Amadeus IT Group SA

MAD:AMS

Earnings Call Transcript 2019-Q1

[Operator]

Welcome to the first quarter 2019 results presentation webcast. The management of Amadeus will run you through the presentation, which will be followed by a question-and-answer session. [Operator Instructions] I am now pleased to hand over to you, Mr. Luis Maroto, President and CEO of Amadeus. Please, sir, go ahead.

[Luis Maroto Camino, President, CEO & Executive Director]

Hello, ladies and gentlemen. Welcome to our 2019 first quarter results presentation, and thank you very much for joining us today. As always, our CFO Ana is here as well. Ana will walk you through the details of our financial performance, and I will focus on our most relevant developments.We are pleased to present our first quarter results of 2019. This quarter played out in a context of less robust travel industry growth, impacted by factors such as the 737 MAX problem, [ a number of ] airline bankruptcies, the situation in India, Brexit and others as well as quite a tough quarter to 2018 comparable. Despite this, we have got a good start to the year as you have seen with our business demonstrating its resilience. We reiterate our confidence in the outlook we gave you at the beginning of the year.Let me start with a review of our financial performance. Please note, the following evolutions exclude nonrecurring TravelClick acquisition-related costs and PPA adjustments. In the first quarter of 2019, we have experienced double-digit growth in revenue and EBITDA funding by 14.6% and 11.3%, respectively, with adjusted profit increasing 9.5%. This result was driven by the positive operating performance of our Distribution and IT Solutions segments, TravelClick's consolidation acquired on October 4, 2018, and positive foreign exchange effects.Our free cash flow declined by 7.3%, driven by higher cash taxes this quarter. As you may recall, during our last call, we talk about this net tax payment effect. However, our pretax free cash flow grew by 7.8%. At the end of the quarter, our net debt stood at EUR 3.038 million, representing 1.43x last 12 months EBITDA.Regarding our performance by segments, in Distribution, our volume growth was supported by steady travel [indiscernible] gains across regions except for Asia Pac, driven by the situation in India. Worldwide Amadeus distributional volumes increased by 1.6%, plus 3.4%, excluding India, and our global competitive position expanded by 0.4 percentage points by 1.1 percentage points, excluding India.North America was our fastest-growing region in the quarter with our volumes there growing at a double-digit pace and [ Western Europe recover ] a positive volume growth rate trend. Distribution revenue grew 5.6% in the quarter as a result of the volume growth, average revenue per booking expansion and positive foreign exchange effects.In IT Solutions, revenue increased 31.2% in first quarter of 2019. This evolution was driven by growth in Airline IT solutions, a continued expansion in our new business delivering double-digit revenue growth, the consolidation of TravelClick and positive foreign exchange effects.Amadeus' consistent and focused investment in technology over the years has been key into our success. In the first quarter of 2019, R&D amounted to 15.8% of revenue and it was dedicated to supporting our mid- to long-term growth, the product evolution, portfolio expansion, new customer implementations, system performance optimization and our continued [ seek ] to next-generation technologies and cloud architecture.I will now turn to our most recent business developments. Please turn to Slide 5. In Distribution, during the first quarter of 2019, we signed 7 new contracts or renewals of content distribution agreements with airlines [ that given ] an expanding content for our subscribers. Subscribers of Amadeus inventory can access over 115 low-costs and hybrid carriers' content worldwide.Our merchandising solutions continued to gain traction in the indirect channel. During the first quarter, each of Amadeus Airline Fare Families and Amadeus Ancillary Services have 3 new customers. Today, we have 84 and 154 Fair Families and Ancillary Services contracted customers, respectively.In May, we renewed our distribution agreement with the Finnair, which now includes the Finnair NDC Partner Program. This agreement will allow Amadeus travel sellers that sign up for the program to access the wide range of content available to it and aims to bring NDC forward in the indirect channel. Additionally, Finnair is one of our partners in the NDC-X program, will be the driver airline to integrate Altéa NDC with the Amadeus travel platform.In the quarter, our Airline IT customer base continued to expand. Etihad Airways contracted Altéa DCS Flight Management. Icelandair contracted for Amadeus Altéa Network Revenue Management, Customer Experience Management and Passenger Recovery. Qatar Air was contracted for revenue optimization functionality. And Air Tahiti contracted the full Altéa Suite and digital solutions. All Nippon Airways implemented Airline