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Amadeus is the world’s largest provider of ticket distribution and operational software for airlines. So if you’re looking for flickers of optimism about a recovery in travel — especially in the corporate travel and international leisure travel segments that Amadeus specializes in handling — you will be disappointed in the numbers it reported as part of its financial filings on Friday.
The volumes of tickets that Amadeus processed for travel agencies in the first half of July were almost no better than it handled either in the first or last halves of June. Amadeus travel agency air bookings in the first half of July contracted by around 95 percent year-over-year, compared to the same period in 2019. The company had a corresponding percentage decline in bookings in the first half and the second half of June 2020.
Compared with May, things were a little better, but the reduction in awfulness was modest. The first half of July’s performance was about 10 percent better than in the first half or second half of May. Caveat: Amadeus has little share in China, which is further along in a domestic travel rebound than Europe and the Americas.
As you would expect, the poor booking volumes hurt Amadeus’s revenue and profit.
“It was the toughest trading quarter in our history,” said president and CEO Luis Maroto in a call with investors on Friday.
Maroto referred in his remark to the second quarter, which represented the pandemic’s first peak in Europe and the Americas. Amadeus saw negative revenue in the three months ending June 30. That means the company paid out $17.7 million (€15.9 million) more in owed money than it collected in the quarter. For comparison’s sake, the company generated about $950 million (€797 million) in the second quarter of 2019.
Amadeus began feeling the impact of the pandemic at the start of the year when coronavirus emerged in China. During the first six months of the year, Amadeus saw its revenue contract by 54.7 percent year-over-year to $1.52 billion (€1.28 billion). Amadeus saw a decline of 83.6 percent year-over-year to $230 million (€194 million) in its earnings before interest, taxes, depreciation, and amortization.
The brightest note in Amadeus’s earnings call was that it revealed that it had recently signed an airline which had boarded more than 40 million passengers a year for one of its passenger service systems, a key piece of operational technology for airlines, as first called out by Neil Steer, a research analyst at Redburn.
Amadeus executives declined to name the airline or say if it had won the business away from a competitor.
“We don’t see any major change in the competitive dynamic,” Maroto said.
Executives at Amadeus seemed to speak Friday in more guarded terms about the harsh operating environment than they had before. Analysts might interpret the remarks as reflecting caution about the travel sector’s recovery. Or they might construe the commentary as the habit of Amadeus executives to manage analyst expectations so that the company can beat those expectations later.
Executives said they saw a path to profitability even if the sector’s struggles last through 2021. They said Amadeus had access to financial liquidity worth about $4.74 billion (€4 billion). The company has also cut costs. A combined workforce reduction and operational programs will result in a fixed cost and capital expenditure reduction of about $295 million (€250 million) in 2021 relative to 2019. These cuts come beside $350 million (€300 million) in annualized cost cuts the business announced in March.
Maroto said Amadeus would speed up a digitization effort to create a more integrated process for sales and implementation of its services. He also said the company would simplify and standardize many of its workflows and integrate its services and commercial operations portfolio.
To simplify its business and customer unit structure, the company said Friday it had brought together its distribution and airline information technology businesses in a wider transversal and platform-led customer unit under Decius Valmorbida, who before led the distribution unit alone. This move appeared to make Valmorbida the next-most influential person at the company after CEO Maroto and Ana de Pro, the chief financial officer.
As part of its reframing and consolidating of its technology and operational resources, Amadeus made Christophe Bousquet its chief technology officer along with his role until now as head of airlines research and development.
“Additionally, we are speeding up our adoption of agile, lean, and similar software development methodologies to become nimbler, driving faster times to market and increasing productivity and quality, whilst delivering higher customer engagement,” Maroto said.