Evercore ISI analysts are bullish on Amadeus. They like the strength of its airline IT business and expect the company to continue growing share on the GDS side. Evercore in a research report issued Jan. 4 raised its Amadeus outlook to “outperform” from “in line.” Amadeus’ gains would be losses for Sabre and Travelport, both downgraded by Evercore from “outperform” to “underperform.”
Amadeus’ global GDS market share by late 2017 had reached 42.4 percent, according to the report. Sabre had 36.4 percent and Travelport trailed at 21.2 percent. Evercore’s forecast assumed “sustained” annual GDS share gains for Amadeus of .05 percent to 1 percent. It cited the company’s “100 percent cloud-based” computing.
Amadeus distribution revenue also should benefit from Air France-KLM reverting to rack rates for GDS transactions. That’s because the airline company decided to start levying a GDS fee after not renewing a full-content agreement.
Evercore also expects Amadeus to gain share among online travel agencies, including in the United States, owing to “superior” technology.
Meanwhile, Amadeus has progressed in airline IT, which “creates synergies with the GDS business,” according to Evercore. Amadeus got a foothold in North America a few years ago when Southwest Airlines selected it to run the passenger service system. Last year, Amadeus landed a similar contract with Air Canada.
Evercore pointed to “10-plus years of investment in open system technology” by Amadeus, adding that “no one else has done this.”
The Amadeus Alteá PSS, the analysts suggested, is more advanced than the SabreSonic system. Travelport no longer plays much in airline IT. Overall, the Evercore report described Amadeus’ tech leadership as “insurmountable.”
“In contrast,” the analysts wrote, “restricted by substantial debt, both Sabre and Travelport have under-invested in technology relative to Amadeus, limiting their ability to hold market share with the exception of offering more generous commissions to travel agents, which will negatively pressure margins, earnings and cash flow.”