Cloud Availability, and Kenya Airways implemented revenue management. Also, we are pleased to announce that in March, Philippine Airlines migrated successfully to the Altéa Suite, which it contracted in March last year.Our NDC -- on NDC, our Amadeus NDC-X program is driving the industrialization of NDC. As an IT provider, we have been certified by IATA as NDC capable of Level 4. Also, both Navitaire and Amadeus were granted ONE Order certifications by IATA during the first quarter of 2019.We continued to advance in our newer business areas as part of this. And as part of this, in Hospitality IT, a sizable chain contracted for Amadeus Sales & Event Management solution. And in addition, we extended our partnership with another of the big chains to further implement Amadeus Sales & Event Management across all its hotels. We have not been granted permission to mention the name of these chains.Hesperia Hotels & Resorts adopted TravelClick's integrated web-based solutions. We also increased our offering of hotel shopping options for Amadeus' connected travel sellers to over 4 million through new agreements with Booking.com, Agoda and Restel.In Airport IT, we were pleased to announce the acquisition of ICM Airport Technics, which we expect to close during the second quarter of 2019. ICM specializes in the provision of passenger automation and self-service bag drop solutions for customers, principally in Asia Pac and Europe.We also have new customers contracting for our solutions such as San Diego County Regional Airport Authority and New Orleans Louis Armstrong International Airport in the U.S. and Carrasco International Airport in Uruguay.Please now turn to Page 6 where we will review our Distribution business. In the first quarter, as I already mentioned, industry volumes were broadly stable compared to the first quarter of 2018, which had delivered a strong 4% growth. Also, the potential positive impact from the Easter timing effect that's spread over the first 2 quarters in 2018 and taking place fully in the second quarter in 2019 was offset by the -- by a lower number of working days in this quarter. To review the industry by region, North America reported limited growth impacted by the U.S government shutdown and extreme weather conditions early in the year. Latin America grow slowly and all other regions reported an industry decline.I will highlight that in Western Europe, the first quarter saw an improvement compared to the first quarter but still negative. And United Kingdom and the Nordics were impacted by geopolitical and macroeconomic effects. Asia Pac reported an important deceleration, largely driven by the negative performance of India, a market that had double-digit growth in the first quarter of 2018. Central, Eastern and Southern Europe also underwent macroeconomic effects in several countries including Russia, Central Asia and Ukraine.With regards to our own performance, Amadeus air bookings increased 1.6% in the first 3 months of the year, outperforming industry growth, supported by market share expansion across regions except for Asia Pac, as I describe before, where our performance has been negatively impacted by the situation in India. As you know, an Indian full-service carrier canceled its distribution agreement with Amadeus late last year and another Indian full-service carrier has been undergoing significant distress, both impacting our volume and the overall performance in the country. Including India, our global air booking volume growth was 3.4%, and our competitive position increased by 1.1 percentage points.Moving to IT Solutions on Slide 7. In Airline IT, our passengers boarded in quarter 1 increased 4.6%. Our growth was driven by our 2018 implementation, including S7, Maldivian Airlines, Cyprus Airways and Aeromar on Altéa and Volaris Costa Rica on New Skies and our 2019 implementations, including Philippine Airlines, offset by the negative impact for -- from the migration of LATAM Airlines Brazil from our platform during the second quarter of 2018 and the ceasing of operations of Germania and bmi Regional both in February 2019. We saw organic growth of 6%.I will make a brief recap of our upselling success of Airline IT, where our [ 12 ] development investment efforts over the past year started yielding a growing customer base. We have today 17 customers for revenue accounting, 48 for revenue management of which 12 for our modern Network Revenue Management, 9 for Airline Cloud Availability, 14 for Amadeus Anytime Merchandising, 11 Passenger Recovery, 18 Customer Experience Management.On our new business front, we continue to advance well. In Airport IT, we expanded our customer base by 5 new customers in the first quarter of the year. Hospitality IT continued to grow steadily, supported by customer implementations and organic growth. And in payments, our customer base also continue to expand, and we have over 1,100 customers with contracted services from our portfolio, and the volume of payment transactions processed by us deliver a double-digit growth in the quarter.With that, I pass to Ana.

