Travelport Limited executives last week raved about corporate travel demand during a conference call with investors and analysts about the company's fourth-quarter 2010 results, which included a $69 million net loss versus a slight profit a year earlier.
Overall, Travelport GDS in the December quarter processed about 1 percent fewer transactions worldwide than during the prior-year period. Volume rose 8 percent in Asia/Pacific and 2 percent in Europe, but fell 3 percent in the Americas and 9 percent in the Middle East and Africa region.
Among corporate travel management companies, though, segments processed in the December quarter rose 11 percent, and Travelport is "seeing that at roughly 12 percent to 13 percent here in Q1 so far," according to president and CEO Jeff Clarke.
Pre-tax earnings in the Travelport GDS segment fell 10 percent as net revenue dropped 3 percent and pricing (revenue per available segment) dropped 2 percent in the quarter. Pricing fell 1 percent during the year and Travelport officials warned investors to expect continued low single-digit percentage decreases. Clarke later referenced an "inability to raise prices." On the cost side in Travelport's "highly competitive" market, CFO Philip Emery pointed to ongoing growth in travel agency incentives of "around mid-single-digits."
Clarke said he was "reasonably pleased" with the company's current performance "given all the things that are going on," including the tragedy in Japan, unrest in the Middle East and higher interest rates. [The company's net debt at year-end was $3.4 billion, which it expects to reduce when its planned $720 million sale of Gullivers Travel Associates closes in early May.] Segments booked by Travelport's GDSs globally were up about 3.5 percent in January and February, Clarke said, but turned to 1 percent lower during the second part of the March quarter following these "macro events." He added, "we're seeing a slowdown in pretty much every market across the world, and overall for us Q1 is flat."
Another "headwind" for Travelport in 2010 was a $25 million reduction in business from Delta Air Lines following its acquisition of Northwest Airlines. Travelport's other major reservations system customer, United Airlines, is expecting in 2012 to move its merged airline to Continental's system (provided by Hewlett-Packard), according to a recent United presentation. "It will be a transition where we have cash flows coming from UA until it's finished, and we're not sure when it will be finished" Clarke said today.
Meanwhile, Travelport GDS booked 20 percent more hotel room nights globally in the fourth quarter than in the prior year.
Travelport Limited announced flat fourth-quarter and full-year adjusted earnings before interest, taxes, depreciation and amortization of $139 million and $629 million, respectively, although it said EBITDA would have increased 10 percent if not for currency fluctuations and one-time items.
Clarke was asked to comment on the AA Direct Connect situation and said only that AA bookings drive less than 3 percent of Travelport's revenues and margins. "It's not a big swing in our financial results," he said, after noting that Travelport processes bookings that drive upwards of 16 percent of AA's revenue.
The article originally was published in The Beat.