Q2 2021 Sabre Corp Earnings Call
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Okay.
Good morning, and welcome to the Sabre second quarter 2021 earnings Conference call. My name is Josh and I will be your operator as a reminder, please note today's call is being recorded I will now turn the call over to the Vice President of Investor Relations. Kevin Crissey. Please go ahead Sir.
Thanks, Josh and good morning, everyone. Thank you for joining us for our second quarter 2021 earnings call.
This morning, we issued an earnings press release, which is available on our website at investors 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 and recovery trends benefits from commercial and strategic arrangements expected revenue costs and expenses cost savings.
<unk> 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 first quarter 2021, 10-Q, and 2020 form 10-K.
Throughout today's call. 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 reconciliation for non-GAAP measures are available in the earnings release and other documents posted on our website at investors.
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 with that I'll turn the call over to Sean.
Thanks, Kevin Good morning, everyone and thank you for joining us today.
Like to start by thanking all my favorite teammates around the world for their ongoing dedication to serving our customers our shareholders and 1. Another this has been a challenging period and I couldnt be prouder of what they have been able to accomplish.
Specifically I'd like to acknowledge my colleagues across our offices in India, and Singapore as they continue to work resilient. Despite ongoing challenges from COVID-19 in fact, our Bangalore office was recently certified by the Great place to work Institute is an organization that builds up built a high trust high performance culture Congratulations too.
India on a job well done.
As we have done in prior quarters on the next slides I will walk you through the impact of COVID-19 on specific bookings passengers boarded or PBS and hospitality Crs transaction trends. The takeaway is that the travel environment is beginning to improve at a faster pace versus the winter and early spring led by growth in our largest region.
As we reached a pivotal turning point in the recovery. We also gained commercial momentum and announced major new passenger service systems, our PFS wins.
We feel competitively well positioned as we progress on the important work related to our technology transformation and expect to benefit from the anticipated continued travel recovery.
Turning to slide 4 travel volume trends continue to improve across distribution solutions and hospitality solutions in fact, the recovery accelerated significantly in the second quarter and showed the strongest sequential improvement since Q3 of 2020.
As has been the case since the start of the recovery Hotel Crs transactions are leading down 22% in July versus 2019.
I'd solutions passengers boarded and distribution gross bookings are also stronger down, 38% and 59% respectively in July versus 2019 as.
As you can see some of the strong recovery trends in June Rick rest in July due to the impact of the Delta and other COVID-19 variance in some parts of the world.
As we have learned increases in COVID-19 case counts have correlated with a near term impact on bookings.
The promising news is as case counts and travel restrictions subside the underlying travel demand trends remain encouraging and we believe the overall recovery arc remains positive.
We are sometimes asked about the reason for the differences in the rate of recovery between passengers boarded and distribution bookings.
The answer is that it is primarily or primarily reflective of the type of travel recovery fastest and thats leisure travel a higher percentage of leisure passengers booked directly on airline dot com websites than new corporate customers. Consequently, these leisure travelers are captured in our sabre Sonic and <unk> PV data, but not in our.
<unk> bookings.
Importantly, this does not reflect a change in customer behavior. It is merely a reflection of the type of travel recovering faster.
Turning to slide 5.
The chart on the left shows weekly GDS industry net air bookings by region.
Positive standout regions are North America led by the United States and Latin America.
Asia Pacific bookings remains significantly depressed.
As we have discussed in past calls we believe there is pent up demand to travel but conditions need to be met from this demand to be realized as bookings, notably safety and convenience passengers need to feel safe onboard planes and at their destinations vaccination levels moving higher have had a direct correlation with travel or confidence as evidenced by the booking.
A vaccination trends in the United States. This is shown on the chart on the right.
Today, we believe the greatest inhibitor to global travel recovery are the ongoing and changing travel restrictions throughout the world as travel restrictions.
Restrictions have relaxed or been removed we have begun to see significant improvement.
For example, following the recent announcement by the Canadian government to loosen travel restrictions total GDS booking recovery in Canada improved by 29 percentage points from down 90% in April to down 61% in July versus the same period in 2019.