[Ana De Pro Gonzalo, Chief Financial Officer]

Thank you, Luis. Hello, everyone. Please turn to Page 9. I'm now going to discuss our evolution, excluding TravelClick's nonrecurring acquisition's effect, as Luis said at the beginning of the presentation. These include acquisition-related costs amounting to EUR 1.2 million and the PPA effects, which reduced revenue and EBITDA by EUR 3.9 million and EUR 3 million, respectively. Please see section 3.1 of first quarter management review for all of the details.Group revenue grew by 14.6% in the first quarter of 2019, supported by the positive performance in Distribution and IT Solutions as well as the consolidation of TravelClick. And revenue was also impacted by positive ForEx effect. Distribution revenue grew by 5.6%, resulting from booking volume growth, as Luis has just explained, and an expansive average revenue per booking, which was driven by a positive booking mix impact from a higher [ weight ] of global bookings as well as customer renegotiations.Revenue in IT Solutions increased by 31.2%, boosted by the TravelClick consolidation. Airline IT continued performing positively on the back of higher passenger boarded volumes. Average unitary revenue is funded, supported by the good performance of several revenue lines, including Revenue Management, Passenger Recovery and Merchandising, which more than offset the dilution effect from the higher weight of low-cost and hybrid carriers in our customer base. New businesses grew strongly in the quarter as a result of an underlying double-digit growth rate and the TravelClick consolidation.Our EBITDA in the first quarter of 2019 grew 11.3%, up to almost EUR 600 million, driven by the positive performances of distribution and IT Solutions, including TravelClick consolidation, partially offset by an increase in the net indirect cost. EBITDA margin was 1.3 percentage points lower than the same period of previous years due to the consolidation of TravelClick, which, as you know, is a lower-margin business.Let me give you some color on our operating cost. Total operating cost, excluding D&A, increased by 17.2% in the quarter, negatively impacted by ForEx. Operating cost growth resulted from -- the cost of revenue grew 18.1%, highly impacted by the TravelClick consolidation. And if we were to exclude this, the underlying cost of revenue growth resulted from air booking volume growth and a higher unitary distribution cost, which was primarily driven by competitive pressure.Fixed cost, including personnel and other operating, grew 16.5% in the quarter as a result of a 13% increase in our workforce or 5% if we were to exclude TravelClick. [ A limited ] manpower unit cost growth and higher non-manpower expenses also impacted by TravelClick's consolidation.Below the EBITDA line, D&A increased by 11.2%, driven by a 14% increase in ordinary D&A resulting from previously capitalized R&D cost, which has started to be amortized during the period and the TravelClick consolidation. Net financial expense doubled to EUR 20.7 million, mainly due to a higher average gross debt outstanding during the period due to TravelClick acquisition.In the first quarter, our income taxes increased by 10.8%. The income tax rate for the first quarter of 2019 was 26.4%, higher than the 26% reported in the first quarter of 2018 and the 25.2% reported over the full year 2018. The increase in the income tax rate was mainly driven by changes in tax regulation across countries. The combination of growth in operating results plus the growth in financial expenses and taxes resulted in a 9.5% increase in adjusted profit for the period. Our adjusted earnings per share for the period was EUR 0.78, 9.1% higher than in 2018.Turning to Page 11. As you can see, in the first quarter of 2019, our investment in R&D increased by 15% up to EUR 222 million, impacted by TravelClick's consolidation effect. R&D investment represented 15.8% of revenue. Our R&D spend, as you know, is centered in 3 main categories. The largest is product evolution and portfolio expansion, which continues new business and represents about 50% of our R&D investment.During the first quarter of 2019, we continued investing in solutions for merchandising and personalization amongst others and expanding the resources devoted to our new businesses. We also progressed on the development of a platform to combine content from different sources, such as from existing technology, NDC and content from aggregators and other sources.The second category is customer implementations, which accounts for approximately 30% of our total R&D investment. And the third one is our internal technological projects, which almost amounts for 20% of the total R&D investment and focuses on system performance optimization and a continued enhancement of our overall infrastructures and processes as well as cloud-based architecture and application of new technologies.As you know, our CapEx is very linked to our R&D investment as typically 70% or 75% of our CapEx is capitalized R&D. We only capitalize when there is significant visibility as to future value generation. Other than the capitalized R&D, 15% to 20% of our CapEx generally relates to tangible assets, mainly in relation to our data center in Erding. And finally, we also invest in contractual relationships and payments to travel agencies in the form of signing bonuses.Our CapEx increased in the first quarter of 2019 by 22.4%, up EUR 299 million, which represents 14.2% of revenue. The growth in CapEx was driven by TravelClick's consolidation effect, an increase in capitalized R&D investment and higher signing bonuses paid, which are lumpy by nature.In the first quarter of 2019, we generated free cash flow of EUR 283 million, 7.3% lower than 2018, mainly, as we have mentioned, as a result of higher CapEx and taxes paid, which more than offset the EBITDA growth. With regards to the cash flow taxes in the past, in the first quarter, we used to recover certain taxes. And however, this is no longer going to happen. And therefore, as we advance you during the year-end presentation, we have had this first quarter 2019 onetime effect. The tax operating cash flow grew by 7.8%. Net debt amounted to EUR 3 billion at the end of March with leverage amounting to 1.43x our EBITDA.With this, we have finished the presentation for our first quarter results in 2019, and we are ready to take any questions you may have. Thank you.

