Release Date: July 30, 2021
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Amadeus IT Group SA (XMAD:AMS, Financial) reported a positive trend in adjusted profit loss, showing improvement from the prior quarter.
- The company achieved a fixed cost reduction of EUR 168 million compared to 2020, demonstrating effective cost optimization efforts.
- Distribution revenue showed progress, declining by 66.4% versus 2019, an improvement from the 77% decline in the first quarter.
- The company signed 16 new contracts or renewals of distribution agreements with airlines, including Virgin Australia, indicating strong commercial momentum.
- Amadeus IT Group SA (XMAD:AMS) continues to see commercial momentum and positive engagement with existing and potential new customers.
Negative Points
- Group revenue declined by 56% in the second quarter of 2021 relative to 2019, reflecting ongoing challenges.
- Free cash flow performance amounted to a EUR 79 million cash outflow in the second quarter, impacted by unexpected working capital effects.
- Travel agency air bookings declined by 67.6% in the quarter compared to the same period in 2019, indicating a slow recovery in travel demand.
- Passengers boarded contracted by 67.7% in the quarter compared to the second quarter of 2019, showing a significant drop in airline traffic.
- IT Solutions revenue decreased by 42.8% versus 2019, driven by lower PB volumes, highlighting the impact of reduced airline traffic on the company's revenue.
Q & A Highlights
Q: Can you talk more generally around the appetite and engagement you have with airlines regarding renewing and broadening PSS?
A: We see a positive trend in upselling additional functionalities to our existing customers. Airlines are open to considering new solutions, and we have seen an increase in our upselling capabilities. For example, LOT Polish Airlines has taken a broader portfolio of our solutions, which is a trend we expect to continue.
Q: What is the customer penetration for NDC, and do you think everyone will eventually adopt it?
A: NDC is here to stay, but its penetration is still low. We expect it to increase over time as technology evolves and standards become clearer. However, it will take years for NDC to achieve significant traction and penetration worldwide.
Q: Can you talk more about the reduction in R&D and its impact on your hospitality plans?
A: We have reviewed our portfolio and prioritized strategic projects. The reduction in R&D has not impacted our hospitality business, which remains a key focus area. We are confident and optimistic about our future in hospitality.
Q: How is the Delta variant of the virus impacting bookings?
A: In July, bookings were more or less in line with June, despite the Delta variant. Domestic traffic continues to improve, and we have not seen a significant negative impact on overall figures so far.
Q: Should we expect positive cash flow in Q3 and Q4?
A: We expect free cash flow to improve progressively in the second half of the year. For H2, we anticipate being free cash flow positive, excluding implementation costs, assuming a recovery in volumes in line with IATA's projections.
Q: How does NDC change the comparability of offers seen by travel agents, and will you be incentivized by airlines for ancillary services?
A: NDC offers additional capabilities for airlines to differentiate their products. We aim to remain neutral and not promote one airline over another based on economics. Our goal is to provide the same capabilities to all airlines without discrimination.
Q: Can you provide more color on the revenue contraction in new businesses and the appetite for hospitality IT relative to airlines?
A: Our new business areas, including hospitality, have been growing and holding up better during the pandemic. We have revenue lines that are not transactional, providing support to our revenue performance. The appetite for hospitality IT remains strong, and we are optimistic about its future.
Q: What role can Amadeus play in addressing new travel requirements like tests and vaccination proof?
A: We are active in supporting travel recovery with our technology, integrating health information into departure control and boarding processes. We are collaborating with governments and carriers to simplify and improve travel processes, aiming to recover travel demand.
Q: Can you comment on your partnership with Hopper and its impact on your business?
A: The partnership with Hopper is very small and part of our open platform strategy. We work with many companies globally, providing connectivity and APIs. This partnership does not represent a significant change in our business model.
Q: What is the level of engagement with non-customers for Airline IT, and can we expect growth in the number of contracted airlines?
A: We are actively engaging with potential new customers and have a healthy pipeline. While it's difficult to predict exact contract signings, we expect the number of contracted airlines to grow as we continue our efforts to demonstrate the value of our solutions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
