Release Date: November 06, 2020
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Amadeus IT Group SA (XMAD:AMS, Financial) saw a gradual improvement in global air traffic and air bookings throughout the third quarter, despite the ongoing impact of COVID-19.
- The company achieved positive EBITDA in the third quarter, excluding cost-saving program implementation costs, demonstrating resilience in a challenging environment.
- Amadeus IT Group SA (XMAD:AMS) signed 24 new contracts or renewals of distribution agreements with airlines in the third quarter, showing continued business development.
- The hospitality segment outperformed air volumes, with CRS transactions declining by only 34% in the third quarter, indicating stronger performance relative to the overall market.
- The company has implemented significant fixed cost reduction plans, achieving a 16.8% decline in P&L fixed costs in the third quarter, excluding bad debt effects.
Negative Points
- Amadeus IT Group SA (XMAD:AMS) experienced a significant decline in air TA bookings, which decreased by 89.8% relative to the previous year in the third quarter.
- Distribution revenue declined by 85.3% in the third quarter compared to the previous year, heavily impacted by the reduction in air bookings.
- The company reported an adjusted profit loss of EUR 125 million in the third quarter, reflecting the severe impact of the pandemic on its financial performance.
- IT Solutions revenue contracted by 52.4% in the third quarter, driven by a 74.9% decline in airline passengers boarded volumes.
- Amadeus IT Group SA (XMAD:AMS) faced an increase in bad debt provisions, negatively impacting the combined personnel and other operating expense cost line.
Q & A Highlights
Q: Can you provide insights on Q4 volumes given the current restrictions in Europe and trends in Asia?
A: We have seen continuous improvement each month, including October. However, Europe has deteriorated while other regions have improved. IATA's latest estimation for Q4 is a minus 70% passenger growth, indicating a slight improvement but not substantial. Asia, excluding China, shows progressive improvement in domestic traffic, but not to the extent of China's recovery.
Q: How is the environment for cross-selling and upselling to airlines during the recovery period?
A: Despite the challenging environment, business continues, and we have a healthy pipeline of discussions. Airlines are still open to conversations about future projects, and we are optimistic about our upselling capabilities.
Q: What is your outlook for the GDS market post-COVID? Will airlines be more or less dependent on GDS networks?
A: In the short term, airlines may rely more on GDS to fill planes from various channels. Long term, GDS will continue to play a crucial role if they evolve technologically and provide efficient content distribution. We are investing in NDC and aggregating content from various sources to maintain relevance.
Q: Can you provide more detail on the IT Solutions revenue, which seems to be outperforming bookings figures?
A: IT Solutions revenue includes various components. Hospitality has been more resilient, and services performed well in Q2 and Q3. The worst-performing segment is directly linked to passengers boarded. The different behaviors of these components explain the revenue outperformance compared to bookings.
Q: How are you planning for 2021, especially regarding cost base and free cash flow?
A: It's challenging to provide specific guidance, but we expect some recovery in 2021. We have secured liquidity and reduced cash outflow significantly. The level of free cash flow breakeven will depend on the recovery's nature and distribution across regions and sectors.
Q: What are the current IT priorities for hospitality customers? Is the integration of CRS and PMS into a single platform still a near-term vision?
A: Yes, integrating CRS and PMS remains a core strategy, and we are actively pursuing it. Conversations with customers are ongoing, and we are optimistic about the future.
Q: Have there been any changes in pricing or payment terms in recent GDS deals?
A: There have been no significant changes in unit pricing due to COVID. Payment terms have been negotiated on a case-by-case basis for cash relief, but this is separate from contractual negotiations.
Q: Can you clarify the increase in bad debt provisions and its impact?
A: The increase in bad debt provisions reflects the current travel industry's climate and is a precautionary measure. It includes updating the provision matrix and classifying more customers as high-risk. Actual collections have been better than initially expected, and we continue to monitor the situation.
Q: Do you expect negative bookings in Q4?
A: We do not expect a significant increase in cancellations or negative bookings in Q4. Volumes are low, and most bookings are made close to departure, stabilizing the situation.
Q: Are you getting closer to core PSS services with Turkish Airlines?
A: While we have extended our footprint with Turkish Airlines, we have not yet secured core PSS services. We continue to provide various technologies and hope to convince them to adopt our PSS in the future.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
