Release Date: November 05, 2021
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) reported a positive free cash flow of EUR 104 million in Q3 2021, marking the first positive result since the pandemic began.
- The company saw a 9-point improvement in revenue performance from Q2 to Q3 2021, driven by better performance across all three segments.
- Amadeus IT Group SA (XMAD:AMS) signed 14 new contracts or renewals with airlines, including major names like JetBlue and Etihad, indicating strong commercial performance.
- The company achieved a fixed cost reduction of EUR 186 million in the first nine months of 2021 compared to 2020, exceeding their target.
- Positive trends in hospitality metrics, such as reservations and bookings, continued to improve, reflecting a steady recovery in the hospitality sector.
Negative Points
- Group revenues in Q3 2021 were EUR 739 million, representing a 47% decline compared to Q3 2019, indicating that the company is still recovering from the pandemic's impact.
- Air distribution revenue declined by 57.7% versus 2019, despite improvements in volume performance.
- The GDS industry contracted by 59.1% in Q3 2021, with slower recovery in regions like Western Europe and Asia-Pacific impacting global market share.
- Despite positive free cash flow, the company incurred EUR 33 million in cost-saving program implementation costs in the first nine months of 2021.
- The average revenue per PB (passenger boarded) in Q3 2021 diluted relative to Q2, indicating that revenue per PB is trending towards 2019 levels as PBs grow.
Q & A Highlights
Highlights of Amadeus IT Group SA (XMAD:AMS) Q3 2021 Earnings Call
Q: One of your competitors mentioned losing domestic business with a major OTA in North America. Was this business you were competing for and won, or did it go to another GDS provider?
A: We reinforced our partnership with Expedia, covering air, car, hotel, and IT solutions. We have started to see incremental volumes from this partnership in the third quarter. Our objective is to engage with Expedia and other travel agencies to increase our market share. (Luis Maroto Camino, President, CEO & Executive Director)
Q: Can you elaborate on the cost progression in Q4 and into next year? Is annualizing the Q4 cost a reasonable starting point for 2022?
A: The EUR 550 million cost savings are structural. We expect excess savings in 2021 to come back progressively in 2022. We are exposed to inflationary increases and will continue to invest in new deals that bring additional revenue and contribution margin. (Till Streichert, CFO)
Q: Do you anticipate a period of irrational incentive payments in the market as competitors try to reclaim market share?
A: We focus on increasing our positioning with customers through technology, content aggregation, and competitive incentives. We aim to maintain and grow our market share by leveraging our technology and customer relationships. (Luis Maroto Camino, President, CEO & Executive Director)
Q: Can you discuss the sales pipeline for CRS and PMS in the hospitality sector?
A: The pipeline is positive, and we are optimistic about signing additional customers for CRS. We offer various business intelligence solutions to hoteliers, which have been performing well and are expected to grow. (Luis Maroto Camino, President, CEO & Executive Director)
Q: What is the pace of recovery for bookings on Asia international routes compared to transatlantic routes?
A: Asia is lagging behind other regions in terms of recovery, with improvements mainly in domestic markets. International traffic is slowly improving, but still well behind other regions. The trend is positive, and we hope it will replicate the recovery seen in other areas. (Luis Maroto Camino, President, CEO & Executive Director)
Q: Have payment terms for airline IT contracts changed due to the industry's situation?
A: There have been no structural changes in payment terms. During the pandemic, we had some short-term renegotiations, but these should come to an end as the situation recovers. (Luis Maroto Camino, President, CEO & Executive Director)
Q: How has the uptake been for your Altea NDC model among airlines?
A: Many airlines are using our NDC capabilities as part of their IT solutions. The integration of NDC with our core technology is a significant advantage, and we have been successful in this area. (Luis Maroto Camino, President, CEO & Executive Director)
Q: Can you provide references regarding the pace of recovery in corporate travel demand?
A: Business travel is coming back, although not yet at 2019 levels. The mix of travel agencies is returning to more normal levels as volumes increase and the situation improves. (Luis Maroto Camino, President, CEO & Executive Director)
Q: Should we expect unitary revenue in your distribution business to be more deflationary with the ramp of NDC contracts?
A: We expect NDC to be neutral to positive for us in the medium term. The mix of customers and regions will vary, but overall, we do not expect it to be negative. (Luis Maroto Camino, President, CEO & Executive Director)
Q: How is the market share gain across regions achieved? Is it due to greater aggressiveness or a better competitive environment?
A: Market share gains are due to a combination of factors, including technology, content aggregation, and customer relationships. We aim to continuously increase our share and volumes on our platform. (Luis Maroto Camino, President, CEO & Executive Director)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
