Q1 2021 Sabre Corp Earnings Call
[music].
Good morning, and welcome to the Sabre first quarter 2020 One earnings conference call. My name is the China and I will be your operator as a reminder, please note today's call is being recorded I would now turn the call or two day, Vice President of Investor Relations. Kevin Crissey. Please go ahead Sir.
Thanks, and good morning, everyone. Thank you for joining us for our first quarter 2021 earnings call. This morning, we issued in the earnings press release, which is available on our website at investors that sabre dot com.
A slide presentation, which accompanies today's prepared remarks is also available during this call on the Sabre Investor Relations webpage.
A replay of today's call will be available on our website later this morning.
We would like to advise you that our comments contain forward looking statements that represent our beliefs or expectations about future events, including the duration and effects of COVID-19 industry trends expected advancements depreciation and amortization capital expenditures cost savings and liquidity among others.
All forward looking statements involve risks and uncertainties that may cause actual results to differ materially from the statements made on today's conference call.
More information on these risks and uncertainties is contained in our earnings release issued this morning, and our SEC filings, including our 2020 form 10-K.
Throughout today's call we will be we will also be presenting certain non-GAAP financial measures. All references during today's call to EBITDA operating loss and EPS have been adjusted to exclude certain items.
The most directly comparable GAAP measures and reconciliations for non-GAAP measures are available and the earnings release and other documents posted on our website at investors day at Sabre Dot com.
Participating with me are Sean <unk>, our Chief Executive Officer, and Doug Barnett, Our Chief Financial Officer, Dave <unk>, Our president of travel solutions and Scott Wilson, our president of hospitality solutions will be available for Q&A. After the prepared remarks, and with that I'll turn the call over to Sean.
Thanks, Kevin Good morning, everyone and thank you for joining us today.
Before we get into the details and trends from the first quarter I'd like to take a moment excuse me to highlight a few items.
First I'm very pleased to welcome Phil its new house, and Wendi Sturgis as newly elected independent directors to our board Phyllis and when they bring significant technology and cyber security expertise and we look forward to their perspectives and support over the coming years.
On behalf of the Sabre Board and leadership team I'd also like to thank Joe off knows Judy Odom, Rene James and John Siciliano, who retired from our board last week their counsel and guidance over the years has been extremely valuable.
Second I'd like to personally congratulate for current Sabre team members Traci Mercer Senior Vice President and product segment, Amy Greene, Vice President and global business systems, and the Wilson, Vice President marketing and Cory to Camp Senior Vice President and program management for being named among the top 50 women and travel by the global.
Business Travel Association I'd.
I'd also like our sabre teammates and India to know our thoughts and prayers are with them as they navigate through the impact of the COVID-19 crisis.
And finally I'd like to thank all of my favorite teammates around the world for their service to our customers shareholders and each other as we all navigate this pandemic.
Turning to slide four as we have done in prior quarters on the next slides I will walk you through specific booking passengers boarded or PBS and hospitality Crs transaction trends, but I will start with a bigger picture perspective.
Global travel trends continue to be reflective of COVID-19, 19 case counts cumulative and daily vaccination rates and regional travel restrictions and the United States part of our largest region. We are encouraged by the accelerating pace of daily vaccine doses administered as well as the recent bullish demand comments and capacity plans made by us.
Airline executives.
We have seen this confidence reflected in our north American booking recovery as expected international markets very significantly and collectively have been slower to rebound and U S domestic travel, including in regions and which of vaccinate vaccine distribution remains slow and daily cases remain high.
As Doug will discuss in more detail. Shortly this has resulted in a more pronounced rotation and our booking mix.
To give further perspective on our largest region North America represents 55% of our GDS bookings in 2019.
As of April 30th about 29% of the total U S population has been fully vaccinated and about 45% has received at least one dose of COVID-19 vaccine.
Since our Q4 earnings call. The daily vaccination rate has increased by 1 million vaccines daily from about $1 $7 million and February to $2 7 million per day and April U.
U S travel trends have picked up on this momentum our north American gross air bookings, which reflect the new demand have recovered to nearly 50% of 2019 levels over the last two weeks of April.
