Travelport Adjusts Fees and Technology to Navigate the Recovery

Travelport's business used to be predictable and low stakes. The transaction processor — which acts as a distribution middleman between travel agencies and airlines — consistently squeezed out modest revenue growth while routinely rolling over and whittling down about $2 billion in debt. Yet the pandemic strained its model, and the management team led by CEO Greg Webb must sail through a narrow passage and across turbulent waters. The pandemic caused business travel to crater, slashing Travelport's revenue by 70 percent in 2020, according to Fitch Ratings. Net debt ballooned to about ten times earnings, and Fitch has forecast that the debt ratio may last until "at least 2023." Travelport's financial shock absorbers lack vital padding. As of the end of March 2021, cash on its balance sheet stood at $114 million, after a total cash burn of $131 million in the first three months of the year, Fitch said. The second quarter was tracking to be better, however. The debt problem isn't management's fault. The pandemic wrong-footed Travelport's financial sponsors. When activist investor Elliott Management and private equity firm Siris Capital bought Travelport for $4.3 billion in 2019, they planned to generate significant cash by selling the company's majority stake in eNett, a business-to-business payments company. But the pandemic crushed eNett's value. Travelport had to sell its stake in the subsidiary and a sister company to Wex for $577.5 million in cash — far less than the $1.7 billion that Travelport had agreed on as a price before the crisis. Signs of Optimism Vaccinations may be bringing leisure travel back sooner than expected in some markets. Rival Sabre said on Wednesday it forecast its second-quarter revenue to be between $400 million and $420 million, which is higher than analyst estimates had been, thanks to "higher travel volumes." Travelport may similarly be seeing better-than-expected leisure travel. In a ray of sunshine after months of gloom, business travel may also rebound faster than expected in key markets. JP Morgan Research this month published a survey of 1,000 European travelers. The results suggested that, by 2022, European business travel patterns could be back to 2019 levels as companies race to reconnect with their customers, partners, and suppliers. That's a more optimistic take than the conventional wisdom. A quicker business travel rebound would be welcome news to Travelport, the third-largest global distri