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Turning Around LeapFrog: CEO Jeff Katz (Part 3)

Posted on Saturday, Nov 24th 2007

SM: Was Saber under American Airlines or on its own?

JK: Saber, by that time, was a public company. It was not controlled by American Airlines anymore. The Chief Financial officer at United had the idea that the airline industry needed to form its own competitor to Travelocity and Saber, otherwise the industry would be in trouble. The mega retailers, Travelocity and Expedia, would make it so that the airlines would have no distribution power. They called me up because we had all worked together back at American Airlines. The President at Delta had been a marketing guy at American with me. It was a very small world, and several people called me saying they had this idea to compete with Travelocity and Saber and that they wanted me on board.

I was sitting in Switzerland thinking the world was nice, and my first reaction was “What a stupid idea!”

Because they were friends of mine, I came to visit the project team, which at that stage was just a bunch of consultants in a planning mode. There was one technology guy who I thought had a very good search idea, and he had already corralled five or six people from Mark’s Andreeson’s group at the University of Illinois who had written Mosaic. It was a very high end Internet group and they had a very interesting idea around search.

Between the very interesting technical idea and all the high powered airlines saying they would fund this, we had about 80% of the industry saying they would back this, it was just something I thought I should do. In the summer of 2000 I joined, and thus we began. I always tell people my first encounter was 10 guys and a bad power point deck.

SM: Orbitz was entirely funded by the Airline Industry?

JK: Entirely by them. Nobody else would do it. I actually tried to raise money because I did not want the airline influence to be overwhelming. It was middle of 2000 and the bubble had burst. Nobody was funding Internet ideas at the time.

SM: Consumer internet was very unpopular.

JK: It was extremely unpopular. On top of that you had two very large, established competitors. That was like someone saying they had an idea for internet search and they wanted to compete against Google. Even if you thought it was intriguing, why would you invest? The Airlines were the only ones who would have been so foolish.

SM: How long did you stay?

JK: I was there for four and a half years. We sold it at the end of 2004.

SM: To the private equity guys?

JK: We sold it to Cendent and they sold it to private equity. Orbitz is really an interesting company because it has been IPO’d twice and it has been sold twice and it did not exist prior to 2000.

SM: What stage was it when you left? How big was it?

JK: We were selling $3.5B of travel when I left, and about 400 people worked there.

SM: What were your revenues?

JK: They were around $300M.

SM: It was quite sizable. $300M in four years is huge growth.

JK: We launched the website in the summer of 2001.

SM: And then 9-11 hit. What a time to be in the Airline business.

JK: People here sometimes think it is a difficult time, but there are definitely worse situations. That was definitely one of them. That is the Orbitz story.

This segment is part 3 in the series : Turning Around LeapFrog: CEO Jeff Katz
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