Amadeus IT Group SA

MAD:AMS

Earnings Call Transcript 2023-Q1

[Operator]

Welcome to the Amadeus First Quarter 2023 Presentation Webcast. [Operator Instructions] I am now pleased to turn over to you, Mr. Luis Maroto, President and CEO of Amadeus. Please, sir, go ahead.

[Luis Camino, President, CEO and Executive Director]

Good afternoon. Welcome to our first quarter results presentation, and thank you very much for joining us today. I'm Here with Till. I will start, as usual, with an overview of our most important developments in the quarter until we elaborate on the key financial aspects.

We'll start to Slide 4, please, for an overview of our performance over the period. In the first quarter of the year, the airline industry continued to make progress. Flow of traffic further recovered, and capacity and load factors continued to increase domestic traffic approach 2019 levels, supported by travel policy loosening in China. Global international traffic also improved, although more modestly than domestic traffic led by the Asia Pacific region. In this context, Amadeus' financial performance continued to strengthen. Group revenue increased by 43% over prior year. EBITDA grew 72% and adjusted profit expanded by 188%. This positive development was supported by the strong evolution in our distribution and IT and hospitality and other. Our free cash flow amounted to EUR 273 million, supporting net financial debt of EUR 2 billion at the end of the quarter, which represented 1.1x last 12 months EBITDA.

As we advance, we have remained highly focused on our R&D efforts over the quarter to support future growth levers, including the evolution of our hospitality platform, our partnership with Microsoft and our shift to the cloud, the implementation projects of new customers across our businesses, NDC-related solutions and capabilities, including our next-generation airline retail offering under the offers and order initiative from portfolio enhancement and expansion, including airline digitalization and enhanced shopping and retailing and the evolution of our portfolio for travel sellers, airports and in payments. Please turn to Slide 5 for an overview by segment, starting with Air distribution. During the first quarter of this year, we signed 20 new contracts or renewals of distribution agreements. We continue to advance with our NDC strategy. We signed agreements for NDC content with airlines such as Air Canada, Virgin Atlantic and SaaS as well as with distributors such AERTiCKET and Ávoris Corporación Empresarial. Additionally, American Express Global Business Travel will pilot at France, KLM-NDC content through the Amadeus Travel Platform.

Finally, we continued expanding our portfolio of customers with several signatures for Cytric Easy during the quarter. Review, our volumes evolution in the first quarter Amadeus bookings were 32.8% higher in the first quarter of 2022. Please note that given the recovery experienced by the travel industry throughout 2023 booking growth rates versus last year will slow down in the coming quarters. Our booking performance in the first quarter was minus 25% relative to the bookings in the first quarter of '19, outperforming the industry, supported by market share gains are representing a 3.2 percentage points improvement over the fourth quarter's performance. Our best-performing region was North America. Central Eastern Europe and Asia Pac were the regions reporting the highest booking performance improvements over prior quarter. In April and May, we continue to see an improvement in our bookings evolution.

Please turn to Slide 6 to review Air IT Solutions. In Air & IT, Etihad Airways, ITA Airways migrated to Altéa during the quarter, implementing the full Altéa suite. And in the case of ITA, the carrier also implemented our digital experience suite, along with other Amadeus merchandising, NDC and data solutions. In April, Hawaiian Airlines also migrated to Altéa. There are several upselling wins in the quarter with Southwest Airlines, Spirit Airlines, SAS, EgyptAir, Nile Air and Fiji Airways. In Airport IT, we continue to expand our reach through new agreements with several players, including Hamburg, Pristina and Western Sydney International other ports and ground handler Alyzia. To review our volume performance in the quarter, Amadeus PB were 55% higher in the first quarter of this year than in the same period of last year, driven by continued progress in the travel industry and new customer implementations. Please note that given the recovery experienced by the travel industry throughout '22, '23 PB's growth rates versus '22 will slow down in the coming quarters. Relative to the first quarter of '19, Amadeus PBs were minus 6% versus that year, the first quarter, up 9.5 percentage points improvement over past quarter's performance.

