S&P: Pre-Pandemic Profitability For Travel Management Companies Is Three Years Away

Analysts at S&P Global Ratings do not expect travel management companies to re-establish pre-pandemic earnings until 2023. The credit rating agency made the note in a review last month of $400 million in new financing obtained by American Express Global Business Travel, which GBT CEO Paul Abbott addressed during a Monday interview.

“TMCs are affected not only by the overall decline in travel volumes but also by the loss of top-tier incentive payments from global distribution systems because of their inability to deliver sufficient volumes,” S&P wrote. “We expect the recovery of global business travel will lag the recovery of the leisure travel industry.” The firm downgraded GBT’s credit rating to “B” from “B+.”

S&P said it expected GBT to use borrowed funds for restructuring expenses as well as liquidity to weather the crisis. “We believe there is a greater likelihood that 2021 leverage and cash flow generation will be weaker than we previously expected due to our revised forecast for a slower recovery for business travel, the restructuring charges and the additional interest expense from the new debt,” according to S&P.

Analysts pointed to widespread availability of a vaccine as a prerequisite for recovery.

According to S&P, GBT’s second-quarter 2020 transactions were down 94 percent compared with a year earlier. S&P anticipated a total revenue decline of 60 percent for 2020. It estimated that GBT would outstrip its own earlier estimate of $650 million in cost savings for this year, though restructuring charges in the second half will blunt the benefit.

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Jay Campbell

Author: Jay Campbell

Jay Campbell in 2004 created travel business newsletter The Beat, in 2006 co-founded Travel Procurement magazine and in 2010 integrated them with Business Travel News. He served as editorial director until 2013. Jay made his travel industry media debut in 1993 at the Air Travel Journal of Boston while earning his undergraduate degree in journalism at Boston University.
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