Growing corporate travel spending and the effects of consolidation characterized fourth-quarter earnings reports from the likes of American Express, Cendant Corp., Navigant International and Sabre Holdings. Amex and Cendant reported record fourth-quarter results, while year-over-year comparisons for Navigant and Sabre were negative.
At Amex, corporate spending on travel and entertainment grew in the final quarter of 2003 at a year-over-year rate of 10 percent, compared with 7 percent in the third quarter and no growth during the first half of the year. "The month of December was stronger than the first two months of the quarter," said Amex CFO Gary Crittenden. "Corporations are increasing their T&E-related expenditures, after three years of working to contain them."
Amex reported record quarterly net earnings of $763 million, with its Travel Related Services division clocking 10 percent higher net earnings of $606 million.
The Rosenbluth International acquisition
(BTN, Oct. 20, 2003) added $510 million in travel sales for the fourth quarter, said chairman and CEO Ken Chenault last week, adding that 2004 differs from the past few years as it offers "more opportunities than challenges." Crittenden last month said the Rosenbluth buy and "an improving sales environment" increased travel revenues by 21 percent, while 2 percent lower overall headcount was offset by the addition of 2,700 Rosenbluth employees.
In separate announcements, Amex said the Eclipse Advisors consulting unit obtained with Rosenbluth has encompassed Amex's own consulting division and will "function independently as a wholly owned subsidiary." Also, former Rosenbluth COO Ron DiLeo was named senior vice president and head of corporate travel in Europe.
Fallout from the Amex-Rosenbluth consolidation, in terms of new RFP activity, could pick up during the second or third quarters of this year, according to Navigant chairman and CEO Ed Adams. Navigant also cited rebounding corporate T&E spending into the current quarter and anticipates further increases in its earnings during 2004. Adams characterized the company as "guardedly optimistic about 2004 and beyond," as it posted a net loss of $6.7 million for the quarter, impacted by debt restructuring and one-time charges. Revenues were down 1 percent year over year.
On the M&A front, Adams said, "there are some very good possible acquisition candidates out there, mainly in North America. We haven't concentrated a whole lot outside North America." Adams identified "this quarter" as the time that small Navigant acquisitions would first surface. "We probably have six or seven active deals open," he noted.
The acquisition and subsequent integration of GetThere by Sabre Holdings took a toll in the fourth quarter, as a $14.4 million facilities charge related to the integration put into the red what otherwise would have been about a break-even quarter. Sabre's net loss was $13.8 million on 3.2 percent higher revenue, to $467.3 million.
Sabre was optimistic about its place in the industry, noting that the rate of bookings shifting away from it slowed in recent months, partly because corporate travelers and managers regained confidence in the global distribution system. Sabre in 2003 acquired a large portion of the airline industry's Web-only content in exchange for discounts off the fees it charges the carriers, a factor new president and CEO Sam Gilliland said has cut the rate of bookings shifting away from Sabre to 3 percent 4 percent from 5 percent. He agreed with one analyst who posited that the rate of channel shift at 3 percent to 4 percent "would continue to moderate" if corporate travel picks up in 2004.
Competitor Galileo's discount-for-content deals now cover about 70 percent of U.S. air booking fee revenue, said Cendant chairman, CEO and president Henry Silverman, claiming the agreements "ensured our critical role." Noting Cendant will "not undertake any transforming events" in 2004, Silverman did allow for the possibility of so-called "tuck-in" acquisitions. Cendant's travel distribution division reported 3 percent higher fourth-quarter revenues, despite a 2 percent reduction in Galileo's air travel sales.
Sabre reported a 1.8 percent increase in total bookings for the quarter, versus Galileo's 3 percent drop.