Organic growth was minus 7.7% relative to the first quarter of '19, advancing notably versus prior quarter, supported by enhanced performance of Altéa and most notably, Navitaire, 12.4 points quarter-over-quarter organic performance improvement. North America continued to be our best performing region. Asia Pac reported a notable growth versus 2019 improvement in the first quarter relative to prior quarter and represented 32% of Amadeus PBs, our last year's region in terms of PBs. Into April and May, based on the most recent data that we have, our organic PB performance versus '19 has continued to progress. Please turn to Slide 7 for an update on our Hospitality segment. First quarter of the year, our Hospitality and Other Solutions revenue was 31% higher than revenue in the first quarter of '22. Both hospitality, which generates the majority of the revenues in the segment and payments delivered strong growth versus the first quarter of '22, supported by new customer implementations and volume expansion. We saw continued interest from customers across our hospitality portfolio during the first quarter of this year.

With this, I will now pass on to Till for further details on our financial performance in the quarter.

[Till Streichert, CFO]

Thank you, Luis. Hello, everyone. Please turn to Slide 9 to review our revenue performance in the period. In the first quarter of 2023, our group revenue grew 43% versus Q1 2022, supported by revenue growth across our segments. In Air Distribution, revenue in the quarter was 52.2% above 2022, primarily driven by the bookings evolution Luis described and by a revenue per booking, which was 14.6% higher than in Q1 2022, driven by a lower weight of local bookings in the first quarter of 2023 compared to 2022, and pricing effects, including impacts from inflation and yearly price adjustments. With regards to Air IT Solutions, revenue in the quarter was 35.7% higher than in Q1 2022, driven by the PB volumes evolution coupled with a 12.5% lower revenue per PB. The decrease in the revenue per PB in the quarter was expected and was fundamentally driven by a proportion of Air IT revenues not linked to PBs, growing healthily, but at a softer growth rate than PBs, more than offsetting positive pricing impacts from inflationary or price adjustments and from upselling of incremental solutions.

To briefly recap on the implementation front in line with plan as of now, we've implemented Etihad Airways, ITA Airways and Hawaiian Airlines and continue working to implement Allegiant and Bamboo Airways during this year, also in line with plan. And as we said in February, this should bring us an approximate incremental 45 million to 50 million passengers boarded in 2023, resulting from the 2022 and 2023 migrations. Let me remind you that this is off a 2022 PB base reduced by the Russian carrier demigrations, which in 2022 brought us 25 million passengers boarded. Regarding hospitality and other solutions, revenue in the first quarter was 31.3% above Q1 2022, driven by strong performances of both hospitality and payments on the back of new customer implementations and volume expansion. At Hospitality, its 3 main revenue lines reported double-digit growth rates in the quarter versus Q1 2022. Within Hospitality, Hospitality IT growth was mainly driven by sales and event management, serve optimization and Amadeus CRS revenues supported by new customer implementations and higher reservation volumes. Media and Distribution revenues continue to advance backed by an increase in media transactions and bookings and business intelligence also progressed, driven by new customer implementations.

Please now turn to Slide 10 for a review of our EBITDA evolution. In the first quarter of 2023, our EBITDA amounted to EUR 510 million, 72.3% higher than in 2022. EBITDA margin expanded by 6.6 percentage points to 38.9%. And the EBITDA performance resulted from the revenue evolution explained before, a higher cost of revenue and an increase in our combined personnel and other operating expenses cost lines. Cost of revenue grew by 59.7% in the quarter versus the same quarter of 2022, resulting from volume expansion across our segments, particularly in Air Distribution. In our media and distribution hospitality businesses and in the B2B wallet payments business. Cost of revenue was also impacted by several factors, including customer country and business mixes. Our P&L fixed costs in the first quarter of 2023 compared to the same quarter last year were 14% higher. This cost evolution resulted from: one, increased resources particularly in our development activity to support our R&D investment, as Luis has described, coupled with a higher unitary cost resulting from our global salary increase; two, growth in non-personnel-related spend like travel and training, among others, driven by the business expansion relative to prior year; and three, higher transaction processing costs caused by the volume expansion and our shift to the cloud.

