British Airways set for pounds 300m windfall from Galileo flotation

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The Independent Online
British Airways is set to reap a windfall of up to pounds 300m through the flotation on the New York Stock Exchange of Galileo International, the worldwide airline computer reservations system.

BA has a stake of just under 15 per cent in Galileo, half of which will be sold in the public offering later this year. When American Airlines floated a 20 per cent stake in its computer reservations system Sabre last year the business was valued at $3.5bn (pounds 2.15bn).

Galileo operates through a network of 36,000 travel agents in 73 countries and made operating profits last year of $175m on revenues of $1.2bn. It accounts for a quarter of all airline bookings made in the US and nearly 40 per cent of airline travel in Europe.

BA and the 10 other airlines which own Galileo have agreed not to sell any further shares for six months after the flotation, the main aim of which will be be raise funds to allow Galileo to acquire three travel businesses, the biggest of which is Apollo Travel Services Partnership in the US.

According to a filing lodged this week with the US Securities and Exchange Commission, Galileo will pay $700m for Apollo, $22.4m for Traviswiss of Switzerland and $14m for Galileo Nederland.

No details were made available of the proportion of Galileo that was to be floated, although the filing says that the offer price will be a maximum of $400m.

The most important airline in the Galileo system is United Airlines of the US, the world's biggest carrier, which accounts for 12 per cent of all the bookings made through it. Galileo's five biggest subscribers are the American Automobile Association, American Express, Business Travel International, Wagon Lits and Rosenbluth International who between them account for 21 per cent of bookings.

Apart from airline tickets, Galileo also operates a reservations system for booking hire cars and hotel rooms in conjunction with 48 car rental companies and 220 hotel chains around the world.

It is slightly smaller than Sabre, which made $327m operating income on revenues of $1.6bn last year. Amadeus, the other member of big three, is owned by Lufthansa, Iberia of Spain and Air France.

Galileo International was created in 1993 out of a merger of Covia, United's reservations system and the UK-based Galileo company which was set up in 1987 by BA and four other European airlines.

It has headquarters in Rosemont, Illinois and employs 1,950. Last year a total of 300 million bookings were made through Galileo generating ticket sales worth $50bn.

Ownership and control of computer reservation systems has become an increasingly important feature of airline competition in recent years. Smaller carriers complain that they are squeezed out by the likes of Sabre, Amadeus and Galileo because their flights are not featured as prominently on the computer screens in travel agencies.

Apart from BA and United, the other members of Galileo are Swissair, KLM, USAirways, Alitalia, Olympic of Greece, Canada, Portgual's TAP, Aer Lingus and Austrian Airlines.