Amex GBT Losses Underscore Business Travel’s Incredibly Sluggish Recovery

A large gap still exists between pre and post-pandemic business travel volumes, going by American Express Global Business Travel’s latest full-year results. Amext GBT, because of its scale, is often a bellwether for corporate travel trends.

Amex GBT posted sales of $34.1 billion in 2019, while for the 12 months ended Dec. 31 it notched up about a quarter of that figure.

“We ended 2021 on a high note despite the Omicron impact in December, with financial results for the full year well ahead of our adjusted (earnings before interest taxes, depreciation and amortization) forecast driven by a 119 percent increase in fourth quarter revenue and efficiencies from continued cost discipline,” said Paul Abbott. “We believe the business travel recovery is well underway and is gaining momentum with transactions reaching 51 percent of 2019 levels in the last week of February 2022.”

That was a 23 percentage point improvement versus mid-January. Still, business travel is still nowhere near its pre-pandemic levels.

And the numbers can become a little clouded, owing to Amex GBT’s acquisition of Egencia as well as surprise purchase Ovation Travel in January last year, but the headlines for the world’s biggest corporate travel agency include a loss of $340 million (on an adjusted EBITDA, or earnings before interest, tax, depreciation and amortization, basis), when including two months of ownership of Egencia. That’s after revenue of $763 million, based on total transaction volume of nearly $7.8 billion.

Pro forma for 12 months of Egencia ownership, Amex GBT reported a full-year 2021 loss of $520 million on an adjusted EBITDA basis, with revenue of $889 million.

Amex GBT plans to go public by merging with an Apollo Management-backed blank check company in the first half of year, and said the $520 million loss exceeded the forecast provided in Apollo Strategic Growth Capital’s registration statement by $37 million. Its financial results are preliminary and unaudited.

Subdued Recovery Ahead

The results are a marginal improvement on the $363 million loss in 2020, which came after $793 million revenue, and just over $5.9 billion in total transaction volume. But speaking at an online conference last week, several travel managers revealed only a slight rebound in corporate travel, including Bank of America. It has 140,000 staff, and had only recently recovered to 20-30 percent. Software firm Automation Anywhere was at just 10 percent of 2019 travel levels, while Snapchat’s travel manager said his company trips were back up to about 40 percent.

Acquisitions Are Paying Off

By buying Ovation and Egencia, Amex GBT said it had doubled its footprint among small and medium-sized clients, which now represent 45 percent of its total revenue. They now make up its fastest growing and most profitable customer segment, but the agency also expects to save money as part of its Egencia deal, and realize $109 million in total synergies, including $25 million in 2022.

Owning Egencia also means offering those clients the special fares Amex GBT has negotiated with airlines. “Since Amex GBT’s acquisition of Egencia closed in November last year, we have been focused on using our new ownership structure to deliver tangible, bankable value to customers,” said Mark Hollyhead, president of Egencia. “In a short space of time, we have brought even more choice to the Egencia Preferred Rate program for more substantial saving opportunities and differentiated content.”

In terms of bigger customers, Amex GBT secured $3.7 billion in total new wins value, including Hewlett Packard, Standard Chartered and Palo Alto Networks. And so far in 2022 it has secured contracts with Raytheon Technologies and Ferrero Group. At the end of January, it was awarded a place on the Crown Commercial Service’s new procurement framework so it can supply government departments and the wider public sector with business travel.

How do the numbers shape up against other travel management companies? Australia’s CTM reported underlying EBITDA of $13.2 million for its 2022 first half (covering the six months to Dec. 31, 2021), compared to $11 million in the same period last year. It said it won new corporate business worth $3.27 billion.

The next few months will be critical for the agency during the build-up to its public listing, having spent the year laying the groundwork for the future.

In December 2021, Amex GBT bolstered its liquidity by establishing a $1 billion term loan facility under its amended credit agreement, and it expects to raise $1.2 billion of gross proceeds as part of its blank-check deal. “We expect our pending business combination with Apollo Strategic Growth Capital to provide access to the capital required to accelerate our growth strategy,” Abbott said during a conference call on Monday.