Let me remind you what we said in February. Our P&L fixed cost growth in 2023 should range between 10% to 14% over 2022, excluding the EUR 51.2 million government grant received in 2022. Additionally, this cost growth in 2023 from a quarterly perspective will be higher in the first half of the year and slower in the second half. Please bear in mind that next quarter when we report our figures we will be comparing against the cost and EBITDA base, which benefited from the government grant received in Q2 2022. So we will show you our performance with and without this nonrecurring effect. To review the evolution below the EBITDA line briefly in the first quarter of 2023 compared to 2022, G&A expense decreased slightly by 1.1% with a lower depreciation expense from a reduction in hardware investment, largely driven by our shift to the cloud, offsetting higher amortization expense from internally developed assets. Net financial expense also declined in the period by 53.1% driven by an increase in financial income and exchange gains and a reduction in other financial expenses. Interest expense was 5.8% higher caused by a higher average cost of debt relative to last year despite a lower gross debt. Income taxes increased by 2% and in the quarter versus the same quarter of prior year, driven by higher taxable income. As a result of these effects, adjusted profit grew by almost 188% in the first quarter versus 2022.

Please turn to Page 11 to review our R&D investment and CapEx. R&D investment grew by 26.4% in the quarter versus 2022. As Luis has described, we are investing for the future and focusing on several strategic areas and new customer implementations. In the first quarter of 2023, our CapEx increased by EUR 31 million or 26.7% compared to the same quarter in 2022, mainly driven by higher capitalized R&D investment and represented 11.4% of revenue. Please turn to Slide 12 for a review of our free cash flow leverage. With regards to free cash flow, we generated EUR 273 million in the first quarter, which is 117% higher than the same quarter of last year. Excluding implementation costs paid in the first quarter of 2022 was almost EUR 18 million. Growth in the quarter was 90.2%. This progress is fundamentally explained by our EBITDA evolution by a change in working capital outflow as expected and higher CapEx and taxes.

Free cash flow generation in the quarter supported our net debt evolution. Net debt amounted to EUR 2.026 billion at the end of March, with leverage amounting to 1.1x net debt-to-EBITDA. For our expected Q2 2023 free cash flow evolution, please take into account, as I mentioned before, we have a nonrecurring benefit in the base from the EUR 51 million government grant we received 1 year ago. Also, we advanced in -- also as we advanced in February, cash taxes in 2023 are going to have a higher impact in our free cash flow generation than in 2022. This is as expected, and it does not change our free cash flow outlook for 2023.

And with this, I pass back to Luis for final remarks.

[Luis Camino, President, CEO and Executive Director]

Thanks, Till. We have started the year with a good set of numbers, strong operational performance across all our businesses from Air Distribution and Airport IT and Air IT to hospitality distribution and IT as well as payments. We are looking forward to the rest of the year to continue strengthening our financial performance and to advancing in all our business and technology strategies to position ourselves strongly to capture future growth opportunities. With this, we have finished the presentation and are ready to take any questions you may have.

[Operator]

[Operator Instructions]

The first question comes from Alex Irving from Bernstein.

[Alex Irving, Bernstein]

Good afternoon. Three, if I may, please. First, only American Airlines moving of content from EDIFACT at the beginning of April. How has your booking flow changed in North America after that? And what are you hearing from North American agents in terms of demand? Second, about outsourcing opportunities. We're seeing more Altéa customers coming close to non-Altéa customers. I'm particularly thinking about the promotion of other group and [inaudible] merger. Does that meaningfully improve your ability to add new airlines to the Altéa platform? And Third, we hear from airlines that Corporate Club has come back quite slowly, especially at large corporates and the European corporate volumes are, in particular, a little bit soft. Where is the PMC booking flow back to -- relative 2019, please?

[Luis Camino, President, CEO and Executive Director]

I'm very sorry, but we really struggled to hear you. I don't know if the problem is on our side or in general, but we couldn't hear you. So if you don't mind, I mean, we can come back to you as we improve the line or the connectivity or you can repeat the question. I mean I understood the first 1 was about America.

