services, advertising and other platform services.

For the hospitality sector of the travel industry, we provide innovative distribution and merchandising solutions for hotel, car rental, rail, cruise-line and tour operators.

The core offering of our Payment Solutions business is VANs that automatically generate unique Mastercard numbers used to process payments globally. eNett’s operations currently focus on Asia Pacific and Europe, and we believe the model is highly scalable.

We also provide a mobile travel platform and digital product set that allows airlines, hotels, corporate TMCs and travel agencies to engage with their customers through mobile services, including apps, mobile web and mobile messaging.

In addition to hospitality and digital services, we utilize the broad connections and extensive data to provide advertising solutions to approximately 3,500 advertisers that allow our travel providers to easily and cost-effectively promote upgrades, ancillary products or services, package deals and other offers. We also offer other platform services, including subscription services, processing services, business intelligence data services and marketing-oriented analytical tools, to travel agencies, travel providers and other travel data users.

Technology Services

We provide critical IT services to airlines, such as shopping, ticketing, departure control, business intelligence and other solutions, enabling them to focus on their core business competencies and reduce costs. We also host reservations, inventory management and other related critical systems for Delta. In addition, until April 2017, we owned 51% of IGTS, a technology development services provider based in Gurgaon, India that was used for both internal and external software development. We divested our 51% interest in IGTS in April 2017.

Management Performance Metrics

Our management team monitors the performance of our operations against our strategic objectives. We assess our performance using both financial and non-financial measures. As a Travel Commerce Platform, we measure performance primarily on the basis of changes in both Reported Segments and RevPas. Travel Commerce Platform RevPas is computed by dividing Travel Commerce Platform revenue by the total number of Reported Segments. Travel Commerce Platform revenue is generated from a wide portfolio of products and services, including traditional air bookings, ancillaries, hospitality, Payment Solutions, digital services, advertising and other platform services. Reported Segments is defined as travel provider revenue generating units (net of cancellations) sold by our travel agency network, geographically presented by region based upon the point of sale location. We also use other GAAP and non-GAAP measures as performance metrics.

The table below sets forth our performance metrics:

 

*Percentage calculated not meaningful