Similar to last quarter U S domestic leisure travel leading the recovery had a negative impact on our distribution revenue per booking.
We expect increasing global vaccination rates and the removal of or reduction in travel restrictions as illustrated by the recent changes by the Canadian government will be a catalyst for improvement in corporate and international travel, which we believe would move our distribution revenue per booking back towards 2019 levels.
We have already begun seeing green shoots in corporate travel, particularly in the United States.
And July North American bookings recovery at our top TMC has improved by 20 percentage points versus April and is now nearly 50% of 2019 levels globally. We have seen the most meaningful improvements in the materials government utilities and real estate sectors industries that have been slower to recover but are starting to gain momentum.
Our consulting and financials. These are all encouraging signs.
As it relates to international travel we are beginning to see some additional international markets open we outlined the positive trends, we are seeing in Canada, which is opening for non essential travel for fully vaccinated travelers from the United States on August 9 and other countries. Starting September 7th. However, we are also seeing some travel restrictions put in place in Europe.
In APAC in response to the Delta and other COVID-19 variance.
Because of these puts and takes we think volatility and recovery trends across EMEA and APAC are likely over the next several months.
The faster recovery in the U S. Domestic leisure travel has also impacted advanced purchase trends.
The North American average advance purchase window has actually lengthened 3 to 4 days over recent months compared to 2019 exiting June at about 37 days.
This change relates to leisure bookings and we believe it is a healthy sign reflecting travel travel or confidence we have yet to see advanced purchase trends returned to normal in the APAC region, where the average advance purchase exiting June was 20 days versus 29 days in 2019.
Turning to slide 6 in June Savers, net air bookings were down 49% versus 2019, a sequential improvement of 17 percentage points versus March.
Our bookings recovery outpaced the overall GDS industry in the quarter by 5 percentage points, because North America, which is showing the strongest recovery is our largest region.
In July total industry bookings were down 61% versus 2019 levels a bit weaker than the June results due to the impact of the COVID-19 variant.
Turning to slide 7 we remain very active commercially in each of our business lines, we signed or renewed nearly 650 agreements in the quarter across distribution and it solutions and many more in hospitality solutions. Some of the notable logos are depicted on this slide.
In distribution, we added several airlines through our GDS, including bamboo and Vietnam when Roes in the Ukraine. We also renewed agreements with several carriers, including Virgin Australia, <unk> Airlines in Iceland Air.
In July we announced that we launched the full integration of southwest Airlines air content with within the Sabre system, making it easier for travel management companies and corporations to shop book and service southwest flights on behalf of their business travelers.
This milestone not only greatly expand southwest reach into the business travel segment Sabre travel agency and corporate customers will experience the increased efficiency productivity and cost savings that come from bookings southwest through our agency point of sale Sabre Red 360, and our corporate booking solutions get there.
On the agency side, we expanded our footprint with planting travel group 1 of the leading travel companies in the U K. We also renewed many other agency agreements across both the corporate and leisure segments with notable renewals at online travel agencies E travel I in Sweden, and Mr Flying, France, and U S based <unk>.
Consolidator GTT.
It solutions, we had a number of important customer wins and renewals there.
This includes new wins for Sabre Sonic are full service airline reservation system with a certain unnamed large carrier and also Scott Airlines cortex.
Kazakhstan.
We are excited that these wins are expected to bring nearly $40 million incremental passengers boarded based on 2019 levels to the sabre Sonic platform.
This is on a base of over 740 million passengers boarded in 2019.
The signed multiyear agreement, we have for our full service passenger service system for the unnamed carrier is expected to help our new customer advance its strategic growth plans.
This large airline will also leverage other key sabre products, including next generation offer management revenue optimization digital workspace intelligence intelligence exchange and others.
We're really excited to expand our partnership with the airline and proud to be a trusted technology partner, we will have additional details to share with you soon.
Clearly sabre is winning in a marketplace that is very active right. Now we believe these competitive takeaways are proof points that our technology solutions and strategy are resonating with airlines around the world.
