Amadeus’ Full Recovery Is Getting Closer, But It’s Not Here Yet

Despite a strong first quarter for Amadeus, analysts question whether post-pandemic recovery is taking longer than expected. 

Amadeus had significant increases in all sectors of its business, as it highlighted during an earnings call on Tuesday. 

The Spain-based company primarily operates the world’s largest global distribution system, which provides information that travel agents and others use to provide booking services to customers. Amadeus also offers software for travel agents, hotels, airlines, and other travel companies. 

Air distribution revenue had the biggest growth last quarter, up 52.2 percent to €678.9 million ($743.8 million). Air tech services revenue was at €424.9 million ($465.5 million), up 35.7 percent, and revenue for the hospitality and other solutions sector was at €207.5 million ($227.3 milion), up 31.3 percent.

Total revenue for the quarter was €1.3 billion ($1.4 billion), up 43 percent.

Amadeus achieved its first year of profit since the pandemic in 2022, and that trend is continuing this year. Adjusted profit increased 187.6 percent last quarter to €273.1 million. 

Still, air distribution revenue for the first quarter of 2023 is far from the €839.9 million ($920.3 million) that it was in 2019. 

While there have been predictions in the past that air distribution might fully recover next year, analysts questioned whether it might happen in 2025 or even later. 

Amadeus is not sharing predictions beyond 2023, said president and CEO Luis Maroto, but the company expects continued growth. Exactly how that looks is uncertain, however, because various factors are involved. Corporate travel may not fully recover until 2025, while leisure travel is continuing to recover more rapidly — Asia Pacific traffic for Amadeus was up 150 percent last quarter. 

“Our assumption is, clearly, that things will keep recovering as we have seen during this year and we continuously see as we speak,” Maroto said.

Amadeus stock was trading at €63.44 Tuesday morning, up 28.7 percent year to date. 

Continued Tech Investment 

Maroto said the company is still highly focused on upgrading its technology and services, including its growing hotel tech products, payments services, and migration to the cloud. 

The plan for Amadeus is that its cloud migration in partnership with Microsoft will be complete in 2026. Sabre’s target is to complete most of its migration to Google Cloud by the end of 2024, and there was a question as to whether Amadeus should speed up the process. 

“No, we are not accelerating. We are really doing as we expected. It’s a complex project that has timelines,” Maroto said. “We have already started to see costs of the cloud migration into our [profit and loss statement] this year, and therefore we’ll keep with the plan that we had originally.”

Amadeus and other distribution companies are also growing new distribution capability (NDC) services, a next-generation distribution system that’s meant to enhance communications between airlines and travel agents without the traditional global distribution system intermediary. 

American Airlines in April stopped selling almost half its airfares through traditional channels, instead selling them exclusively through its own website and NDCs. Despite industry criticism about shakeups caused by such changes, Amadeus and others want to make sure they can offer the NDC option if that’s what airline customers choose to use.  

“Some airlines have different strategies around the world. What is important for us is to really have a solution and keep the platform attractive enough for all airlines and the travel agencies to be part of that,” Maroto said.

While NDC is still a small share of the overall distribution, Maroto thinks that could change in the next couple of years. 

Many of the air distribution contracts that Amadeus is signing include some NDC component. Most recently, British Airways said NDC content is now available to travel agencies through the Amadeus platform. 

“We are working to really make that seamless and a good reality. It will still take, in my view, some time until this is fully implemented process,” Maroto said. “I believe 2024 will be a year where the volumes could start playing a relevant size.”