BUSINESS NEWS s and profit warnings by holiday companies and GDSs. Ian Taylor reports

On the Beach warning as virus spreads in Europe

On the Beach issued a profit warning last week and announced it has reined in plans for substantial growth this summer following the spread of coronavirus to Europe. In a statement, the OTA noted:

“The reduction in demand has accelerated significantly following the increase in Covid-19 cases in Europe, particularly the spread of the virus to Tenerife.”

This followed “a small but

noticeable reduction in demand for summer 2020 travel following the early reports of Covid-19 cases in early February”. In light of developments, On the

Beach said: “With the expectation that the spread of Covid-19 is going to cause significant disruption for a period of time, the board believes the group’s full-year results

[to September 30] will be below current market expectations.” On the Beach added: “The

board does not now expect the group to achieve payback in the current financial year on its previously outlined strategic marketing investment.” In a trading update as recently

as February 6, On the Beach noted: “There exists an unprecedented opportunity to take market share in the beach travel market following the failure of Thomas Cook.” It said then: “On the Beach has responded to this opportunity [by] more than doubling offline marketing spend to drive awareness of the brand.”

GDSs warn of ‘material impact’ of virus in 2020

Amadeus and Sabre warned the coronavirus would have “a material impact” on bookings as both GDSs released full-year results for 2019 last week. Sabre’s stock price fell 16% in a

day after the company predicted the Covid-19 outbreak would impact its revenue for January to March by $100 million to $150 million. In a statement, Sabre said: “The

coronavirus will have a material impact on our 2020 financial results. “At this point, no one can predict

the timeline and ultimate effects of the outbreak.” Sabre chief financial officer Doug

Barnett said: “History shows health epidemics have a major impact on global travel. Quarter-to-date GDS industry bookings [for January to March] are down [in the] mid-teens [percentage].” He added: “We have little insight

as to when to expect relief. We cannot reasonably estimate the full-year financial impact at this time.” Sabre president and chief

executive Sean Menke said: “We’ve seen increased cancellations or a bookings slowdown in the European marketplace [over recent days].” He noted the impact on bookings

began in mid-January but mostly affected the Asia-Pacific region. Amadeus also warned the virus

epidemic would impact bookings. Luis Maroto, president and chief executive, said: “The coronavirus outbreak will impact our industry and our business in 2020.” Maroto reported double-digit

growth in revenue and profits at Amadeus in 2019, with an adjusted profit of €1.27 billion, up 13% year on year. He said: “In distribution, we saw market share gains in all regions except Asia-Pacific.” Amadeus claimed it

outperformed the industry in air bookings “supported by market share expansion across regions except Asia Pacific”. Travel agency bookings grew 0.5% year on year.

Sabre reported a 3% rise in

revenue in 2019 and claimed its global booking share increased to 38.9%, driven by growth in North America “which represents more than half our total bookings”. The company declined to

comment on its Farelogix acquisition “due to ongoing litigation and pending decisions by the US Federal Court and the UK CMA”.

5 MARCH 2020 71

Heathrow’s third runway still awaits take-off

Sean Menke

Heathrow ruling due to policy contravention

The Court of Appeal ruled the government’s decision to build a third runway at Heathrow “unlawful” last week. But the ruling was limited to

a single aspect of the Airports National Policy Statement (ANPS) delivered in June 2018. The Court of Appeal ruled

on a number of legal challenges to the statement but found against challenges lodged by rival bidder Heathrow Hub, the Mayor of London, local authorities, and environmental groups Greenpeace, Friends of the Earth and Plan B Earth. However, it found the ANPS

contravened a Planning Act requirement that it “include an explanation of how [it] . . . takes account of policy relating to . . . climate change”. It concluded the ANPS “was unlawful by reason of a failure to take into account the government’s commitment to the Paris Agreement on climate change in 2015.” However, the court noted:

“We have not decided that there will be no third runway. We have not found that a national policy statement supporting this project is necessarily incompatible with the UK’s commitment to reducing carbon emissions.” The government is expected

to review the ANPS and redraft it. i Get Social, page 27

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