We are also gaining commercial momentum across other areas of our it solutions portfolio.
For example, dynamic availability continues to gain traction, including with new revenue share pricing agreements with Alaska and Air Serbia.
At both Alaska and Lion Air some of our largest sabre Sonic customers, we signed a long term PSS renewals and expanded our footprint of solutions.
And hospitality I'm pleased to highlight new <unk> Central reservation systems agreement with cure rate our hotels in resort collection Anoma hotels, the largest African hotel provider in the mid range segment we.
We signed a number of renewals, including with Mandarin Oriental Noble House and others.
The outlook in hospitality remained strong and as I noted reservation growth has led the recovery.
Our incoming project work is now above 2019 levels, driven primarily by North America and Latin America. This implementation work sets the foundation for higher transaction volumes in the future.
Turning to technology, we previously identified 3 key technology milestones for 2021 as a reminder, the milestones are to deploy travel solutions are shopping includes Google cloud platform. The.
The second is the transition hospitality solutions Crs into DCP with a global footprint.
And finally migrate 15% of our mid range workloads to Google cloud platform.
I'm pleased to say these milestones are all on schedule.
Let me take a moment and briefly provide more details.
We previously announced that are shopping for agencies is running in GCB production. We now have 100% of shopping for airlines and <unk> production and are in the process of decommissioning. The hardware previously used for this service in our Texas data centers at this point all Sabre Air shopping is running in public cloud environments.
And hospitality so an extra Crs is running in production per loop, 1 of our new enterprise hotel wins in our European <unk> regions. We are furthest in excess cutover to <unk> planned for the fall.
Finally, we are continuing to make progress building, Google Cloud Foundation in support of our mid range workload migration, we have several GCB regions with full availability in North America and already have regions with limited availability in Europe we.
We have also completed the integration of many Google platform services, including Google Kubernetes engine and span our database.
We remain excited about our strategic partnership with Google and believe it provides us with an important competitive advantage, we're continuing to develop sabre travel AI in partnership with Google and other initiatives under our innovation framework.
With respect to Sabre travel AI, specifically, we are already seeing promising results across early customer like simulations. Some initial proof points. We have seen include accuracy improvements with market intelligence to improve forecast of future travel demand.
<unk> increases with Sabre smart retail engine, which enables personalized offer to be generated at the right price.
And significant run time reduction with crew management, which enables us to produce better results, while reducing compute cost and footprint.
Finally, there is 1 other topic I would like to address before turning it over to Doug.
In June American Airlines filed a breach of contract lawsuit against Sabre related to the release of our new airline storefront and our new value based incentive model with agencies. We believe this lawsuit is without merit and designed with 1 purpose to stifle innovation and the travel marketplace and we plan to vigorously defend ourselves in the law.
Shoot.
We remain on a path to create a new marketplace for personalized travel which includes a shift in the way we view the future of travel and how we operate.
To fulfill our vision and to deliver the innovation and solutions our customers want we remain committed to our strategic initiatives to evolve our business and create a next generation marketplace that will better align with the future needs of our travel partners.
And with that I'd like to hand, the call over to Doug at this point, Thanks, Sean and good morning, everyone as expected. The COVID-19 pandemic continued to weigh heavily on our results in Q2. However, our results came in at the top end of our revenue expectations and exceeded the EBITDA expectation provided in our recently filed form 8-K.
The second quarter showed significant financial improvement versus Q2 of 2020.
When the COVID-19 pandemic caused an unprecedented disruption in global travel.
Total revenue was $420 million, a significant improvement versus revenue of $83 million in Q2 last year due to continued gradual recovery in global Air Hotel and other travel bookings.
Distribution revenue totaled $218 million.
An improvement versus revenue of negative $48 million in Q2 of 2020 recall then in Q2.2020, we were operating in a zero gross bookings environment and had significant cancellations activity that resulted in net negative bookings.
Our distribution bookings totaled $57 million in the quarter compared.
Compared to 2019, which we believe is a more useful comparison. The 2020 net air bookings were down 65%, 62% and 49% in April may and June and down 59% in the second quarter as a whole.