On this chart you can better see the pronounced rotation and regional booking mix towards North America.
And the first two months of the year, our North American gross bookings were down 72% versus the same timeframe in 2019, whereas the rest of the world was down about 84%.
By April the GAAP widened with North American gross bookings recovery accelerating two down 53% and the rest of the world down 77% versus 2019 levels.
Looking ahead, we expect the U S domestic travel to continue to lead the recovery as the vaccination rollout progresses and reported COVID-19 cases continue to decline.
We have already seen an improvement and leisure bookings and have begun seeing green shoots and U S business travel with our large TMC customers we.
We expect European and APAC markets to recover more slowly due to greater fragmentation tighter travel restrictions slower vaccination rates and new variant strains. However, based on what we have seen in the U S and these region gains and as each region gained confidence from increasing vaccination rates, we expect booking activity.
To follow we remain confident there is pent up demand for global travel and that global travel will recover.
Turning to slide five industry are net bookings so showed sequential improvement over the first part of this of the first year of this year with strong sequential improvements in March and April as.
As compared to 2019 and January GDS industry net air bookings were down 82% and February and March were down, 77% and 71% of 71% respectively April was down 70% slightly ahead of March.
Our largest region North America improved the most with the seven percentage point quarter over quarter recovery and the positive trend continued into April.
Other regions were largely flat quarter over quarter and into April.
On slide six you can see this effect more clearly using weekly data by region positive trends continue to accelerate and North America.
And APAC continue to lag behind the global average.
Latin America, which has been showing a strong recovery over the winter showed signs of improvement again in late April after a dip and the early spring.
Slide seven shows <unk> volume metrics for air gross bookings passengers boarded and hotel growth Crs transactions. After a slowdown and January all metrics have trended and a positive direction with the U S domestic leisure travel driving much of the improvement.
Hotel Crs transactions continue to lead the recovery and reached over 70% of 2019 levels and April.
Turning to slide eight we continue to be very active commercially and all lines of business.
And distribution, we've added several airlines to our GDS, including Sky up in the Ukraine, and ego Airways and Italy, We also renewed agreements with carriers, including West jet and frontier of.
And on the agency side, we added several new agencies, including clear trip the largest OTA in the middle East Kiwi Dot com, Europe's fastest growing <unk> and Omega one of the largest business management companies and the U S. We.
We also renewed agencies, including the new travel the largest travel company and the middle East and travel Haynesville and one of the Europe's largest otas travel of Hany was also implementing sabre virtual payments.
On the solutions side, we've completed and implementations of the Sabre Sonic with the Sky and Zambia. We also added a couple of new <unk> customers, including U S startup of Elo Airlines.
Air India Express and develop airlines each renewed their <unk> agreements of <unk> also added market intelligence and other operations related products.
We also had some key renewals and our operations portfolio, including flight plan manager with Spirit Airlines crew control with jet to Dot Com and crew manager went live with the Zhao.
And hospitality and addition to the traction with enterprise Hoteliers announced last quarter, we continue to be very active and the community segment with many new deals and renewals signed.
Despite the effects of COVID-19, we have of healthy sales pipeline and are well positioned to capture new opportunities.
Turning to slide nine we have talked about the importance of strategic initiatives to enable sabre to capture opportunities created by evolving travel trends and to increase shareholder value.
Now update you on the commercial activity the demonstrates our progress against these initiatives this quarter.
First personalized offers we are moving aggressively to create new capabilities methods and intelligence to allow suppliers such as airlines to deliver more customer centric personalized offers.
Examples of momentum in this area and Q1 include Latam Airlines going live with dynamic pricing and key markets. We successfully migrated Jetblue center and of Sky to revenue Optimizer, our revenue management tool that enables airlines to set optimal price points availability and provides real time data to better support decision, making and.
<unk> analysis.
Additionally, phase one of our Sabre smart retail engine remains on track for Royal rollout. This spring as a reminder, we expect sabre smart retail engine to enable airlines to deliver personalized offers to their customers and better serve the needs of todays travelers, while unlocking more value per passenger boarded.