[Alex Irving, Bernstein]

Maybe let me try this.

[Luis Camino, President, CEO and Executive Director]

Yes.

[Alex Irving, Bernstein]

All right. Apologies. I'll repeat. So first question is around the North American booking flow since April and the removal of American's content from EDIFACT [inaudible] American content EDIFACT, have you seen any meaningful changes to North American booking flow? Second question is around outsourcing opportunities, please. So we're seeing more Altéa customers coming close to non-late customers, and I'm particularly thinking about the formation of [inaudible] Group and the Iberia Air Europe merger. Does that meaningfully improve your ability to add new airlines to the Altéa platform? And then third question is on corporate travel. So hearing that large corporate volumes and European corporate volumes, in particular, are coming back quite slowly. Where is your TMC booking flow back to related 2019 levels, please?

[Luis Camino, President, CEO and Executive Director]

Okay. Look, let me start with American Airlines. I mean look, American Airlines follow their own strategy as any other airline. Of course, we have an agreement, as you know, to really manage NDC bookings and EDIFACT bookings. And again, as always, trying to really prove our value and trying to really support American Airlines in whatever they try to do. As you know, some airlines have different strategies around the world. What is important for us is to really have a solution and keep the platform attractive enough for all the airlines and the travel agencies to be part of that. Saying that, there will be movements. In this case, American Airlines, as you know, has made a number of announcements about the way they plan to really make their strategy with regards to NDC. Other airlines are taking a different approach. And again, we are trying to really be there and do our best to really keep the relevance of what we offer to both airlines and agencies. I mean much more than that. I think it's difficult to release --.

With regards to the opportunities, of course, there are always opportunities. You have seen the number of airlines we have bring to our platform. This is an ongoing matter. There are some mergers happening on some acquisitions. In the majority of the cases, due to our presence, we feel it's more an opportunity to bring airlines. If they are not part of the platform. But of course, market share is high overall, both for Altéa and for Navitaire and we keep working. I mean, again, in this case, it's very difficult to really commit about specific matters. We keep ongoing work. We keep convincing our customers both to really come to Altéa and to the platform as well as upselling, and we have announced a number of airlines that have taken additional functionalities. And of course, when we bring customers to Altéa, we try to really cover the full spectrum of our solutions and not the pure BSLs that was the rein of our platforms. So yes, opportunities are still there.

Yes, I mean, as the airlines go through different corporate operations, hopefully, part of that could represent additional volumes to us. And in corporate travel, yes, we see a recovery, definitely. I mean has been well advanced and this is part of the reason, as you see why in the non-GDS especially when we talk about Navitaire, has been growing faster and recovering faster than what we have seen with a full-service carrier. So definitely true that the leisure has recovered much faster and more advanced than business travel or corporate travel, but we also see a recovery of corporate travel is still behind the rest. But within the pure GDS, the growth of corporate travel has been there and reaching closer figures to 2019 than in previous quarters, okay? So overall, TMCs are also recovering as the industry recovers and the GDS recover, but it's a fact also that low-cost carriers or leisure has been clearly moving well ahead of corporate in the last years and is still the case.

[Till Streichert, CFO]

If I may add just in terms of the mix of the segment. In actual fact, we have reached in terms of the TMC bookings the same mix within the GDS as we had actually in 2019. So it is approximately on the 30%, which is a good indicator that actually within the GDS, there was obviously also on the corporate booking side, strong demand.

[Operator]

The next question comes from Adam Wood from Morgan Stanley.

[Adam Wood, Morgan Stanley]

Hi, good afternoon. Thanks for taking the question. Maybe just first of all, I guess, on the distribution side, the market has recovered enough to maybe have a more meaningful conversation about market shares. I think 1 of the competitors have said that they think they're taking share. I wonder if you could just comment on what you see around market share shifts on distribution, whether regional variations? And maybe just could you help us understand how important NDC is to those conversations with agents? Is it the factor today? Or is it still just 1 of the multiple factors that agents look at when they're deciding. And then maybe secondly, on the Air IT side, you've mentioned the cross-selling and upselling is a driver of PB price growth? It's very difficult for us to factor in what's going on underneath the surface in there. Could you help us a little bit with maybe an idea of the percentage improvements you've seen on average over the last few years through that upselling movement?