As noted domestic leisure bookings recover faster than both international leisure and corporate bookings and represented 50% of our total bookings in the second quarter.
Domestic leisure bookings are lowest booking fee segment.
Now that cancellation activity as normalized the impact of this mix shift on our average booking fee can be more easily seen in our Q1 and Q2 results.
We expect a negative mixed impact on our average booking fee to persist until international and corporate bookings make a more meaningful recovery.
Our it solutions revenue totaled $155 million in the quarter, an improvement versus revenue of $104 million last year.
Passengers boarded totaled $104 million down 43% versus the second quarter of 2019.
The second quarter benefited from some upfront revenue recognition due to new implementations that went live in the quarter.
Because the installation of licenses to our customers were completed a head of schedule. We came in at the top end of our previous revenue guidance.
And because of this revenue has high flow through to EBITDA, we exceeded our previous EBITDA guidance. This benefit is nothing new for the solutions business, but it is magnified in this lower volume environment.
We do not expect a similar benefit in Q3.
Hospitality solutions revenue totaled 51 million, an improvement versus revenue of $29 million in Q2.2020.
Central reservation system transactions totaled $24 million in the quarter down 17% versus 2019.
EBITDA showed meaningful year over year improvement, but was negative in the quarter, reflecting the continued impact of COVID-19 pandemic.
The significant year over year improvement in revenue in the quarter was partially offset by increased travel solutions incentives expense.
In hospitality solutions transaction fees due to higher volumes recalled in the second quarter of 2020 temporary cost measures such as furloughs salary reductions and suspension of certain employee benefits were put in place to partially mitigate the unprecedented impact of COVID-19 pandemic on the business.
Accordingly, labor and professional service expenses also increased compared to the prior year quarter.
In the third quarter of 2020, our longer from cost saving actions were put in place, including the renegotiation of our contract and reduction of about 15% of our workforce.
<unk>. This June our head count was down approximately 20% versus 2019 year end.
Operating income net income and EPS also all showed improvement versus the prior year quarter.
As expected our cash burn rate improved sequentially versus Q1 free cash flow was negative $152 million in the second quarter versus free cash flow of negative $204 million last quarter.
Looking ahead to the third quarter, we expect our revenue to largely be a function of travel volumes in bookings mix.
The variable components of our cost structure, including the incentives are expected to move in line with volumes.
Expect our technology.
And selling and general administrative cost increase sequentially in the third quarter, primarily due to lower capitalization rate increased hosting costs from higher volumes, including shopping <unk>.
Investments in business systems, and labor inflation now.
Now turning to slide 9.
As you are no doubt aware, we took quick decisive actions to raise additional liquidity at the onset of the COVID-19 pandemic, we closed on a series of transactions over the last 15 months to bolster liquidity and maintain flexibility. Most recently our July refinancing eliminated certain restrictive financial covenants and further extended our debt mature.
The profile with a pro forma average maturity of over 4 years, we did this while keeping our weighted average cost of debt flat.
And therefore expect our annual interest expense to remain unchanged at $260 million.
After this refinancing effort all our debt now matures in 2024 and beyond.
Finally, we ended the quarter with a cash balance of $1.1 billion and have no significant near term uses of cash.
Before I turn it back to Sean there reminds you of Sabre investment case.
We believe sabre is positioned for long term strength travel and booking trends continue to show meaningful improvement.
We are continued to make measurable progress in achieving our strategic initiatives.
We have longstanding customer relationships.
We expect high incremental margins during the travel recovery after the fixed cost base is covered.
We expect operating leverage over the medium term.
We have no near term significant uses of cash and extended our debt maturities.
And finally with our important technology transformation.
We are positioning the company for an expected larger revenue opportunity and lower costs with that let me turn the call back to Sean.
Thank you Doug in conclusion, the bookings environment has improved and we are gaining traction with new commercial wins, including new major PFS deals, we're progressing along our technology transformation and Google partnership.
As travel demand returns, we expect to be positioned with larger addressable opportunities more advanced innovative products and faster sales cycle and product development deployments.
