Amadeus Sees Travel Tech Profit Soar on a Rebound

Amadeus, the world’s largest travel technology firm, reported on Friday a significant second-quarter net profit as the travel sector sped up its rebound from the pandemic.

“We’re trying to come back to normality,” said president and CEO Luis Maroto during an earnings call. “The level of cancellations is normalizing. We have seen a strong rebound in business travel, and in the last part of the quarter, it has come very close in percentage terms to the levels we saw in 2019.”

Amadeus, a Madrid-based provider of software services to travel companies and distributors, generated a second-quarter profit after taxes of approximately $242 million (€237 million), versus a net loss in the same period a year ago.

Revenue was approximately $1.2 billion (€1.18 billion), down about 17 percent from the same period in 2019 but roughly double from a year ago.

There’s still more room to grow. The company has traditionally generated its most revenue and profit from international long-haul travel, which hasn’t yet come back fully in force, especially with little outbound travel from countries such as China and Japan.

Amadeus’ services to help airlines distribute their tickets to travel agencies processed 109.2 million air bookings during the quarter, down by roughly 24 percent from the same period in 2019. In July, passengers boarded was down only 19 percent from the year-ago period.

The company’s software that helps airlines manage operations helped with boarding about 397 million passengers in the quarter, down by approximately 22 percent.

Surprisingly, the company’s revenue per passenger boarded exceeded 2019 levels by 4.9 percent. Management’s mixed reasons included improvements in contract terms via renewals and incremental deals as well as positive currency exchange rate effects.

“Amadeus is well positioned competitive, with greater than 40 percent share in both GDS [global distribution systems] and PSS [passenger service systems for airlines], and likely continued market share gains in the future,” wrote analysts Varun Rajwanshi of JP Morgan in a recent report.

Amadeus also recently boosted its prospects in selling software services to hotel companies when it signed Marriott International as its second large customer for its central reservation system (following IHG, or InterContinental Hotels Group). The company’s unit for developing software for hotels and other travel segments was down just 6 percent from 2019, supported by volume growth and new implementations.

Amadeus spent about $465 million (€455.9 million) on group-wide research and development in the second half of the year and approximately $800 million (€765.2 million) throughout 2021, which some analysts believed was together more than its two second largest competitors, Sabre and Travelport, spent in the period. The company’s headcount is about 15 percent below its 2019 levels, but it is hiring.

Looking ahead, Maroto acknowledged that inflation and an uncertain macro-economic environment could cause headwinds for recovery, but the data hadn’t shown an impact yet.

The headwinds for the travel industry so far this year have instead been disruptions primarily in the airline sector preventing a resumption of full capacity because of staff shortages.

“The majority of airlines are quite positive on the rest of the year,” Maroto said. “The underlying demand may offset the potential macroeconomic environment, but this remains to be seen.“