Trx Inc. Case

TWST: Can we start with an overview of TRX?

Mr. Davis: TRX is a travel process outsourcing company focused exclusively on the travel industry. We process and issue tickets, both electronic and paper, for airlines, travel agencies, and Websites. We also do a whole host of data management and data reporting. We serve the market leaders in each segment of the global travel industry as clients. We do all this work behind the scenes for clients like Expedia, American Airlines and American Express, handling all the actual processing and e- mail confirmations and reporting. Annually, TRX processes over 10% of the global tickets sold.

TWST: What are you hoping to accomplish at the PhoCusWright Conference?

Mr. Davis: PhoCusWright is by far the leading conference for the 'new age' travel industry. Where is the industry going with the Internet and the shift to supplier-direct sales and all the other components? If I had to pick one conference for the year to personally attend and sponsor, it would be PhoCusWright. It is a must-have for us, and when we go to that event, we take a handful of our executives and schedule personal time with our clients and those who would like to be our clients. It serves us with a great networking opportunity and also a great educational opportunity. I've learned so much about this industry and about the people just by listening. It is a rare event where I would actually go and attend all the sessions, sit in the audience, listen, take notes and ask questions.

TWST: The travel industry has had a problem for the last couple of years. How badly has this affected TRX?

Mr. Davis: There certainly has been a very down cycle for the travel industry. The perfect storm of terrorist events and a tough economy, and then you have other factors ' SARS, the war in Iraq and the rest. We have come through extremely well. Starting back in 2001, even after the September 11th events, we closed a major financing deal with several institutional shareholders in November 2001. We continued that progress by showing the stability in our business, where we processed not only new bookings, but also exceptions and changes. During times of travel disruptions, we still make money on the exception handling and that mitigates our exposure to the down cycle. At the same time we have seen continued migration to online booking, where we are are very strong. So, while we've had a little bit softer transaction volumes, we have added new clients like American Airlines. We have expanded business with key clients like Expedia and American Express. It has been a time of growth for us even amid a tough time for the industry.

TWST: Are you focusing at all internationally and in the global marketplace?

Mr. Davis: We focused initially in Europe, and that focus has paid off extremely well for us. We started our operations in Europe at the end of 1999, working with strategic partners. We now have a great client base in Europe with clients such as Expedia, Opodo, Lastminute, American Express, Hogg Robinson and Rosenbluth. We have a couple of contracts with British Airways and some other groups as well. So, we're making good progress in Europe. We plan to be operational in Australia and Asia over the next couple of years.

TWST: What do you see as the competitive advantage that TRX has over other companies in your space?

Mr. Davis: We have a very interesting competitive set where we don't have one direct competitor. We have certain competitors in different solution sets, but for our primary offering, we don't have a direct competitor. Most of our competition stems from in-house operations at major airlines and at the mega travel agencies where there is a huge opportunity for re-engineering and cost saving. We have a lot of work to do to convince those clients who have not yet outsourced to TRX to do so. We also have a lot of work to do to keep up with competition in certain areas of the business where there is more of a direct competitive element such as online booking offerings for corporate travel.

TWST: What do you see as some of the major challenges facing TRX in the next year?

Mr. Davis: We have to continue to demonstrate a cost advantage while demonstrating our value proposition, which is really strategic flexibility and focus. We take on our clients' non-core operational and process-oriented work, so we enable our clients to focus on growing and introducing new products. I think the shining case study there is Expedia, where, since it started in 1996, TRX has processed every ticket and handled their agency operations, and they've been able to grow and really demonstrate leadership across the industry. We have to continue to do that, to build that momentum and to build scale and, at the same time, we have to bring underlying cost advantage for our clients. We will continue to re-engineer our processes and make heavy-duty investments in process re-engineering and Six Sigma efforts. Secondarily, we will be moving to invest a lot of money in our global footprint and figure out how to operate in low-cost markets. It doesn't mean we are going to eliminate functions or jobs in the US, that's not what we need to do. We need to broaden our base and explore what low- cost markets such as India or the Philippines