Travelport Reports Declines, Sees Stability Ahead
Travelport GDS CEO and president Jeff Clarke today said processed segment decreases seen in the first quarter of 2009 have carried over into April and the first weeks of May as the global travel slowdown continues and even accelerated last week as the travel industry battled the economic impact of the swine flu.
Total first-quarter segments decreased 16 percent to 90.4 million, including a 16 percent drop in the Americas and a 17 percent fall internationally, compared with the first quarter of 2008. Along with lower demand, Clarke attributed segment drops to the continued reduction in global airline capacity.
During the company's first-quarter earnings call, Clarke said there has been further segment deterioration after the quarter as April segments decreased 17.5 percent and 21 percent the first week in May, pushed by the swine flu scare.
In the first week of May, Travelport had a 30 percent decrease in bookings to Mexico compared with the week before and cancellations exceeded bookings. "At this point, it seems to have stabilized," said Clarke, who expects the company to rebound to the level of declines seen in the first quarter.
Although the company tried to offset the significant drop in segments through massive cost savings initiatives, including a 17 percent reduction in agency inducements and commissions Clarke pointed to several investments the company plans to undertake this year, including the global rollout of its e-pricing system to Galileo and Apollo subscribers.
The company also is focusing on building out international markets, including the Middle East, where it launched new operations in Dubai, Saudi Arabia and Egypt and started new distributor relationships in Syria and Jordan. Meanwhile, segments decreased 21 percent in the region, but earnings before interest, taxes, depreciation and amortization grew 7 percent.
Travelport GDS net revenue decreased 14 percent to $511 million. EBITDA decreased 7 percent to $152 million. Travelport's results were aided by higher yields driven by more cancellations, according to Clarke. He added that while the company's online travel agency subscriber business is flat or slightly up, global accounts are down 25 percent year over year.