[Operator]

[Operator Instructions] The first question comes from Stacy Pollard from JPMorgan.

[Stacy Elizabeth Pollard, Head of Software and IT Equity Research]

Two questions from me. When you look at the revenue growth, and I know you don't give organic growth exactly, but could you give us some sense of the underlying growth? And then, how is TravelClick itself doing since the acquisition? For example, how's the integration going? How effective is cross-selling progressing?And then my second question is to do with hospitality, maybe just a comment on pipeline. And you mentioned expansion into some names, but you couldn't give the name. Can you give us a sense of the size of that? And just to understand, was that for your new CRS or PMS or other products? I'm sorry, it was so quick, I just didn't quite catch it.

[Luis Maroto Camino, President, CEO & Executive Director]

Okay. Let me start with the second one and Ana, you can cover the first one. Yes, in Hospitality, I mean what I mentioned was related to our sales and catering product, not to the CRS or PNS. As you know, in Hospitality, we have a full portfolio of solutions today. Some of them related to TravelClicks, some other related to sales and catering. It was the new market acquisition we did some years ago.Of course, we are focusing in expanding and selling our portfolio of solutions to the different segments in the different areas. And that's why, in the case we talk about types of our business we have communicated to you. So this business is doing very well. And the fact that we have been able to expand with some of the big chains or get a contract of that with another chain is a testimony of the success of this business.And regarding TravelClick, there is not much to say. The integration continues ongoing as planned. It's still a bit early, but in terms of upselling, as you mentioned, or cross-selling, so we are in the process still of integrating and getting into a go-to-market commonality, but the business is doing pretty well. And the situation of the company and the integration is moving according to our original plans.

[Ana De Pro Gonzalo, Chief Financial Officer]

And in terms of organic growth, I think that we try to explain, we don't give the absolute number because normally, as you know, we don't disclose exactly the ForEx impact, the integration of new companies. But I think that Luis has mentioned that we are quite pleased because on the back of an industry that has been somehow [ slower ] than in previous quarters -- and also remember that the first quarter of 2018 was a high base of comparison.So if you were to exclude those 2 impacts, both Distribution and IT Solutions have been growing in line with the outlook that we provided you, benefiting of the growth in volumes but also of good pricings on the distribution line of the business. And I think that Luis has mentioned that even on the Airline IT part of it, despite the fact that the volume and growth has decelerated a bit, there's been upselling and cross-selling of products, which have more than offset the incremental weight of low cost and high web sales benefiting the pricing.And then the other new business activities, when you are to exclude Hospitality, are also growing very nicely on the double-digit side. So I think that we had a good performance in this first quarter, even despite the weaker volumes compared to the first quarter of 2018.

[Operator]

Your next question comes from David Togut from Evercore ISI. Mr. David, you have the floor. We will move on to the next question. The next question comes from Alastair Nolan from Morgan Stanley.

