[VIDÉO] Lancement d’un projet de fonds commun- Maurice / Seychelles

Skift Take

The travel industry has 99 problems, but travel demand ain’t one.

Sean O’Neill

Amadeus, the world’s largest travel technology firm, reported on Friday a significant second-quarter net profit as the travel sector sped up its rebound from the pandemic.

“We’re trying to come back to normality,” said president and CEO Luis Maroto during an earnings call. “The level of cancellations is normalizing. We have seen a strong rebound in business travel, and in the last part of the quarter, it has come very close in percentage terms to the levels we saw in 2019.”

Amadeus, a Madrid-based provider of software services to travel companies and distributors, generated a second-quarter profit after taxes of approximately $242 million (€237 million), versus a net loss in the same period a year ago.

Revenue was approximately $1.2 billion (€1.18 billion), down about 17 percent from the same period in 2019 but roughly double from a year ago.

There’s still more room to grow. The company has traditionally generated its most revenue and profit from international long-haul travel, which hasn’t yet come back fully in force, especially with little outbound travel from countries such as China and Japan.

Amadeus’ services to help airlines distribute their tickets to travel agencies processed 109.2 million air bookings during the quarter, down by roughly 24 percent from the same period in 2019. In July, passengers boarded was down only 19 percent from the year-ago period.

The company’s software that helps airlines manage operations helped with boarding about 397 million passengers in the quarter, down by approximately 22 percent.

Surprisingly, the company’s revenue per passenger boarded exceeded 2019 levels by 4.9 percent. Management’s mixed reasons included improvements in contract terms via renewals and incremental deals as well as positive currency exchange rate effects.

“Amadeus is well positioned competitive, with greater than 40 percent share in both GDS [global distribution systems] and PSS [passenger service systems for airlines], and likely continued market share gains in the future,” wrote analysts Varun Rajwanshi of JP Morgan in a recent report.

Amadeus also recently boosted its prospects in selling software services to hotel companies when it signed Marriott International as its second large customer for its central reservation system (following IHG, or InterContinental Hotels Group). The company’s unit for developing software for hotels and other travel segments was down just 6 percent from 2019, supported by volume growth and new implementations.

Amadeus spent about $465 million (€455.9 million) on group-wide research and development in the second half of the year and approximately $800 million (€765.2 million) throughout 2021, which some analysts believed was together more than its two second largest competitors, Sabre and Travelport, spent in the period. The company’s headcount is about 15 percent below its 2019 levels, but it is hiring.

Looking ahead, Maroto acknowledged that inflation and an uncertain macro-economic environment could cause headwinds for recovery, but the data hadn’t shown an impact yet.

The headwinds for the travel industry so far this year have instead been disruptions primarily in the airline sector preventing a resumption of full capacity because of staff shortages.

“The majority of airlines are quite positive on the rest of the year,” Maroto said. “The underlying demand may offset the potential macroeconomic environment, but this remains to be seen.“

Skift Take

A surprise move from the airline, and costly too, with a “one-time hit” of up to $300 million already set to impact its third quarter results. But it’s a clever strategy to win more corporate business, as companies won’t fret so much about rushing to use up their vouchers in the future.

Matthew Parsons

If there was one lesson that airlines learned from the pandemic, it was the need to be flexible.

Now Southwest Airlines has eliminated all expiration dates on flight credits unexpired on, or created on or after July 28, 2022. But showing such goodwill comes at a cost.

The move will be popular among its business customers, taking off some of the pressure to rebook flights before the end of year or whenever the time runs out. At the start of the pandemic it was a bugbear for most corporate travel agencies, while in 2021 U.S. senators criticized airlines for failing to make all pandemic-related flight credits valid indefinitely. Back then it was estimated airlines were sitting on more than $10 billion in unused flight credits.

“Flexibility just continues to come to the top,” said Dave Harvey, vice president of Southwest Business. “We felt this fits with our brand in how people view us.”

Already the airline doesn’t charge bag fees, or change fees.

Southwest isn’t breaking down the percentage split between the outstanding amounts between its business and leisure customers, but it’s likely to be higher for leisure travelers with businesses more prudent when it comes to using them up.

However, in the third quarter, the total value of credits that would have otherwise expired is in the range of $250 million to $300 million in revenue headwind.

After that the value levels out to be “not meaningful,” according to Harvey. “We think of it as a one-time hit.”

The additional flexibility will go some way to encouraging more corporate bookings. Reporting its second quarter results on Thursday, it revealed managed business revenues were down 24 percent compared with the 2019 second quarter.

“Clearly June was much better than that,” Harvey said, adding January and February were “squashed” by Omicron. Corporate traffic then was down 70 percent on 2019 levels, so it didn’t see any acceleration until March.

The change of heart to credit expirations applies to all currently valid, existing flight credits, with no action required by customers with flight credit in the bank, and will apply to any new flight credit issued. Customers will first see a placeholder expiration date of December 31, 2040, on valid flight credits ahead as it updates its technology systems.

The company said it was a first-of-its-kind policy and value among major U.S. airlines.

“While other airlines eliminate benefits and value, today we’re enhancing our experience again,” Ryan Green, senior vice president and chief marketing officer, said in a statement.