[Luis Camino, President, CEO and Executive Director]

Adam, thanks for the question. So the -- let me take the first 2. I mean, in terms of market share, I mean, again, we are pleased with the evolution of our performance. Again, it's still difficult to compare every single month because you have many impacts at 1 point when the growth will be lower, hopefully all these impacts of mix and generation will not be there. But if you see the trend of the company in the last years, we are very pleased with our underlying performance. Of course, again, there are always mixes here and there, different growth rates of different areas, mix of customers that can play in favor against that. But overall, we are very pleased with the evolution, and we feel we have the capabilities to keep improving. I mean with that, I'm not saying we are going to improve every single month, every single market. But overall, the trend has been extremely positive, and we feel will be positive in the future. With regards to NDC, yes, we expect an increase. Still, the volumes are low, but we expect an increase in the next couple of years. So it's part of the discussions with travel agencies as part of our discussions with airlines. And as you have seen in many of the contracts we have signed, and this is part of that, and we are working to make that a seamless and a good reality. It will still take in my view, some time until this is a full implemented process, some airlines are more advanced than others and have more interest than others and some travel agencies are the same.

But overall, we are moving in the right direction. We expect this year to be higher than 2022. And I believe 2024 will be a year where the volumes could start playing, I will say, a relevant size percentage of the total because still today, they are small. But overall, things are moving in the right track. And with time, it will represent a significant part of our total volumes. With regards to Airline IT and upselling?

[Till Streichert, CFO]

On the upselling side, we've continued to make further progress. And also in our evolution in terms of the unitary albeit negative, as I've highlighted, which again is a function of the non-transactional revenue element within our average revenue per PB, we've made reasonable progress on the upselling side. And therefore, I would say this has been clearly a positive in the evolution. However, in terms of opportunity, again, as we've said also before, in terms of the different additional modules, functionalities that we've got, be it revenue accounting, be it the Altéa NDC side, customer experience. These are all elements where we've got further runway and a significant opportunity to also upsell further to our customer base.

[Operator]

The next question comes from Sven Merkt from Barclays.

[Sven Merkt, Barclays]

Great. I have a couple of questions on the recovery in bookings in Western Europe. This has now been broadly around the same level compared to 2019 since the second quarter last year. Can you comment how bookings have recovered relative to the capacity of your clients? What I want to understand is, has there been more disintermediation? Or is it just mix effects with more capacity moving to low-cost carriers? And then the second part of the question is just on the outlook for further recovery in bookings in Western Europe.

[Luis Camino, President, CEO and Executive Director]

I mean, look, when we take out migrations and FX because, of course, you have a kind of effects with migrations of outside ITA and other customers. I mean the main effect has been, as you mentioned, the fastest growth of low-cost carriers, some of the low-cost carriers worldwide, but including Western Europe are well ahead 2019 already, which is not the case of the full-service carriers. So when we see the evolution that has happened movements per quarter. And we see the organic growth of Altéa. I mean, evolution has been quite similar in terms of improvement quarter versus quarter.

Then, of course, in many cases, as you know, well, figures have been impacted by different timing of holidays. You have strikes that have happened, you have disruptions in some parts of Europe that have impacted the volumes overall. But I will say the biggest part of the difference when you compare 1 quarter to the other, and we already reported the Navitaire huge increase and excluding migrations, I mean we have not seen at all an increase of the difference within the Altéa versus what we see in our booking volume, okay? That was the first part of the question with regards to Europe.

[Till Streichert, CFO]

European volume.

