Google is  purchasing ITA Software to shake up onine tavel search results
03 July 2010

Google is purchasing ITA Software to shake up onine tavel search results

The all-cash acquisition announced Thursday signals Google's intention to challenge flight-comparison services that are ITA customers

Google Inc. plans to buy travel technology company ITA Software Inc. in a $700 million deal that would enable the Internet search leader to steer more of the airline reservations booked on the Web.

The all-cash acquisition announced Thursday signals Google's intention to challenge flight-comparison services that are ITA customers, including Kayak, FareCompare, Hotwire and Microsoft Corp.'s Bing Travel. The deal is likely to face a rigorous review by federal antitrust regulators.

ITA Software, a 500-employee company created in 1996 by computer scientists at the Massachusetts Institute of Technology, sells technology that helps run the reservation systems of many airlines, including American, Southwest, Alaska and Continental. Its software also powers the tools that other travel websites use to track air fares.

The widespread reliance on ITA's technology means federal regulators are likely to spend six months to a year trying to determine whether the acquisition will give Google an unfair advantage in the rapidly growing online travel market, said Ted Henneberry, an antitrust lawyer in Washington for Orrick, Herrington & Sutcliffe.

Schmidt declined to predict when the deal might close, but said he expected Google would ultimately win approval after regulators take a fair amount of time to review the deal.

Online travel industry analyst Henry Harteveldt predicted the acquisition will be cleared because ITA Software isn't a direct competitor to Google.

If it clears the antitrust hurdle, Google will be picking up expertise that will help improve the quality of its search results in one of electronic commerce's biggest markets. Consumers and small-business travellers in the U.S. will spend about $45 billion on airline tickets booked online this year, and that figure is expected to rise to $59 billion by 2014, Harteveldt said.

And with thousands of engineers at its disposal, Google conceivably could build upon ITA's success in the airline industry to expand into hotel, rental car and cruise reservations.

Google is counting on ITA's expertise to improve the quality of its search results when people are looking to make airline reservations.

The biggest winners in this deal would be consumers and Google will be able to drive more traffic to airlines and travel agencies such as Orbitz and Expedia. Google would profit from ITA's technology by selling more ads alongside the flight data.

Bing has been picking up more traffic with features that help people figure out whether the prices of airline tickets are likely to increase or decrease. Like other search engines specializing in travel, Bing checks multiple sites at once for the best deals and sends users to those sites to book there.

Travel websites generally earn fees for sending traffic to flight booking sites, but Google appears more interested in improving its travel search service so that it can retain users and sell more ads.

Google intends to honour all of ITA's existing contracts if the acquisition is approved. It's unclear whether Google would still want to work with some of its rivals after the contracts expire.

This isn't the first Google acquisition to come under intense scrutiny. Regulators took nearly a year to approve the company's $3.2 billion purchase of online ad service DoubleClick in 2008 and six months to OK its recent $750 million takeover of mobile ad service AdMob.