The second the future of distribution and MDC airlines have been investing to differentiate their brands and the number of ways, including notably with ancillary products. Although this practice has created more choices for travelers. It has also created the challenge.
It is easy for consumers to determine the cost of travel it has become more difficult to understand what the related travel experience will be.
This quarter, we announced the new industry first airline storefront to help solve this problem.
The new storefront provides digital shelves that organize airlines offerings to support product differentiation and provide more merchandising opportunities for airlines, while allowing efficient comparison shopping for travel buyers based on the total value of the offer.
Delta Airlines is one of the carriers, who help collaborate on the development of our new airline storefront.
Yesterday, we announced the new value based multi year distribution agreement with Delta. This represents an industry first model that we believe will create value for the travel ecosystem.
In terms of MDC progress this quarter, we achieved IATA level four certification is and it provider after previously reaching that certification milestone as in and DC aggregator.
This certification confirms our technical ability to support a set of credit criteria related to full offer and order management capabilities.
We also expanded access to MDC offers from Singapore Airlines to more than 25% agency locations.
Eligible agencies can now not only shop and book, Singapore and D. C offers but also avoid refund and exchange and DC orders.
Additionally, this quarter, we announced the launch of and D. C offers from Qantas to travel agencies, and Australia, and New Zealand with plans to expand to agencies and other regions over time.
Finally, and DC content can now be booked through our corporate online booking tool get there.
Low cost carrier growth, we've talked on previous earnings call about the investment we are making and the low cost carrier segment and how we are expanding the capabilities of <unk> to increase sales opportunities in this fast growing leisure segment of travel this quarter, we made important progress and this pursuit, including the including the integration of <unk>.
Labour Sonic inventory for availability into <unk>. This improves <unk> ability to scale to larger airlines and we continue to view the LCC segment as an important growth Avenue for Sabre.
Hospitality solutions growth, we continue to grow our central reservation systems business. As a reminder, our Crs is industry, leading and serves more than 42000 hotels resorts and change across nearly 200 countries and territories.
<unk> central reservations allows hoteliers to distribute rates and inventory to more than 400 online channels across the world, including all major GDS systems as well as hundreds of online travel agencies.
Last quarter, we signed two new enterprise wins, representing over 600 hotel properties across 54 countries with the majority coming from lube.
This quarter, we made progress and support of these new enterprise CRM deployments, and our hospitality solutions business generally, including setting up Google cloud environments and two of our four global regions.
We are optimistic about the growth outlook for our hospitality solutions business as hoteliers are increasing and are increasingly turning to sabre to broaden their distribution and reach to drive incremental revenue opportunities.
And finally, our technology transformation.
I am excited about the progress, we're making and our tech transformation. This quarter. We moved travel solutions agency are shopping to Google cloud.
We believe running our future air shopping growth on GCB is important and the post COVID-19 recovery because of its scalability and lower costs. This was one of our three major technology milestones for 2021 with the other two being moving at least 15% of our mid range workload and transitioning the hospitality solutions Crs two the.
Google Cloud platform and these milestones are on track the.
Additionally, in Q1, we created of GCT region, only about 30 miles from our existing data center and Tulsa operated by <unk>. This close proximity combined with high bandwidth linkage is expected to create and extremely low latency connection to simplify migrations of capacity from DSC to the Google cloud.
And finally, we successfully offloaded, some compute heavy mainframe capabilities, including display inventory from most airlines and schedule changes for the majority of non hosted airlines as we continue to migrate compute from the mainframe we expect to realize further savings.
In conclusion, despite the challenges presented by the pandemic, we are making essential technology investments develop developing innovative new products and advancing strategic initiatives and seeing commercial success. We believe sabre is well positioned competitively as the travel environment rebounds, and with that I'd like to turn the call over.
Doug Thanks, Sean and good morning, everyone.
And as expected the COVID-19 pandemic continue to weigh heavily on our results from Q1.
Revenue was down 50% from the quarter totaling $327 million versus $659 million and Q1 of last year.
Versus last year distribution revenue of the quarter was down 62% to of $152 million or.
And our distribution bookings were down 55% year over year in the quarter with air bookings down, 52% and lodging ground and sea bookings down 72%.
