There could be some Travelport drama in the second half 2018, given that New York-based activist investor Paul Singer of the hedge fund Elliott Management recently took an 11.8 percent stake in the UK-based travel technology group.

But the shape of things to come are unknown. During Thursday’s first quarter earnings call with investors. executives declined to discuss the demands of the fund — which has enough cash to buy the company and take it private.

Travelport CEO Gordon Wilson only said that his team had been having “constructive conversations” with the fund’s representatives.

Elliott has said that it is prodding the board to review the technology company’s operations.

Flat Performance in the Core

Travelport recently lost a distribution contract with Flight Centre, one of the largest travel agencies in Australia and New Zealand, and Travelport rivals Amadeus and Sabre picked up the pieces. That loss hit the tech company’s adjusted, earnings before interest, taxes, depreciation, and amortization (EBITDA), a measure of operating earnings frequently used by financial analysts, by nine percentage points.

It counterbalanced that loss with share gains in Asia, via deals with India’s online travel agencies MakeMyTrip and Yatra and with leading Indian airline Indigo. Travelport believes those gains can continue. It has about a third of the online travel agency market in India and may boost that to half, it claimed.

The gains compensated for the Flight Centre loss in the core distribution business, leaving the unit essentially flat for the quarter, year-over-year.

The company had a significant long-term renewal of its distribution contract with Priceline.com, which assured stability for its share in the North American market. Priceline is one of about 40 online travel agencies that have signed on to use Travelport’s recently introduced APIs (application programming interfaces, which are a method for retrieving data) as a more sophisticated way of displaying airline branded content.

Payments Potential

During the quarterly call, analysts focused most of their questions on Travelport’s majority-owned payments division, eNett, which saw its net revenue grow 81 percent, to $74 million, in the first quarter.

The eNett growth was mainly due to an increase in the volume of payments settled with existing customers rather than gains of new customers.

Analysts were puzzled why Travelport has had surprisingly modest growth forecasts in its financial guidance for the commercial payments unit for the second half of the year.

“We’re hedging our bets,” explained Wilson, referring vaguely to uncertainties. One factor he named was the possibility that some of its customers would stop being enthusiastic about using the tool.

Perhaps the unspoken assumption was that eNett might not be part of Travelport’s business by year-end.

Spinning off eNett might bring a short-term gain in a profitable sale. The unit has lower margins than Travelport’s core business, and it is forecast to contribute less than 10 percent of Travelport’s total revenue for 2018.

Activist investors sometimes prod companies to spin off certain business units under the theory that the parts can be greater than the whole.

Without eNett, Travelport may find it harder to impress the public markets with its performance unless it enjoys a long-promised sudden uptick in business, or “share of wallet,” from existing customers. At least, that is one conclusion to draw from the company’s modest first quarter earnings uptick.

Performance

Travelport reported steady performance in line with its forecasts in its first-quarter earnings 2018 report on Thursday.

“We are ahead of our expectations for the year,” said Wilson.

But those expectations were modest, and when you factor out eNett, essentially flat.

Wilson talked up how all early signs show that this content and the way of displaying it leads to higher transaction volumes with the potential for Travelport for promising commissions.

As context, Travelport is one of the three biggest travel distribution technology companies, along with larger rival Sabre, which similarly reported strong earnings on Tuesday — a reflection of stronger-than-expected, industry-wide spending on travel in Europe and North America in early 2018. The other leading peer technology company, Amadeus, reports its earnings on Friday.

Catch the CEOs of Travelport and Sabre and the top distribution executive at Amadeus speak at the June 12 Skift Tech Forum in Silicon Valley.

Photo Credit: Operating from the Langley, UK office, Travelport's executive management team includes, left to right, Stephen Shurrock, Bernard Bot, Margaret K Cassidy, CEO Gordon Wilson, Rose Thomson, and Matt Minetola. The company reported first quarter 2018 earnings on Thursday. Travelport