Led by once again thanking my sabre teammates around the world for their dedication and their hard work and with that operator, we'd like to go ahead and take questions.
Yes.
As a reminder, John Good question, you will need to press star 1 on your telephone to withdraw your question Christopher Keith Please standby, while we compile the Q&A roster.
Our first question comes from Mark.
<unk> with Bernstein Research you May proceed with your question.
Thank you very much and congratulations on the good quarter and a bit of a beat.
So 2 questions. If you don't mind last year use you significantly cut costs with many of the cost cuts being permanent can you give us an update on how you're tracking to the prior expectations. We have 2 new hire more spend more are you tracking in line any color would be appreciated and then a follow up to that sure.
As I mentioned in my prepared remarks Mark.
We originally cut 15% of our head count we're now running 20 <unk>.
20% below our head count so all of those cost savings are still locked down.
Excellent that's easy.
Doug.
Some variability with certain costs.
As we've seen in the past are there any specific expenses or payments expected in Q3 that would impact the trajectory of improving cash should we instead model that cash will improve in line with revenue and the different travel components or is there anything that we should be cognizant of in advance.
There's nothing unusual from a out from a cash outflow standpoint in Q3 that I would highlight now.
Perfect easy questions. Thank you.
Thanks Mark.
Sure.
Thank you. Our next question comes from Matthew Broome with Mizuho Securities. You May proceed with your question.
Hi, Sean.
Doug It's Kevin.
Firstly, just in terms of the average revenue.
Segment metric.
Just based on the recent mix that you've been seeing I mean is that is that it has remained relatively stable in the near term or how should we think about that.
Yes, I'll kick off and I think Doug Doug can add on its why we tried to talk about.
We look back at sort of how the recovery has happened.
Highlighted it being really early U S flattens.
Articulated that's the lowest.
Essentially revenue that we get on a transaction basis.
And it was in my comments relative to as you have sort of the Canadian market open place you see international marketplace opening up.
Going to begin to see the improvement taking place on the booking fee and that's why we highlight and we try to provide the breakdown relative to the regions on the bookings Doug I don't know exactly as you said I mean normally.
As you know North America has recovered, but it's been leisure so thats why youll see the booking fee being fairly consistent between Q1 and Q2 because in Q2 Q1. We also saw 50 per cent of our bookings be leisure as well so as Sean mentioned is international and as corporate bookings come back we would expect that rate to continue to rise remember back in 2019, and a normal mix is about 4.
80.
The way that we looked at recovery as you look at it from a mix perspective, because you would hope for a more balanced mix.
And you look at the mix, it's probably the worst we could get as it relates to the average booking fee. So again as we see progress and improvement throughout the world our expectation is that booking people move.
To a higher level.
Okay Fair enough and then.
In terms of.
Tony.
<unk>.
Youll PSS wins.
Could you, maybe just talk a little bit about this.
The competitive process that sort of thing.
Factors that played into it into the Wednesday with Sonic and then following on from that just how the current deal pipeline looks.
Solutions more broadly.
Sure. This is Dave So again, we can't go into any detailed specifics around that but the competitive landscape. It was a highly competitive based environment situation as you would expect.
In addition to that our focus over the last couple of years has been around our technology transformation.
Our move to the cloud some continued advancements in our inventory system and dynamic based on pricing system is retailing based orientation and then our data and analytics. Those are all really key pieces to a digital airline transformation and we think that that has positioned us well.
These situations that we've talked about today and.
And we continue to to look at the pipeline and drive forward with more competitive base situations that we're actively involved in.
Alright.
Thanks, very much appreciate the color.
Thank you.
Thank you. Our next question comes from Jed Kelly with Oppenheimer. You May proceed with your question.
Hey, great. Thanks for taking my question I guess, the first question would be yes.
It seems like the multitude of different government restrictions.
The efficacy of the vaccine.
The international travel recovery keeps getting pushed out.
How should we think about your ability to manage free cash flow with this is going to be primarily domestic recovery.
No.
At least for the foreseeable future.