<unk> Air bookings were down, 80% and 73% year over year and January and February respectively, and up 4% year over year in March.
We report bookings on a net basis, meaning net of cancellations net net bookings were down 79% and 69% year over year and January and February and up.
409% year over year in March as cancellations were exceptionally high and March last year.
We believe comparisons to 2019 may provide more useful information.
Third to 2019 gross air bookings were down 82%, 77% from 69% and January February and March and net bookings were down, 81%, 76% and 66% and the same months.
And as expected domestic leisure bookings have recovered faster than international leisure and corporate bookings and represented 50% of our total bookings this quarter.
Domestic leisure bookings are lowest booking fee segment.
And now the cancellation activity as normalized the impact of this mix shift on our average booking fee can be more easily seen we expect a negative mix impact on our average booking fee to persist until international and corporate bookings make a more meaningful recovery.
Our it solutions revenue was down 36% year over year with passengers boarded down 55% in the quarter.
As a reminder, it solutions as a higher percentage of revenue not tied to travel volume and distribution and hospitality solutions.
Hospitality solutions revenue was down 29% with of 16% decline and Crs transactions because of our property and mix, particularly in the enterprise segment was less dependent on city centers and pop from venues, we continue to see relative outperformance and our central reservation system transactions versus <unk>.
Distribution bookings and passengers boarded.
And operating income were negative in Q1, reflecting the impact of the COVID-19 pandemic the.
The year over year decline and revenue was partially offset by declines and travel solutions incentive expense and.
And the hospitality solutions transaction fees due to lower volumes.
The count expenses due to the ongoing benefit from cost savings initiatives, we previously implemented and technology expenses due to the lower transaction volume environment.
Additionally, our provision for expected credit losses, which impacts SG&A decreased by $39 million versus the prior year quarter net.
Net income and EPS were also negative in the quarter year over year. The declines were driven by the factors impacting operating results as well as increased interest and the lower tax benefit.
In addition, free cash flow was the negative $204 million and Q1 as we mentioned on our last quarterly call. We expect Q1 free cash flow to be the lowest of any quarter in 2021.
And this is primarily due to the timing of large working capital items that will have offset the benefits over the rest of the year as well as $8 million and severance.
And we ended the quarter with the cash balance of $1 3 billion and of no significant.
Near term uses of cash.
Turning to slide 11 and <unk>.
Response to be Retuned comment letter from the SEC regarding our calculation of adjusted EBITDA.
We're no longer excluding amortization of upfront and incentive consideration from our adjusted EBITDA calculation.
We believe this change will provide enhanced transparency and facilitate the analysis of our company.
This change has no impact on revenue adjusted operating income adjusted EPS or free cash flow, we will continue to breakout amortization of upfront incentives and the operating section of our cash flow statement.
As a reminder, and the GDS industry and travel agency incentives are typically paid overtime with bookings as well as upfront and contract exception or renewal and the latter case typically there is a related customer volume commitment from an accounting perspective. These upfront cash incentive payments are amortized over the life.
Of the contract.
Amortization of upfront incentive consideration was $78 million, and 2018 $83 million and 2019 and $75 million and 2020 over.
Over the medium term, we expect annual amortization of upfront incentives the consideration to be between 50% and $70 million.
Turning to slide 12.
As we have previously discussed we began migrating our systems to the cloud and transitioned to full adoption and maturity of agile development methods resulted in a decrease and the percentage of our technology spend eligible for capitalization under U S GAAP and.
And 2018, we capitalized 24% of our total technology spend and.
And 2019, we capitalized 9% and in 2020 just 5%.
The shift and capitalization mix temporarily burdened our P&L with both the increased portion of the technology spend that is expensed and current periods plus the depreciation and amortization from previous capitalization.
Going forward, we expect our capitalization rate to remain at 5% or below and therefore, we expect our capex to remain low.
And <unk> to range between 50 and $90 million annually over the next five years.
Because of this we are seeing our depreciation and amortization expense fall, we expect annual DNA to fall from about $200 million and 2000 $21 million to $110 million by 2025.
Which would provide earnings leverage over the medium term.
With that I'll turn it back to Sean.
