Distributors Saw Uptick Toward End Of Second Quarter

Most corporate travel distributors suffered lower year-over-year revenues in the second quarter ending June 30, but all saw reason for optimism as transactions began to rise in annual comparisons toward the end of the three-month period.

According to Navigant International, transaction levels near the end of June were "almost flat," compared with the same period last year, while the three-month period ending June 30 as a whole was down 10 percent. Navigant officials increased their earnings expectations for the third quarter and were hopeful that 2003 transactions would turn out to be down 3 percent to 5 percent from last year.

"The corporate travel industry is making a gradual recovery from its spring 2003 low," said Navigant CFO and COO Bob Griffith. "We're seeing a slow, but hopefully sustainable, uptick," he added, noting that September is the crucial month for the third quarter.

Sidoti & Co. analyst David Gold was encouraged by Navigant's results and expectations. "This quarter came in on the high side, and that's great," he said. "Next quarter also is looking good. For annual comparisons, it's taken two to three quarters to bounce back from Sept. 11. Add in the war and SARS, and it seems we may have seen the lowest sustainable levels of corporate travel, where people have cut as much as possible."

Cendant officials said that for its distribution business, July was better than June, which was better than the prior months impacted by military action in Iraq. Galileo International's domestic air bookings were up 3 percent during the second quarter, but worldwide air bookings were down 10 percent and car/hotel reservations were off 1 percent worldwide.

At Sabre, worldwide air bookings fell 17.6 percent year over year during the quarter. The largest global distribution system provider's overall share of worldwide bookings fell 2 percent, which it attributed to the loss of two agency subscribers to a competitor last year. "By the end of the quarter, our demand levels, albeit in a state of flux, once again returned to pre-war levels," said Sabre chairman and CEO Bill Hannigan. Sabre said it expects third-quarter revenues to range between 3 percent lower to 4 percent higher year over year, though full-year revenues will take a hit from Sabre's new discount deals with most of the major airlines (see story, page 1).

According to Amadeus Global Travel Distribution, quarterly reservations fell in all regions except central and eastern Europe. "In June, the travel industry was clearly recovering on a global scale, with reservations growing in all regions except South America," the company said in a press statement. "This positive trend has continued through July." "While Amadeus was adversely affected in the second quarter of 2003 by the conflict in the Middle East and the SARS epidemic, as was the entire travel industry, our overall performance in the quarter allows us to believe that we will conclude the year positively," said president and CEO José Antonio Tazón. "For full-year 2003, we expect net income to grow over 5 percent."

Joining Expedia in bucking the trend of lower year-to-year performance, Amex's Travel Related Services division turned in 12 percent higher year-over-year earnings of $634 million—an all-time second-quarter high—on 6 percent higher revenues. The boost came mostly from small-business and consumer spending.

"While it's difficult to get too excited about the quarter's T&E-related spending, we have recently begun to see an improving trend," said American Express CFO Gary Crittenden. "There was slight improvement in the corporate business as we came through the quarter and exited with more momentum there than we started the quarter with. This is the first real time we're seeing encouraging signs of improvement, but there still are macroeconomic factors that are mixed."