[Alastair P. Nolan, Research Associate]

Just 1 or 2 for me. Maybe first of all, on India, is there any more detail you can give us on the backdrop there? Maybe specifically on the -- how long do you expect the drag from this area of the business? And any changes when it comes to the kind of competitive backdrop in India?And then secondly, just on -- back to the GDS business. It looks as though we've kind of turned a bit of a corner with regard to share gains in Western Europe. I just wanted to check, is there anything we need to be aware of when it comes to some of the benefit you got from surcharging last year and lapping of that? Is there any kind of headwinds we need to be aware of on that front kind of as we progress through the remainder of the year?

[Luis Maroto Camino, President, CEO & Executive Director]

Okay. Let me start with the GDS, the share gains. Yes, that's the reality. Of course -- I mean, we always mention our objective to really keeping the medium term our share increasing. Of course, this may impact us in specific quarters, specific accounts, but our goal is to really keep increasing our competitive position in the different regions.And in this quarter, as I mentioned, this has been the case with the exception of India. And therefore, the objective will be to continue there. And in Western Europe, yes, last year, especially starting in the third quarter more, we have -- and we have been reporting that, this situation of losing share. We have been talking to customers and getting again back part of this share, so this is positive news.And in the case of India, as you also mentioned, at the beginning, it's quite difficult to really have a complete assessment of the situation as news are happening as we speak. I mean you know the situation of one of the Indian carriers that started to reduce capacity and now it's grounded. The fact that the 2 biggest full-service carriers have gone through some financial difficulties and some changes is bringing volumes to other, in some cases are low-cost carriers, in some cases low-cost carriers that are not distributed in the GDS, some of them are distributed through the GDS.We also see increases of some the international carriers that operate in India. So the whole mix of how the market is going to evolve is difficult. We already anticipated an impact to us, and this is why in the guidance we provided you, we included that. We have already seen that in the first quarter. How things will evolve is difficult to assess, but it's already somehow in our figures of the first quarter, the majority of that.Again, I mean if you see how the market is evolving and changing, it's changing. I mean SpiceJet, which is a customer we have reached also a distribution agreement, has announced a codeshare agreement with Emirates. So there is a situation in India quite similar to what we saw in 2012, where we have the companies like Kingfisher that went bankrupt and there was changes in the industry.So hopefully, at the end, okay, this will settle and we will come back to increasing volume because again, it's not normal that we have negative figures in this huge market. But one point -- but difficult to say when. And at one point, I will expect this market to come back to add volume. I mean in the last 5 years, this market has been growing double digit. So it's quite strange what has happened during the first quarter, but I will say -- I will not expect this to recover in the coming quarters. But at one point, it should come back. That's more or less the situation today in India.

[Ana De Pro Gonzalo, Chief Financial Officer]

And on the overall GDS, yes, it's true that we've recovered our market share in Western Europe. I think that we explained during -- last quarters in 2018 several times that it was a handful of travel agencies that we have lost, and we have recovered quite a lot on -- of that market share.And in terms of pricing, we are benefiting of some customer renegotiations that we have last year. We have of course the ForEx, which has a higher impact probably in the first quarter than what you could be expecting in the rest of the quarters because of evolution of the dollar versus the euro was quite different in the first half of 2018 versus the second half. So you should have a less positive impact if things remain as they are right now in the second half of the year.And we are benefiting also of the mix with higher global bookings compared to the more local bookings. So as there is a difference on the timing of the contract renewals, as you know that we signed the agreement with Air France by the end of the first quarter in 2018, so next quarter, we won't have the positive impact of the global distribution agreement.But the ForEx will be slightly less, and we will restart benefiting higher of the market share gains, which has started in the first part of the year 2019 and we're -- going throughout the year of 2018. So a little bit of mix there in what you would expect from the GDS Distribution business evolution throughout the different quarters. So more tougher on the second -- on the first part of the year, better on the second part of the year probably because of the market share gains.

[Operator]

Your next question comes from James Goodman from Barclays.

[James Arthur Goodman, Research Analyst]

Just to follow up on India. As you say, the situation seems to be evolving further and you've reiterated your guidance. But do I take your comments just now to imply that, on an underlying or FX mutual basis at least, you're thinking more towards your worst-case scenario in GDS? Or is it too early to really say between the 2 scenarios that you gave at the full year? And then, if you could just clarify for me on the India situation, is there any material business there on the IT side of the business? Or is it pretty much only a GDS issue?