Thanks, Doug and despite the pandemic, we are continuing to make critical investments, including and our products and our technology migration.
With the $200 million annual cost reductions we've already made if revenue returns to 2019 levels. We would expect to have a five percentage point higher EBITDA margin all else equal we continue to expect our annual cost savings to increase the $275 million by 2024, which would further increase our margins again, assuming all.
<unk> equal and.
As travel demand returns, we expect to be positioned with larger addressable opportunities more advanced innovative products and faster sales cycle and product deployments.
I'll end by once again, thank you my favorite teammates around the world for their dedication and hard work and with that operator, I'd like to open up the call for questions.
At this time, if you would like to ask a question. Please press star followed by the number one on your telephone.
And again at the Star one.
For just a moment.
Yes. The question from the line of Jed Kelly with Oppenheimer.
Hey, great. Thanks for taking my questions and appreciate.
The prepared remarks and the slides.
I guess, a couple of ones, but I guess the first.
First one for Rick.
For you Sean.
Some of the Delta and Delta announcement yesterday.
Can you just help us understand like how is the announcement like Delta, how we'll actually see that translate into the financials sort of like on the revenue revenue line.
Yes, it's a very good question Jed and it goes back to some of the things that we have been trying to do and the marketplace and that is with the technology and.
Enhancements.
And products is how do we help airline sell the products and services the way that they want meaning if it's the branded fares are selling ancillary as it has the capability of doing that and thats, what the storefront allows us to do that would be it.
Delta Airlines American Airlines Whoever's there.
Similar to if you go to and airline Dot com and you'll see how the branded fares are laid out it's that now from an economic perspective. The thing that we had talked about is how do we align the interest specifically airlines and what we're doing and technology that as we advance our tech as we advanced technology capabilities that if we're helping them sell higher yield tickets we will.
Actually get more revenue for that so it really is driving in that vein Jed of how do we make sure that technology is being looked at as valuable and and doing so we can drive more revenue into the future.
And we're seeing Expedia and make a big push here with the marketing.
And the advertising I mean.
Does that benefit the Otas, which I think are going to drive a lot of the volume over the next 18 months.
How is that going to be integrated.
Hey, Jed this is Dave.
And the answer would be the can.
The technology itself is based first and foremost on moving.
The airline storefront capability that we talked about which essentially is the digital shelf technology that have the set of API and all of our customers and all of our agencies will have access to that as part of the process. So if they choose to use the technology and continue on the journey of some of these retailing piece of the challenge is referring to.
Two absolutely could take advantage of the situation.
Alright, and then just one more from me can you talk about the.
And the pipeline for solution contracts over the next.
18 months and how Youre, Google cloud contract is going to help you can get some wins.
Yes, Jed against day so.
On the pipeline part of your question, we continue to be invited into conversations. We continue to have activity that is occurring or LCC efforts are I would say are probably the strongest you might've seen of Wall Street Journal article the other day that the 90, plus ltc's of being launched globally.
Hope to take advantage of that situation.
Lee on the full service side, and just globally and general.
And these things tend to stop start stop start because of the pandemic.
<unk> and various resources, but we are actively engaged and as you saw and the transaction activity.
A couple of quarter ago, with our ACI win and our Pacific Airlines wins those were examples of.
Of that activity and that pipeline structure moving forward.
And Jed this is Sean I'll take the the question on Google and let me put it and this perspective, because we talk about when we did the deal do you have the cloud economics, you have the technology transformation.
The integration of the data analytics, AI and ml capabilities and then the innovation framework, but if you if you take it into your question on sort of the financial impact I think of it this way is.
When we look at expanding margins and that's really through a lower cost of the infrastructure and what we're doing so it's lower unit cost of compute and Thats why we keep talking about this because that does drive the cost savings that we're wanting to do the.
Other things that it's doing is just lower infrastructure requirements that allows us to again save money.
And the other piece of it that I that we talk to and talk about internally is just really driving efficiency on the tech transformation and product development on the labor cost side of the equation because.
It allows us just to become more efficient so again you're funding the <unk>.
Cost savings flipping into the revenue side.