Just it looks like APAC is not going to come back for 18 to 24 months, how are you thinking about managing that cash flow.
Yes, Jed let me, let me kick off and then I'll pass it to Doug for some comments when we and I'll go back to the work that we actually did in 2020 is because of the uncertainty in the environment. We took some very aggressive steps as it related to.
What we're going to do as it relates to cost cutting measures right sizing the organization, but also what we're doing as it related to putting.
Putting cash on the balance sheet, because we knew there was going to be a period of time.
And we didn't come into this with rosy colored glasses relative to what the recovery was going to be and as we look at it.
We are seeing sort of fits and starts as it relates to recovery, but.
If you look outside of.
If I look at sort of restrictions right now you know, there's pent up demand come to United States, but as we know theres still travel restrictions to come to the United States. What you are finding is that in Europe and Canada for example.
Theres inbound into those regions that is happening so you're beginning to see those volumes pick up.
When I look at the APAC region. It's 1 that I think it's going to be slower, but we've factored all of this in and that's why I feel comfortable in how we've been managing through COVID-19 is it is going to be a process over a period of time, Doug was asked the question as it relates to our cost I feel really good about where we sit as it relates to the targets that we put out there.
At the end of 2023 into 2024 on our cost savings. So I look at adjusted it's sort of this.
It's not a sprint it's sort of this marathon that we're in right now and we're just continuing to manage that way and the team's doing a great job.
Okay. That's helpful.
Then you did mention it in your opening remarks, some some PSS wins can you talk about the conversations you're having now that you're on your GTP.
You know, how that's going or do you think youre getting more wins, what the future and what the pipeline looks like any update there.
Hey, John this is Dave.
Yes.
The move to GGP continues as I said, we continue to make more and more progress there. We've got now we've got our.
Air shopping peaceful in the cloud we continue to make good progress on some of the milestones that we've talked about in the past.
These are all important parts of the conversation said when it comes to talking about retailing when it comes to you're talking about distribution changes.
Our <unk> and our Google relationship in general.
Very important to that innovation piece some of the stuff that Sean highlighted in his remarks.
We continue to test and learn and we continue to apply those to the existing portfolio, which just makes it more competitive as we go forward with cross sell and upsell situations and Thats really where the focus is out right now and the teams and in the engineering structure.
Ed I think Dave has been a little modest relative to what he and the balance of the team have actually done if you look at it from a <unk> perspective, 1 of the focuses I mean part of it was.
Essentially be enabled with volumes and what was taking place, but it was also actually having global capabilities and reducing latency. That's happening if you look at some.
1 of the comments that I made as it relates to sabre AI and how we're taking.
Really those capabilities and beginning to layer them on top of our products I mean, when you think about crew management and the ability to have run times reduce for example, that's really important to airlines and what's happening in the ability to find incremental improvements as it relates to forecasting and revenue generation opportunity that that's really important and then you go back to really the portfolio.
Dave and team have done as it relates to positioning the portfolio, it's sort of all those aspects are coming together that we have been working on over the past several years that is allowing us to really presents sort of a different sabre with these tools and these capabilities. So I feel really good about.
Yeah.
Thank you.
Thank you. Our next question comes from John Bair with Morgan Stanley You May proceed with your question.
Great. Thanks for the question I wanted to double click on the investments I think it's clear.
On the head count side from the earlier questions I was hoping you could just expand on some of what you're investing in around the business systems that you mentioned and also what youre seeing in labor inflation that.
You called out I think for Q2, and then again kind of looking ahead to Q3.
Yes, with regards to the business and I think we've talked about we're putting into new billing system in called broom by price.
And also doing some work on a new HR system called Workday.
Obviously those will all day.
It will be a multiyear investments for the company, but obviously, we will create some real benefits for the company going forward.
It will enable us to do much more variability of pricing than we can right now our current systems and we're just seeing a little bit right now I'm sure like everybody else's just seen a little bit of labor inflation right now we're going to watch it because the market seems to be getting a little bit tighter for labor.