[Luis Maroto Camino, President, CEO & Executive Director]

So I take the second one and you, Ana, could -- look, in the IT business, no, we operate there. I mean we don't have, as a customer, any of the -- or the airline that is having these financial difficulties today. The customers that we have -- as you know, I mean we have the majority of customers that are doing pretty well. We have IndiGo, we have SpiceJet, we work with Vistara. So we have customers that continue operating properly for the time being because this is a market, as I mentioned, going through some changes, growing well and not impacting our IT business. So mainly, it has been more on the mix on the full-service carriers and on the GDS front than on the IT. So there is no impact of the current situation on our IT business. It's business as usual.

[Ana De Pro Gonzalo, Chief Financial Officer]

And in terms of the seasonality of the Indian market, it's difficult to say right now how this could pan out throughout the year. You've seen one of the full-service carriers that has stopped operations, which of course means that other carriers are catching parts of the volumes, which benefit us on the IT Solution part, as Luis was mentioning, because we are the provider to those carriers that are taking advantage of the shift of passengers from the distressed airline to other airline.But on the GDS front, of course, we have seen decline in bookings because this is full-service carriers and the others are more low-cost carriers. But as you know, even if we have distribution agreement with -- SpiceJet signed recently. They have a larger proportion of the bookings done directly on their web page. So it's not a one-for-one recovery on that front.So I think that we expect the Indian market to slowly recover, but we cannot know the impacts in the following quarters or when this is going to go back to the situation we previously had. So I cannot give you that line. I think that what we are saying is because our overall outlook we provided back in February already took into account the situation into India, we are confident that we can deliver the overall numbers that we gave. And now whether -- if in Distribution we have been more skewed towards the worst-case scenario or to an improvement throughout the year, there, we don't know.

[James Arthur Goodman, Research Analyst]

Okay. That's good. That's great. And just a quick clarification on TravelClick. Appreciate that you don't want to give the organic growth in the business. But last quarter, you give us the TravelClick number. The question is, is there much seasonality in that business? I mean if it's sort of typical software seasonality, should we assume a sequential decrease into Q1? Is that fair?

[Ana De Pro Gonzalo, Chief Financial Officer]

No. As you know, the already told you that the last Q4 of TravelClick last year was quite strong. But in terms of seasonality, [ this ] quarter is strongest, normally the fourth quarter, but the rest is more or less evenly spread.

[Operator]

The next question comes from Matija Gergolet from Goldman Sachs.

[Matija Gergolet, Equity Analyst]

I have 2 questions. First one is on this deal with Booking.com. Can you just elaborate a little bit more about how important this booking is actually? 4 million additional hotels or family of hotels seems like a big number to have under GDS. Is that going to lead on your expectations to a more material step change in the GDS distribution for hotels? Or it's just one of the many -- the commercial agreements?And the second question, just going back to TravelClick. Appreciate you don't really want to give us revenues or EBITDA, although it would be great to have them for Q1. But could tell us what's, say, the underlying EBITDA margin evolution, say, on ex TravelClick for Amadeus in Q1 please?

[Luis Maroto Camino, President, CEO & Executive Director]

Okay. Look, this Booking.com deal is just a proof of additional content that we are having through our platform, and we have got many different agreements that we have been announcing. So the fact that now the content is available to our travel agencies is positive.Our bookings in hotel has evolved very positively in the last years, and this is another added value that we could offer to our travel sellers to access content. Is this going to represent a huge change compared to what we have? Probably not because part of this content is already available but the fact that we are adding additional content offers more possibilities for the travel agencies to really sell.So it's -- in my view, it's quite positive, these kind of deals for providing access and content. I wouldn't say that this is going to be huge in terms impact of volume, but yes, I'm sure it will have an impact in the way we operate to continue evolving our hotel business, definitely.

[Ana De Pro Gonzalo, Chief Financial Officer]

And on margins, if you were to exclude TravelClick, would be -- our EBITDA margins would be broadly stable compared to last year.

[Operator]

[Operator Instructions] The next question comes from John King from Bank of America.

