Sabre Axes 900 Workers to Revamp Some of Its Business Lines

Sabre, the U.S-headquartered travel technology services company, has axed about 900 jobs — about nine percent of its 10,000-person workforce, and will cease recruiting for some openings.

The cuts at Sabre — which the company says will slash corporate and back-office positions by 12 percent and strip away managerial positions that were slowing the pace of software development — follows a strategic review to address what Sabre says calls a refocusing of spending on its most profitable services.

Given that most of the layoffs were of positions at the vice-president level and above, the company is taking a $25 million charge in severance payments.

But it expects to gain $110 million a year in cost savings, which would be plowed into developing retailing solutions for airlines, a better version of its property management system for hotels, and better security for its IT systems and software solutions.

“It’s a tough decision,” says Sean Menke, the company’s chief executive. The restructuring, he says, is intended to transform Sabre into a leaner, more competitive business. “This is a year of transition,” he adds.

The job cuts come with an executive shake-up as the first major management moves taken by Menke since he took the helm seven months ago.

Menke has recently filled new executive positions to oversee the company’s airline distribution division, its airline IT solutions business, and its hotel enterprise software division.

Menke says he expects to make one more executive hire in the next month and that will complete his executive team.

Menke says the company has completed a strategic review of its various arms. Most dramatically, it has decided to “de-emphasize” the support of some products in its Airline IT services business and to shift investment to a greater focus on building a next-generation passenger services system, a platform that airlines use to handle reservations.

Cooled Growth

At its second-quarter earnings announcement Tuesday, Sabre confirmed how the company’s pace of revenue growth since going public in 2014 has cooled off.

In the second quarter, Sabre saw revenues rise to $900 million, a seven percent increase from the same time last year — and a slower pace than the double-digit growth numbers the company used to report.

Net income fell, with the company reporting a net loss of $6 million for the quarter, compared to a $72 million profit in the period a year earlier. Across the six months through June 2017, operating profits dropped 42 percent compared with the same period the previous year.

Growth was dented by the hiccups at a couple of airline customers, the company claims. Air Berlin and Alitalia have faced financial difficulties, which cost Sabre lost revenue.

But this spring Sabre also lost Southwest as a customer to rival tech provider Amadeus, which the company says will cost it about $50 million a year in lost full-year revenue next year.

A data breach in Sabre’s hotel enterprise platform also hit the company’s bottom line. Company chief financial officer Rick Simonson says an unauthorized user gained access to the system and its customer payment card information, gaining access to a limited subset of hotel credit card reservations.”

The cost of fixing the problem and helping out hotel group customers is “in the mid-single digit millions for the second quarter” and will be in “the mid-single digit millions” again between now and the end of the year. (For more, see “Data Breach at Sabre Hits Four Seasons and Other Hotels.”)

As a side note, Menke in the past month has created and filled a new chief information officer role to manage data security better and prevent data breaches like the one reported in May from happening again.

Menke says another investment priority is to upgrade the speed of Sabre’s tool for shopping for fares which online travel agencies such as Expedia Inc. rely on.

Sources tell Skift that Expedia has complained to Sabre about perceived slowness in Sabre’s systems. Menke says his company will begin migrating to a faster and more flexible system by year-end.

Menke also wants an accelerated rollout of the next generation of the company’s SynXis property management system for hotels. Its most high profile hotel group enterprise client is Wyndham, which it is helping to go from four central reservation systems to a single one, a Sabre SynXis product — a brand-by-brand migration that will last until early 2018.

Menke also says that a new desktop reservation system for travel agents, Sabre Red Workspace, has begun to be rolled out with Australian travel agency Flight Centre being the lead launch partner in the next few months.

Weakness in Asia

Sabre notes that its revenues are dominated by its air distribution business, in which it plays technological middleman to airlines and online and bricks-and-mortar travel agencies. In the past year, it says it has lost three-quarters of a percentage point of global market share to its rival Amadeus. (It also competes with Travelport and TravelSky.)

Sabre says it had a particular weakness in Asia. This weakness has come about despite Sabre having acquired Abacus, an Asia-Pacific-focused global distribution system, two years ago.

What it does not say — but which industry insiders tell Skift — is that Amadeus has had a few years of greater success in selling a passenger service system to low-cost carriers in Asia-Pacific. Amadeus recently has been tipping some of those Sabre SuperSonic customers over to Amadeus’ own passenger services business. This has helped to drive its market share gains at the expense of Sabre.

Speaking with investors on a call, Sabre executives cite weakness in India as a particular driver of the slow performance in Asia.

Some industry insiders speculate, based on perceived hints Sabre executives have made during talks in front of investors, that Sabre will make some move, possibly an acquisition or other investment, to double down on India and become more competitive in that market.

Executives offered no commentary during the call on reports that came up during the Amadeus earnings call earlier this week suggesting that Sabre was offering increased incentives to agencies to steal share.

If 2017 is “a year of transition,” 2018 is shaping up to be more of the same, as executives forecast the revenue and profit picture will be the similar. They predict a “muted” first half of 2018 — due to a slower pace of discussions with airlines about renewals and signing up new customers.

For more context, see Skift’s May interview with Sabre CEO Sean Menke.