I sort of look at it a couple of different ways think about us integrating Google technology with the existing revenue streams that we have out there today. So when we talk about smart retailing engine that allows us the combine that with what we have right now and it allows us from our perspective to be a lot more competitive for new business going forward both in the full service <unk>.
Carrier side of the equation, but also on the low cost carrier side of the equation again, you can think about travel AI. The same way as we can take those data analytics capabilities and begin to put it into things that we're doing on the operating side or the commercial side. The other thing that we're doing is and we're focused and.
And partnership with Google is how do we combine sabre plus Google Tac to open up new revenue streams and right now I think we have probably 567 different things that are going on as it relates to those opportunities that will want to talk about into the future and then the other piece of it is really just the partnering and co development of new products that we.
Think of it can be transformational and the marketplace. So it's not like there's just going to be the big Bang. If you create a new product goes out and there's the revenue stream of lot of what's happening right now of enhancement of our capabilities dark and allow us to be.
More competitive and the marketplace and we actually believe positioning US ahead of our competition.
Thank you.
You have a question from the line of Matthew Broome with Mizuho.
Thanks, very much hi, John and Doug.
Does the relative sort of geographic strength and the U S. The status.
You sort of.
Cool.
And then allocation decisions, particularly in terms of Europe, you go to the market.
He hasn't it hasn't really changed a lot again I think we're looking at the sort of in two phases, right, it's where and the recovery phase right now and this is sort of the lumpiness that we're seeing and what's taking place as we think long term. It really does go back to the initiatives that I was talking about because that is global in nature and be it in the United States similar to what we just talked about with the.
The airlines there as airlines around the world that are trying to do that.
Delta is really doing that really through ATP co others are doing it through and D C. But it really hasnt changed the way that we think about it.
And very focused on where we think things are going to be long term as we get to the back side of COVID-19, and recovery is really taking place.
Got it got it and.
Hospitality solutions continued to lead the recovery.
Do you have any update on your plans.
On a full set of it.
EMS system.
Yes, I'll, let Scott.
The answer that question for you Hey, good morning, So Scott one of the.
Of the things that we continue to believe is that a fully integrated hospitality solution set and built on a public cloud is going to be winning proposition hoteliers are looking for a seamless and efficient way to drive more business and the market that has to include the full service Pms and we're very much committed to doing that.
Keep in mind, we do have a very robust property management system in place today, we continue to invest in that and we continue to drive that product further into the market and upmarket. So very much that's continues to be of strategic focus for us we think that it can be a key part of our of our strategy.
And maybe if I could just squeeze one last one and and just curious if you have any update in terms of.
Your internal realignment and.
And how that's progressing.
Yes, I mean the.
The team has done a really good job if you go back to.
And the actions that we took in 2020.
Of the vast majority of that was done under.
Dave Shirk and the travel solutions organization.
We're fully integrated into into that new structure.
And part of it probably.
Really more on the back half of the year was getting people and new seats and getting alignment.
But what I would tell you right now is I think the teams are doing well, we got the savings that we're looking for.
<unk>.
Job well done by the team.
Good to hear thanks, thanks very much.
Thank you question from.
The line of Josh Barry here.
Manley.
Thanks for the question.
Minus two one on the on the hospitality side, just wondering with <unk>.
Thinking back to all of the enterprise wins and announcements over the last year, just wondering like where we are on implementations and the timing of when we see some of that momentum.
The impact revenue.
Josh Let me start by just mentioned and dilutive deal that we announced last quarter, we actually work with them for a few months before we announced the deal to talk about how quickly we wanted to get that implemented in fact, we don't talk as much of our tech transformation of the hospitality side, but do keep in mind, we're going through the same transformation our first version.
And our incidence of our Crs platform on the Google Cloud will be of Europe instance, and it goes live this quarter and we're doing that should we actually can start to migrate their properties onto our Google incidence of Crs This summer and into the fall to be complete next next year. So you take that and.
And the number of your of the things that we have and the pipeline. We think we're going to start having a pretty steady stream of of growth and the enterprise space over the next six months to 24 months.
And I would add one comment.
And then one comment just on that and it does go back to the partnership with Google specifically and the cloud on the cloud is.