[John Peter King, Research Analyst]

Two questions on the Airline IT side, please. Just an update from you on Navitaire would be interesting. You've obviously owned it, and I guess, now for about 3 years. Is there any change in your plan, I think, to maintain 2 separate code bases for the product? I assume not, but interested in your thoughts.And also, as you look forward, how likely is it that some of the renewals that we may see there are going to shift on to Altéa? Or do you still seeing most of those customers likely to stay on Navitaire? So that's the first one.And then on the Altéa side of the business, you mentioned quite a few new modules there, Luis, in the prepared remarks. Could you give us a sense of the size of the opportunity those would represent relative to the core PSS?

[Luis Maroto Camino, President, CEO & Executive Director]

Okay. Let me start with Navitaire. I mean the company has been doing pretty well, of course, also benefiting from an underlying growth of some of these carriers that have been very strong in the last 3 years, okay? So when we talk about the main customers of Navitaire, I mean like AirAsia, IndiGo, Ryanair, I mean you know the figures of these customers because they publish their passenger growth has been strong. So there is already an underlying growth, and Navitaire has been quite successful in getting additional low-cost carriers.So I will say, for me, I mean I am extremely pleased with the performance of Navitaire and the fact that we were able to acquire the company because it has complemented extremely well the offer of Altéa. I mean it's not in our idea to move to the same platform as we speak.We believe that today, it has proven very well our capability to provide 2 different solutions, of course, with some commonality and some optimization in the way Navitaire and Altéa work when we talk about the big groups and how this can be even optimized better going forward. But keeping the 2 offers separated has proven, for the time being, very successful and not moving to [indiscernible] platform, and it will be huge costs that in my view will not be justified, and the company continues delivering very well, to be honest.

[Ana De Pro Gonzalo, Chief Financial Officer]

And in terms of opportunity. I think what Luis has been providing is a little bit of more color on how all of these different solutions that we provide to our airline customers have been catching up on customers acquisitions because I think he has provided a recap of how many of the airlines, whether they are Altéa or non-Altéa customers, are buying into all of these new solutions.So of course, there's still plenty of room to grow because we have our base of more than 200 airlines both from Altéa and New Skies. And I think on the recap that Luis has done, there's none of the modules which get anywhere near those numbers of airlines implemented in the new solutions. So there's a still large room to grow.But I think we are quite pleased on seeing more and more customers buying this new portfolio of solutions that comes to complement what we offer with the pure PSS. So in -- when we did last time our Investors Day, I think we told you that the addressable market in the Airline IT was around EUR 10 billion. So of course, there's still plenty of room to grow. And this only comes to show that our investments in the past are somehow gaining more customer traction win.

[Operator]

The next question comes from David Togut from Evercore ISI.

[David Mark Togut, Senior Managing Director]

Two questions please. First, could you discuss your progress in the U.S. TMC market? You had a big win in the TMC market which nicely expands your presence beyond OTA where I think most of your share gains have been. And then second, if you could discuss the progress of your new product in Hotel IT to offer attribute-based inventory to consumers, in other words, enabling them to customize a room, for example.

[Luis Maroto Camino, President, CEO & Executive Director]

Let me start with the second one. On -- in terms of what we are doing in the attributes that you mentioned, yes, that's part of the continuous project that we are doing with ISC. It's part of the release that continuously we are doing as part of our agreement with ISC. So this will be part of the implementation of the different releases.As we announced before, we had our first migration where we were mainly migrating from the old systems that ISC was having, the Holidex. And then the second part of the project was to really develop all of these functionalities. And as we speak, we are working on that and delivering that on different pieces. So this is going to be definitely a reality in the coming months.With regards to TMCs, yes, of course, part of our whole -- and our goal is to really get more traction of the TMC market in the U.S. after we have done pretty well in the airline space. And well, we are optimistic about that. But of course, the U.S. has always been the most difficult market due to the integration of our competitors, the presence there. But hopefully, this will be an area where we will make our inroads in the coming future because okay, now we are having a bigger presence in that market overall.The U.S. has been, in the different areas, a priority for us. And after signing some of the deals of Airline IT and our presence in hospitality and our presence with airline players and with many of the small travel agencies, the TMC market is definitely an area of focus. And hopefully, one day, we should be able to get a similar share we have for the TMCs in the rest of the world.

[Operator]

The next question comes from Guilherme Sampaio from Caixabank BPI.

