Positive trading updates from all three main GDSs bodes well for the travel industry although it hasn’t blunted the competitive edge between Amadeus, Sabre and Travelport.
Positive first quarter trading from the GDSs underlines their enduring value, claims Travelport boss
Positive trading updates from all three main GDSs bodes well for the travel industry although haven’t blunted the competitive edge between Amadeus, Sabre and Travelport.
Speaking to Travolution as Travelport released its first quarter results yesterday, Gordon Wilson, the firm’s president and chief executive, echoed a general sense of optimism.
He said a genuine like-for-like comparison between the three firms should discount IT solutions, which accounts for just 1% of Travelport’s business, and Sabre’s acquisition of Abacus, the Asia Pacific GDS.
Wilson said this leaves a more comparable sense of the underlying growth in the trio’s core air fare and travel product distribution businesses.
This, he said, saw Travelport and Sabre grow 7% in the three months to the end of March while Amadeus was 5% up.
“It’s good for the industry when we are all doing well,” said Wilson. “People have been talking about the demise of the GDS for as long as I can remember.
“But here they are, all three with robust, strong, profitable, growing businesses. Look at other sectors, not many are showing top line revenue growth.
“It shows the value of GDSs and how well these companies are run and how they’ve got a long-term future.”
The current low-fuel prices airlines are enjoying do not have a direct impact on Travelport, as it operates a transactional model, said Wilson.
But he said it does have a general impact on capacity and frequencies and GDSs benefit when there is heightened supply in the market.
“In a world where fuel is $35 a barrel airlines will run frequencies and routes they may not when its £100. At the moment there’s more capacity than demand it would appear,” he said.
Travelport believes it is leading the way in air merchandising and today announced an enhanced partnership with Air France KLM to join its Travel Commerce Platform.
Wilson said while this was a good area of growth for Travelport the rate will slow this year as “it laps itself” due to the sheer number of airlines – now 160 – signed up to use it.
Travelport says airlines are improving their merchandising capabilities by adding fare families, promoting ancillaries better and developing more personalised deals.
And Wilson said this “brings into question what problem Iata’s New Distribution Capability was brought in to solve”.
Merchandising is helping Travelport continue to increase RevPas (Revenue per Available Segment). This key metric was up 12% in the first quarter to $6.43, mostly driven by the air sector.
However, Wilson expects Travelport’s ‘Beyond Air’ growth to further outstrip air, as area like payments, via subsidiary eNett, continue to grow rapidly.
Beyond Air represented 23% of Travelport’s Travel Commerce Platform revenues in the first quarter and Wilson said it was on track to hit a third of business by 2018.
The timing of this week’s positive trading announcement from the three major GDSs and a much more downbeat update from Lufthansa was not lost on Wilson.
The German carrier imposed a controversial €16 per person GDS charge earlier this year prompting claims the airline had underestimated the true value of third party distribution.
Lufthansa blamed pricing pressures after it sank into the red in the first quarter, but Wilson said the carrier was “pricing itself aggressively to fill its planes”.
He gave a personal example of an international flight he is taking for which Lufthansa came in at a third of the price of BA, although it did include a transfer.
Wilson said GDSs have always been a channel capable of driving higher value corporate and long-haul leisure bookings
Travelport’s recently announced enhanced agreement with BA parent IAG and the new deal with Air France KLM suggests “no one else is following suit”, said Wilson.
