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Amadeus Flags 'Weak Industry Backdrop' In GDS Business

Industrywide global distribution system air bookings faced a "weak industry backdrop" and contracted worldwide during the fourth quarter of 2019, Amadeus reported on Friday. That was before the coronavirus outbreak and its still-evolving effects stifled travel demand further in the opening months of 2020.

GDS air bookings processed by Amadeus, Sabre and Travelport tumbled 1.2 percent year over year for the three months ending Dec. 31, according to Amadeus's figures.

The worldwide GDS air booking environment, marked by varied ups and downs across world regions, was "broadly flat" year over year when excluding India's distribution market, which has struggled in the wake of Jet Airways' insolvency.

Fourth-quarter air bookings processed on the Amadeus GDS fell 1.5 percent year over year to 133.4 million. Non-air bookings, including hotel and rail, rose 4 percent to 16.9 million.

Amadeus' air bookings fell year over year in Western Europe (down 1 percent), the Middle East and Africa (down 4 percent) and Asia/Pacific (down 11 percent).

Amadeus attributed weakness in Western Europe, which is its largest GDS region and delivers a third of its air bookings, to "macroeconomic effects, bankruptcies and strikes (particularly affecting markets such as United Kingdom, Germany, France and Italy)." Meanwhile, India's GDS market weakness and fires in Australia hampered its Asia/Pacific performance.

Amadeus expects the coronavirus outbreak, born in China but spreading globally, to dent worldwide airline traffic, but reported "it is too early to understand the duration and severity," according to a financial filing.

Amadeus' year-over-year GDS air booking trends during the fourth quarter were brighter in North America (up nearly 4 percent), Central, Eastern and Southern Europe (up 7 percent) and Latin America (up 5 percent).

Amadeus' air booking market share among the three major competitors held largely flat year over year during the fourth quarter at 44.8 percent.

Sabre this week reported growth in fourth-quarter GDS volumes, owing to its outsize exposure to the growing North American region. Yet, Sabre reported the worldwide GDS business was down by "mid-teen" percentages year to date on the coronavirus impact.

Amadeus, meanwhile, reported its fourth-quarter distribution revenue rose 1.5 percent to €735.8 million, decelerating from prior quarters amid booking volume declines and softer growth in its distribution payments business.

Growth and strength in Amadeus' IT Solutions business offset the weakening GDS side of the house. IT Solutions, which includes its airline IT and passenger services systems business, saw revenue during the fourth quarter rise 13 percent year over year to €605.5 million.

Companywide, EBITDA rose 6 percent to €481.5 million in the fourth quarter.

Amadeus stated that go-forward revenue and EBITDA growth are "largely dependent on evolution of coronavirus."