[Guilherme Macedo Sampaio, Analyst]

The first one, your comment in previous quarters that you are in conversations with a new potential Hospitality IT client, you're referring to the sales and catering contract that you mentioned or is there something still on the pipeline? And the second question is regarding the GDS growth and outlook. One of your competitors has mentioned a poor outlook for the GDS industry. The gap that you report in terms of industry growth between traffic and the GDS growth has been increasing and way above the figures that we've seen in the past. You've been commenting something on this in the past, but if you can provide further color on how are trends going forward just typically.

[Luis Maroto Camino, President, CEO & Executive Director]

Okay. In terms of pipeline, no, it's -- I mean look, we have pipelines now in Hospitality for the different segments. The only issue is always, okay, until you close a contract, pipeline is a pipeline, it's not a [indiscernible]. I can be more or less optimistic about that. Of course, one of our goals is to continue selling and signing on the different areas.So I was referring more to the CRS, PMS pieces that are the areas that we have today, as you know, 2 customers, Premier Inn and ISC. And of course, this is an area where we expect to really get additional customers. And we talked to many as we speak and hopefully, at one point, we will be able to close. But the timing of closing that is completely unknown because it's a matter of timing, negotiation, conversations. Until the last minute, this may happen or not.However, as I mentioned, in the rest of the areas and I provided you with some color before, we continue signing and in some cases, the size of some of this deal could be significant when we talk about big deals. And in the area of travel [indiscernible] as we have already mentioned, the business is performing well. The size of the deals are smaller because we talk more about the independent hotels and therefore, we are not making so much communication about that. But overall, the business is performing well.So pipeline is strong in all the areas. I will say, at this point, there is also focus in organization as we feel this is an area where we can grow in the future and could provide additional growth to the company overall and therefore, I would say the pipeline is healthy, but still, we need to convert that. Some of that is converted in parts of the business. On the CRS, PMS part, this has to be converted and it's not yet.The second question is about the GDS. I mean we have already mentioned what has happened in this quarter. I mean there is -- there was clearly an increase of disintermediation related to the activities of the European airlines. If we see this quarter, as I mentioned before, Western Europe has performed better than the previous one. So this is not the factor where we have seen the GDS weaker. I will say it's a combination of some traffic that has not been so strong as in the past, in the first quarter, the fact that North America growth has been less. And then of course, the impact of India, which is a relevant market, it's a quite big market, the biggest market in Asia, and Asia has been growing strongly, has got this particular impact.Moving forward, it's difficult. As you know, the economy is quite relevant in how the traffic evolves. And I will say, part of this disintermediation, Europe should -- but okay, we need to see played out because of the implementation of the different activities. Outside of Europe, we have not seen an increase of disintermediation, excluding this complete turmoil of the India market. We have not seen an increase of disintermediation, so it's quite similar to what we mentioned before.Moving forward, we need to see how things evolve in the overall economy to see how the GDS may play. But all of that, again, has been included somehow in our guidance. And as we mentioned, we feel that overall, okay, on the overall business -- depending how the economy evolves and the traffic, but overall, we should be able to redeliver in what we provided at the beginning of the year, taking into account that of course, in some areas, the traffic has been weaker. But overall, the business has performed well in the first quarter. But we are -- now feel more confident than probably when we provided you the guidance, but there's still 3 quarters to go.

[David Mark Togut, Senior Managing Director]

Just to confirm, the disintermediation that you mentioned has been mostly in local markets, local bookings?

[Ana De Pro Gonzalo, Chief Financial Officer]

In -- yes.

[Luis Maroto Camino, President, CEO & Executive Director]

Yes, yes. That's another point. I mean when we talk about -- look, this movement, and Ana mentioned, of course, the mix has been positive, and this is part of the pricing effect because at the end, this is happening much more in the local bookings and in India, it's the same. I mean of course, the impact is in the local market, whatever is happening there. So we are losing, yes, a part of these bookings and this is seen in absolute numbers. But in terms of mix, this is impacting the local bookings much more than what may impact the rest, definitely.

[Operator]

Thank you. Ladies and gentlemen, there are no further questions in the conference call. I now give back the floor to Mr. Luis Maroto for the final remarks. Thank you.

[Luis Maroto Camino, President, CEO & Executive Director]

So thank you very much for your questions and for attending the call and looking forward to talking to you in the second quarter results. Thank you.