[Luis Camino, President, CEO and Executive Director]

Look, when we talk about the outlook. I mean, again -- look, what I can say is what I mentioned in my opening presentation is that what we see -- and again, it's always difficult to really isolate all the FX. And that's why, look, with PBs is more simple because it's the people flying even if you also have different impacts on seasonality. But with the bookings, you have all kind of effects that are happening as we speak. What we have seen when we try to accumulate figures and exclude in our analysis, some of these effects is that the improvement keeps going. And that in April, May, we have seen similar improvements that we have seen from the first quarter to the last quarter of last year. Again, we just have the month of April and the first days of May. But at least we see this evolution on the positive trend, okay, with some caveats because again, we don't know how things may evolve with the current economic environment, things will evolve with the capacity. The load factors are still extremely high, and the first are high but we need to see how -- especially after all the disruption that happened last summer, how the airlines are going to face the demand for this summer season. But so far, the improvement keeps going both for our PBs on our bookings at an overall basis, including Western European.

[Operator]

The next question comes from Toby Ogg from JPMorgan.

[Toby Ogg, JPMorgan]

Yes, hi. Thanks for taking the question. Perhaps just on the pricing in GDS. So clearly, very favorable pricing dynamic in the quarter, 15% growth in the revenue per booking number, and you called out different drivers of this cross-pricing adjustments and booking mix. Could you just help us disaggregate the different components there in terms of the contribution to that pricing growth? And just when thinking about the remainder of the year, is that double-digit level of growth in pricing sustainable? Or should we expect that to moderate as we move through the year?

[Till Streichert, CFO]

Sure. Look, let me just start off first. We are comparing, obviously, against prior quarter -- prior year quarter, which was a quarter where we had a spike of local bookings due to Omicron. Just remember that, please. This obviously has changed in terms of the mix recovery overall. But we did have, obviously, a positive impact, of course, from our price increases that we have applied. We had a slight positive impact from foreign exchange rate. But again, the biggest and most important driver was, in essence, kind of the booking and customer mix eventually, which created, and again, this is back to kind of 2019 levels in terms of booking mix, actually almost a bit stronger by now. And this has resulted into this 14.6% growth. Now for the remainder of the year, as we are also moving off the base comparison of Q1 last year, which was suppressed, as I said, of course, I do expect while revenue per booking growth shall stay positive, I do expect it to moderate a bit.

[Operator]

Your next question comes from Michael Briest from UBS.

[Michael Briest, UBS]

Yes. Good afternoon. Just continuing on the theme of distribution, I guess, for the last 4 quarters, there hasn't been a lot of progress versus the 2019 base, whereas we've seen good traction in Air IT. You're now flagging that passenger-boarded growth might moderate a little going forward. Would you expect within your guidance for this year, that the gap on distribution will narrow and the growth rates will be stronger than in Air IT passengers boarded? And a follow-up on pricing on distribution. Presumably, when you negotiate renewals or new deals, there's a discussion around NDC, there's also the discussion around volumes if airlines are only bringing you for argument sake, 3/4 of the bookings they did in 2019 or whenever you last signed with them, would you expect a higher unit fee? Is that part of the negotiation that might be driving the better pricing that we observe today?

[Luis Camino, President, CEO and Executive Director]

I mean, look, it's difficult to risk project. You know how volumes will evolve and bookings. It is clear that still there is some international traffic that should be coming. But again, domestic, as you know, has been very strong, and China has been very strong in terms of the recovery, of course, coming from a low base. And when we think about PBs, again, we need to consider 3 main factors that I mentioned before. One is the growth of low-cost carriers. Again, this will depend how leisure versus corporate is going to evolve, but it's true that if you see the last quarters, the growth has been very strong. I mean, in some of the low-cost carriers around the world. The second piece is all the migrations. And of course, these migrations will keep having an impact in terms of growth in the coming months versus the GDS as we keep migrating customers, we have just migrated Hawaiian, but the impact of the previous customers that we had, ITA until they -- I mean until next year, we will have a positive impact and then the organic growth. So as I mentioned, before the gap between the pure organic growth of Altéa and the bookings has not increased. But again, the other two factors have increased.