Our ability to essentially have landing zones and regions around the world and the reduction and latency as well as redundancy and so important to these customers and again the <unk> as an example of that.
And that partnership being important and and for us to be able to think about things a little bit differently.
Great and I did have a few on the.
Free cash flow and breakeven.
I'm wondering if you have an update to the demand threshold to breakeven versus 2019 travel demand and that we've got in the last couple of quarters, Yes, nothing's changed vis vis those thresholds still has 50 good of range between 56, and 67% of 2019 levels and all.
So all of those goalposts of all depend on mix.
Right and this quarter.
Are you able to provide any additional context on the large working capital items that you've called out that are weighing on free cash flow just wondering like how big of an impact those were and as we go through the year, if theres any insight and the seasonality of that and the impact on free cash flow and you havent given the.
All of it but I can tell you that there'll be a meaningful reduction and the use of free cash flow as move through the balance of the year.
Great. Thanks.
Once again, ladies and gentlemen, if you have a question. Please press star one.
Yeah.
Yeah. The question from the line of Neil steer with Redburn.
Hi, Thanks, very much and things of that taking the question.
It seems from the day you have given us the.
And sort of the blended reservation fee was probably down around about 25% from you battled.
Can you comment the comment on that and is that total.
So has there been any underlying sort of price.
And this pressured this current through the really negotiate your thing.
All of the mix effect, that's what it is.
Okay, and then and response to one of the idea of questions. You mentioned, the obviously with the Delta contract you announced the other day the.
The reservation fee you get is that tied in some way to the upsell of the ancillary which is clearly moving tools, obviously aligning the reservation fee.
The the value of the ticket.
Is this a meaningful change and the strategy and how do you underpin and made sure that we don't move sort of the more significantly to our pricing structure of this relates to the value of the tickets being sold one day does that is that how you want to take the pricing structure, yes, I mean.
If you go back and this is the one thing that we have talked about for a long period of time is you have to look at it from a value based perspective, and this is a clear step and the direction, where we wanted to go because.
When you're investing in technology Youre trying to differentiate your capabilities versus your competition and we do believe this is what's taking place.
And drives to the agreement that we have with <unk>.
Delta Airlines I would also say the same thing as it relates to the Lufthansa agreement that there are incentives associated with technology advancement that allow them to get the higher yield traffic.
So again this is very much in line with what we want to do because we do believe that aligns the parties across the ecosystem.
Okay. Thanks, and just one final one and rapid because obviously the.
The compromise that you announced the the system last week and can you give us and updates on that.
Please.
Turning all of this is Dave.
We had the incident that we talked about this is our <unk> subsidiary.
Of that particular piece was as we noted in our public statement was the malware incident.
And the effect and roughly 20 airlines, everyone is back live and with the progression through that particular process and we are in active contact with them working through.
The continued movement forward and the environment that we've now reestablished around that piece of it and some of the changes that we've made to that environment and as you.
The imagine Neal, we're very apologetic for what took place.
And important thing to note is they operated throughout the impact of timeframe, what really was happening was the ability to sell tickets into the future. So again.
The team said.
Work with the customers to work through what we needed to address.
Great and thanks very much.
And you have a question from the line of Victor Cheng with Bank of America.
Thanks for taking my question the free from my side Tom.
Tom the smart retail and Jim that you mentioned do you of any customers lined up already.
Prelaunch and.
And then.
Jumping to MDC, obviously, and LTE and the continued progress and certifications and one of the fee side, what percentage of bookings are we expecting and the coming year or so.
And should we expect similar economics versus the traditional GDS distribution channel, particularly.
And so you have alluded to just now the technology and NBC and this case over time.
It's value or how you perceive instead of just being a shift and distribution channel.
And just one last one on recovery.
A lot of color and weekend mix and noted that stronger domestic knee.
And recovery.
So I'm just wondering if you have any color from of Tullow.
And on potential corporate and recovery that you're seeing particularly in April.
Thanks.
So let me let me start the process of Victor here on the smart retail engine all of our focus on this has been to roll out the set of products in the spring timeframe that continues to move along.
