ITA raised all that money to build a reservation system to replace the old mainframe systems that are fabulously expensive to run. That would have been a market of the kind that required outside investement from a company that was already profitable (I think ITA had more people working on the reservation system than the search), and that a big VC would love to bet on.

From what I hear it worked technically, but failed commercially due to the badly timed recession. It seems like a fair bet that Google's offer wasn't putting a lot of value on the reservation system. Even if it could be made to work, it's not the kind of a business that Google is usually in.