I called out <unk> seen some slight increases, but I'd say, it's going to be something I think going forward, we're going to keep our eye on I think I don't think we're unique in that situation and there are a lot of people are starting to see some labor pressure, Josh if I would add to that probably going back to just the investment pieces those have been in the plan relative to what's taking place.
We got into the mid part of this year. That's when the work has really been ramping up I'd say, it really began to ramp up in the second quarter sort of in full.
Full steam specifically on <unk> and what's taking place on the labor side part of it is wells, we have normal merit increase that takes place. So again I always focus on where we're where we're planning on landing and it's really within that trajectory and Doug and team are doing a good job of managing it.
That's helpful.
On the business systems is it like.
Professional services or.
R&D around integration like that that type of it's going to be mainly third party professional services that are going to be helping us do those projects yes.
Got it.
And if I could ask another just wondering on the mentioned the delta between the passengers boarded and GDS bookings and thats caused by the domestic leisure mix.
More domestically as youre going to airline dot com versus corporate and then I'm just wondering if within domestic leisure. If you look at today's environment versus 2019 is there any change in behavior that you're seeing within that domestic leisure group as far as how they're booking flights.
Through airline dot com or through.
The GDS no and Thats what were trying to point out is that if you go back and again leisure led you havent going direct.
Part of the layering on this goes back to what I also mentioned as it relates to just sort of when you look at the recoveries for the mix of the recovery is very unbalanced and as you see the international.
And you see the business come back that's going to be more GDS related. So we don't see anything outside the ordinary as it relates to what's happening with airline dot com.
We're just looking for the layering back on at the international travel in the business travel and like I mentioned.
And I hope everybody has really picked up on it is really the improvement we have seen in the U S business traffic with the Tncs I think we have enough data points out there and this is this is this is something that's really important is when we're early on in Covid.
A lot of question marks relative to recovery and I think what we are definitely seeing is as markets open as people are comfortable meeting from a vaccination perspective. The demand is there I'm not concerned about demand if you'd asked me probably a year ago I've been concerned about demand is it going to come back I'm actually not as concerned as.
I was about when does demand come back I feel good about demand. It's just more of the marketplace opening up and seeing that mix of international business come back.
That's great. Thank you.
Thank you. Our next question comes from New steel at Red Rock and we have received the new questions.
Hi, Thanks for taking my questions just a couple of quick.
I know, you'll probably very limited as to what you can say, but the American airline.
Low.
Do you think that would have happened.
The Delta solutions.
On the M D C compliance.
Let me state laws.
Thanks Felicia.
That really the crux of the disagreement on that.
Yes Neil.
As you know I am limited in what we can say.
When I look at it.
And I go into sort of a bigger way of thinking about this and you've been following the story over the past several years, we are engaged with numerous airlines around the world and understanding how they want to evolve their business and different airlines went towards all different ways.
Our strategy.
Acquisitions are desired acquisitions, the investments that dugan and.
And day talk about are all focus on evolving our technology and this is really in response to customer feedback and from an airline perspective.
We want to help them if it is what sort of the structure today and creating offers or MDC offers moving forward and how do we make sure that we're evolving essentially the commercial model at the same way. The other thing that we always have to think about which I don't think is really brought to the forefront as we talk a lot about the airline side when you think about MDC.
If you think about.
Sure.
What's happening relative to the offers and going through the GDS, it's really enabling the travel agencies at the same time. So again, we have to be limited in our comments Neil but those are a few.
Just 1 quick cleanup and congratulations on the.
On the new.
So new win.
Wayne.
Did you retain.
That's helpful.
The ongoing sort of customers or whether any low.
Alrighty customer be able to bear in mind when modeling going forward.
Non Neal this is Dave we have retained all the customers through the first half of the year.
No change thanks, Rick.
Thanks.
Thank you. Our next question comes from Victor.
America You May proceed with your question.
Hi, Thanks for taking my question just 2 from my side on the new wins in PSS.
I know it was asked earlier in the call, but are you able to comment on the competitive dynamics and whether youre seeing any change of thought, particularly on a couple of weeks.
Are you able to comment on the rationale for the airline to migrate in the current environment.