So look, in theory, part of that -- but again, it depends how low-cost carriers keep growing around the world. We feel that as Asia goes back where you have a lot of international traffic, and there is still some way to go and the fact of business travel versus leisure, it will depend a little bit on how the economy evolves in the coming months. So naturally, there could be a further growth of the GDS versus the pure organic PBs. But again, look, you need to consider the mix of the 3 factors, which are difficult to predict, again, we have our own estimations, but I will say, look, by all means this year will recover faster than bookings because of the factors that I mentioned to you. Again, we are talking about our internal PBs not on the industry where you need to consider the China domestic effect, which is not part of our numbers.

In terms of negotiations, well, negotiations are never easy. But of course, we try to do our best. There is no general statement. You have seen at the end in the figures of the GDS. Of course, we try to really manage negotiations in a way that we keep the benefit of our platform. We keep the benefit of the value that we are adding. And at the end, [inaudible] negotiation with some customers we are in better positions than with others, which is not overall, as you have seen, our blended booking fee has improved, and this will be our objective moving forward. And again, yes, I mean, part of the debate has to do with the volume evolution, but hopefully, the volume evolution will recover compared to 2019 at --.

[Operator]

The next question comes from Charlie Brennan from Jefferies.

[Charles Brennan]

Thanks. I've got two questions, if I can. Firstly, just on the GDS bookings. We've already had a number of questions here, but can I just simplify the debate down to your expectations for the recovery going forward. I think you had previously anticipated getting back to 2019 volumes at some stage through 2024. Does that still feel like a plausible scenario? Or given the pace of recovery, are you now thinking that 2025 issue or beyond? And then secondly, you spoke about the investments in the future I was reading the transcript of Sabre the other day. They spoke about having 70% of their volumes now on or compute power now on Google and the cost of compute coming down by 65%. Where are you with the transition to Microsoft? And is there any competitive pressure for you to accelerate the time line of completion from 2026 to something earlier than that?

[Luis Camino, President, CEO and Executive Director]

Look, in terms of bookings, I mean we are not providing specific guidance about the coming years. What we have provided you is guidance for this year. And as I mentioned to you, I mean, we are assuming a further recovery in this year, definitely true. We are not assuming we will reach this year 2019 figures. But again, I mean, due to the ongoing recovery, hopefully, this will keep going, and we should be able to really have good figures for this year. With regards to next year, we will try to really work on that and provide you with the right information at the right moment. Again, there are a lot of sources outside that are talking about that. I mean in terms of recovery of business travel, some people are thinking or pure business travel recovery of 2025. There are some other people thinking about the following year. Of course, is recovering much faster. So this mix will have an impact at the end of how bookings may evolve in the future. But again, our assumption is clearly that things will keep recovering as we have seen during this year, and we continuously seen as we speak.

With regards to the cloud. No, we are not accelerating. We are really doing as we expected and having our plans, and we're working on that -- and it's a complex project that has time lines we have communicated to you. We have already started to see cost of the cloud migration into our P&L this year. And therefore, we keep with a plan that we had originally is not related, of course, it's important for our future believe on this technology, but we are taking our journey, and I'm sure [inaudible].

It is taken their journey with Google. We are very pleased with the relationship with Microsoft overall and the project is doing according to the plan at this point and look pleased with the current timing, and it will be a progressive project with ongoing migrations as we speak, but the plan is similar to what we had anticipated to you, and we had a couple of years ago.

[Operator]

Next question comes from Victor Cheng from Bank of America.

[Victor Cheng, Bank of America]

Hi, Luis, Till. Thanks for taking my questions. I guess, first of all, how confident are you with your '23 guidance given volumes likely have recovered slower than expected year-to-date? Should we expect lower spend to meet free cash flow or EBITDA and rest of the year recovery continues to be relatively mild? And then secondly, on air distribution, I guess as Adam alluded earlier, your -- one of your competitors cited market share wins. I know it's hard to compare on certain months, but maybe can you give us some color on maybe which regions you're winning or losing? Or is it corporate or leisure that you're seeing some share gains? And then lastly, can you remind me what's the percentage of Airline IT revenue that is non-PB related currently? And then back in 2019?