And is on track as we noted last quarter.
First pieces of some of the Alpha and beta pilot work were already taken live and testing at the out of Airlines and this quarter. We took further capability sets for pilots that are live and being tested at Latam and several markets and so we are.
The optimistic.
This particular piece will help in the retailing.
The elements as part of the recovery with airline. So we are already engaged and pipeline discussions with folks that are interested and the technology and we'll give you guys more updates on that piece as we get further into the spring and the fall cycle of that.
So that I think addresses your first question on your end of the question you had a lot of parts of their so let me let me see if I can maybe take a stab at some of those as we kind of work through that and then I'll ask for Sean or Doug you made the comment on the regional and domestic piece and this so on the ADC piece as part of the.
Your question around percentage of bookings and the shift and how we'll see that and what will be the change et cetera.
Again.
First off NBC transactions are very very small at this point as you can imagine it's the volume situation and that certainly is tied to the pandemic. It is also the case, we've gone live with Qantas and Singapore and you can see the outlets and the things that we've done there, but it's still the case of the transaction volume is extremely.
At this particular point and time I think the other thing that youll see as part of that and time will tell as part of the recovery. The majority of airlines that are doing and tier ones that were very far long before COVID-19 and the vast majority of airlines have paused or completely stopped there and DC activity of this particular point.
And time because of the pandemic and the resource.
Hit to their organizations and cost containment et cetera.
Continue to move the roadmap along but.
As I said I think it will take some time before we're really truly be able to understand and answer the question, but I think this is part of why the sorry the.
Announcement of Delta is so significant because.
And that is also a very advanced retailing effort that is the first of the time.
And to move that piece out, which I think the number of airlines and agencies will find much easier to begin that journey and find alternatives to how they might think about retailing.
And the environment Thats out there as well so we're providing a number of avenues for them to kind of head down that particular path.
And then as far as the regional domestic yes. This is Sean I'll go ahead, and take that and I think part of.
And the way and I'll come back to your business, specifically, but what we truly have seen and we're trying to get this and the commentary as you know.
Everything is based on confidence right now there is no doubt that is foreseen in the.
The U S domestic marketplace.
And when confidence has improved and we're seeing because of the vaccine rates are continuing to improve testing is good.
Things are beginning to reopen that demand is improving and we've seen it more from the leisure side.
As I mentioned in my prepared comments, we are seeing green shoots as it relates to corporate travel at the beginning of the year.
It was it was down call it 90, and 90% or so it's been sort of.
And at that way for a period of time, we've probably seen and the domestic U S 15 to 20 point of improvement.
And from where we were so again thats, just part of the confidence and things starting to happen.
We do drill it down into specific sectors and understand certain sectors are moving more than other sectors, but really from the beginning of the year, we're beginning to see some really good movement there.
And what then happens is you have airlines and add more seats and that's really what we're seeing and the U S. Marketplace is more seats are being added so I expand it because this.
This is how we try to think about balanced recover recovery is when we think about international offline and.
And as Doug talked about that's where we.
And make more of our money the the margins are higher their international standards are important as it relates to bilateral discussions between countries and.
We had sabre as well as other travel Ceos have been engaged with the bite and administration and I'm trying to get standards in place opening up travel core doors or bubbles is from as you hear it.
We have seen Hong Kong, Singapore, we've seen the trends Tasmanian.
The flight corridor as well as recent announcements and Greece, and even going back to the U K when they began to outline what they were going to do from opening travel we see shopping pop and then we see bookings begin to happen. So we believe the demand is there and with that sort of that cycle continues the capacity. It will be added back so again and sort of step by step day by.
The day, but that gives you some insight on just sort of what you've seen recovery, but also what we're seeing on the business side because it is important.
John Thank you that's very clear.
And there are no additional questions at this time I will turn the call back over to Mr. Mcgee for closing remarks.
Thank you very much once again.
I would like to thank my Sabre employees for everything that they continue to do day in and day out and for.
The people on the call investors that are focused on sabre. Thank you for your focus on the company and look forward to talking to you again.
Thank you again for joining us. This morning, we appreciate your interest and Sabre and look forward to speaking with you.
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