Thats economic for them or better functionality.
Should we expect more similar themes to come.
And then.
Question relates to new distribution side as Rick.
Probably happened, particularly in the U S domestic.
Are you seeing any early signs on share gains.
We're competitive.
So on the victory. This is Dave let me comment on the competitive dynamic again.
Similar comments to what I made before it is very similar to what we've seen.
In the past.
As you can imagine these are always very competitive situations.
Our focus has really been around and the thing that we continue to differentiate on and instill confidence in these pursuits and isn't our technology transformation, we've put a lot of energy into our retailing and distribution capabilities as.
As we kind of move through that the nature of retailing and some of the advancements with our big data solutions around data and analytics have continued to show up in that discussion set helping and assisting in the transformation to more of a digital airline has also been a part of the activity and the effort that we've under.
And then the nature of revenue management and pricing.
Put a number of capabilities into the product dynamic availability that John highlighted in his comments is a very large differentiator as well as some very advanced capabilities in our inventory system.
As we get into these settings and situations.
There is always pros and cons, but.
We continue to have some significant positives in terms of the technology transformation and the movement that we've been underway over the last couple of years. So.
No nothing that showed up that I would say is dramatically different from the past.
<unk>.
Probably a little bit more elongated cycles, just given the environment that we're in right now and Resourcing from the carrier perspective.
And Victor I'll I'll take your second question as it relates to you were more focused on U S. Domestic and then sort of share the 1 thing and I'll speak more broadly, we've really sort of back away if looking at share because its just if you look at the recovery and the Lumpiness of recovery on a region basis or.
The at leisure versus business. We just don't think it's the appropriate thing to be looking at because its going to be up and down for a while as we see global recovery happening.
Okay. Thank you.
And then sorry, just 1 quick follow up on the comments, yes, yes.
Is that a sign that airlines increasingly have more appetite for IP solutions are about so.
From a timing in terms of the deal coming in.
I think I'd have to break it down between full service carriers and low cost carriers on the full service carrier side.
As we've stated in the past. These are these are things that happen frequently so.
Theres no characteristic that's that different than what we've commented on in past quarters.
So.
A smaller basket.
Activities, you would see the appetite isn't just massively changed from that perspective, but but there are clear opportunities that are in the marketplace on the LCC side. This pipeline continues to grow we continue to see that opportunity. We continue to see LCC carriers trying to take advantage of the environment, especially from the domestic first recovery.
Cycles, and so we've been very active in that particular space as well and we'll continue to do so with our <unk> portfolio.
Thank you.
Thank you and as a reminder, a question you will need to press star 1 on your telephone. Our next question comes from Dan low season.
With Morningstar you May proceed with your question.
My questions.
Question on the business model longer term and how it potentially could evolve so.
<unk> do you envision an increasing mix of contracts tied to central booking value versus flat.
If so how that might impact <unk>.
Longer term economics.
Yes, I think this is part of the evolving landscape that we've been focused on I think we've been very very clear around our goals with change.
Changing the industry, focusing on retailing distribution and fulfillment that we want to align the needs of both the carriers and the distribution agency.
Channel set so that it really is more value based as we go forward with it that's not something is going to change overnight, but it's certainly been our path to try to make things much much more focused around a.
Percentage of value and incremental.
Benefit that that particular customer is receiving from us and so we will continue to try to drive that several of our product sets already lend themselves very well to that.
And again, it will be something that will evolve over time in the marketplace.
Okay, Great and then just 1 quick follow up.
Any change to I believe prior guidance for breakeven free cash flow with 6% to 60% of pandemic levels.
No change.
Okay perfect. Thank you.
Thank you.
Yeah.
Thank you and I'm not showing any further questions. At this time I would now like to turn the call back over to Mr. <unk> for any further remarks, great. Thank you Josh once again I would like to thank all those who have participated to hear our second quarter of 2021 results.
As you can see I'm very pleased with the progress that we have made very proud of the organization and look forward to talking to you in the future have a good day.
Thank you ladies and gentlemen.
This concludes today's conference call.
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