There’s no let-up in Sabre’s full-throttle technology transformation with Google, but there's a risk it could alienate some customers along the way.
While most travel companies focus on making it through the rest of this year, Sabre still has its gaze fixed further ahead. Or more specifically, the year 2025.
The Southlake, Texas-based technology company has long debated its vision of personalized retailing by that point, and coronavirus hasn’t dented its appetite.
Speaking during Sabre’s third-quarter results earnings call, executives discussed how a partnership with Google would dramatically lower costs.
Savings will be needed. Sabre’s third-quarter revenue totaled $278 million, with a net loss of $312 million. While that revenue outshines the previous quarter’s $83 million figure, losses remained relatively high (they totalled $384 million in the second quarter) due to Covid-related costs.
But as part of Sabre’s 10-year deal with Google Cloud announced in January, it expects an “incremental $75 million per year of fixed technology cost savings,” once it migrates to Google’s platform, said Sabre’s chief financial officer Doug Barnett. These can be expected from 2024, and are also in part due to an outsourcing contract with DXC.
“We’re already doing great things with our products, and this is just going to pole-vault us even further into opportunities to continue to accelerate wins in the future,” said Sean Menke, Sabre’s president and CEO. “It’s aligning to what the marketplace needs to do.”
Does getting into bed with Google, which has its own travel ambitions, alienate some of Sabre’s relationships with its own online travel agency (OTA) customers?
“We have to look at airlines, hoteliers, and how we are helping them create new products they can sell,” said Menke. “At the same time, we have to be thinking about OTAs, travel management companies, and bricks and mortar agencies. How do we make sure these new offers are pushed through to the agencies that want to sell them?”
Meanwhile, the Google collaboration goes some way to compensate for the failed Farelogix acquisition. On Wednesday, Sabre announced it will launch early next year a “smart, scalable retail engine” — its first product to be powered by its proprietary Sabre Travel AI technology, developed with Google.
“This AI integration, innovation framework, on the merchandizing side… it’s essentially a Farelogix replacement,” Menke said.
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While the quarter saw fewer cancellations, distribution bookings were still down 86 percent compared to the 2019 quarter. There may be a lot of talk about technology, but Sabre still needs customers. A notable win in the quarter was its renewal of a long-term, worldwide distribution agreement with American Airlines.
“We continue to win new business and lock in long-term commitments with some of our largest customers and have signed 1,400 individual airline and agency deals year-to-date,” said Menke.
However, talks are still ongoing with two major airlines.
In August, Southwest Business’ vice president David Harvey told Skift he wouldn’t renew a contract with Sabre at the end of the year. “As we look at our long-term strategy, that platform is limiting. We’ve been actively negotiating for two years. We need to move on,” he said.
In May, Lufthansa Group informed its travel agency partners its fares would soon be removed from the global distribution system, although more recently Tamur Goudarzi Pour, the airline’s senior vice president revenue management and distribution, recently told Skift “intensive discussions” were back on track.
Dave Shirk, Sabre Travel Solutions president, told Skift he echoed those sentiments. “We feel very good about getting to a situation that will benefit and balance the entire travel ecosystem with the relationship we’re working through right now.”
With Southwest Airlines, Shirk said Southwest continues to be an important customer for its Intelligence Exchange platform. “As far as a GDS, we continue to engage in open dialogue and are looking for something again that will balance the ecosystem.”
For the next quarter, Barnett said he expected Covid-related costs to impact $90 million, which included severance payments. The company also has $1.7 billion in cash to see it through.
Like its rival Amadeus, which has similarly earmarked cost reductions for the years ahead, Sabre will look back on 2020 as a year of difficult decisions. But its decision to work so closely with Google means its fortunes are closely aligned for the foreseeable future, and it will be expecting results by 2025.
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Photo credit: Sabre signed a 10-year deal with Google Cloud in January. Associated Press