[Luis Camino, President, CEO and Executive Director]

Look -- Yes. Look, we keep the guidance that we provided to you. We feel it's too early. We have started the year strongly. So we feel very confident today that we can achieve that. But at the same time, we feel it a bit early. Again, I mentioned some of the question marks as you know, because we are live in the same world about how things may evolve, how the capacity is going to evolve so far, so good. Demand is strong bookings overall KPIs having good, and our results have been strong, saying that, that gives us confidence that we'll be able to achieve our guidance, but it's not today and we are not in a position, and we are not going to change that today.

With regards to market share, I already mentioned that, I mean, look, we need to look into the trend. We need to look into what we are doing. We feel very happy with the performance we have in a single region. There are some mix effects sometimes from some customers, we are not losing customers, which is good. Again, in some specific cases, you lose 1 here and there. But overall, our track record is good. We feel confident. And again, this is our goal and more than that, it's difficult to really talk because we don't provide you specific region. But overall, the performance has been strong, and the commercial traction and opportunities are clearly there.

[Till Streichert, CFO]

In terms of the third question, just on your IT non-transactional revenues. Look, I mean, what I can tell you is, without sharing -- without providing the specific split is basically what's behind it is our Air IT services business. And the other 1 is largely our airport business, which is basically not flexing with the passenger's boarded volumes. And again, as I said, and this is behind the whole dynamic of the passenger average revenue per PB, evolution SPBs are now coming back. And as you can see, we are pretty close to that. That share it doesn't flex with PB is also shrinking relative. And therefore, I do expect that in the not-too-distant future, we are also back in an environment where I don't need to comment, or we don't need to highlight that as basically a factor in -- when you interpret revenue per PB.

[Operator]

The next question comes from Guilherme Sampaio from CaixaBank BPI.

[Guilherme Sampaio, CaixaBank BPI]

Hello. Thank you for taking my questions. So three for me. The first one, how do you think about your cash uses as you turn towards the low end of your [inaudible] net debt to EBITDA? Second one, can you comment on the transition process to NDC? And to what extent it has been an opportunity to generate market share gains on the distribution front? And the third 1 on NDC as well. Can you comment on the competition environment for Altéa NDC mainly from Sabre and the so-called next-generation PSS and contextualize the efforts you are undertaking within your offering in this area?

[Till Streichert, CFO]

Shall I start with the capital allocation question?

[Luis Camino, President, CEO and Executive Director]

Yes, please.

[Till Streichert, CFO]

So look, I mean, first of all, just to recap, we obviously have resumed the dividend distribution based upon last year's results. So that's the first element in that equation. The second one, as we always said, and we are very pleased with the progress we've made in terms of free cash flow generation, and therefore, also the leverage side. Our priority is always to invest into growth and therefore, where we are opportunities to accelerate our growth as well, this would be always top of mind to consider. But of course, as a third step in that is when we have approached our lower range of our net debt-to-EBITDA guidance, as in the past, we've also made use of additional of, we've made use of share buybacks, for example. And this is, in essence, the pecking order.

[Luis Camino, President, CEO and Executive Director]

Okay. Look, NDC, again, we are making our investments. This is a must. This is a trend in the industry. Again, we are having a solution both for Altéa as well as for distribution. Is this an opportunity for us market share? Look, again, it's like any technology evolution and keeping investing in technology for us has been and is fundamental for our competitive position. It has been in the past. It's not just NDC, the only lever that you have to increase share. We keep investing in other areas to really support our service versus our competitors. Of course, our competitors will also invest on NDC. So we expect there will be competition there, and our goal is to have a technology that is ahead of them as much as we can. But of course, they will try to do the same to really be competitive against us. We feel we are well advanced. We feel we have good solutions. We keep signing customers.

And of course, this will be an additional point in trying to really improve our market share. And again, covering the last part, we need to differentiate between NDC, which is more related to merchandising, and we talk about evolution with Finnair, which is more about of an order all is included into the evolution of technology, of course, but we are talking about different concepts. But again, it's part of the natural evolution of technologies that have been here and the industry as any other industry is trying to reduce the possibilities that technology is offering to us. And of course, this will not be the end. There will be new technologies. You know everybody talks today about AI, ChatGPT and we need to see how we can leverage all the technologies that are in the market to support our customers and to support the evolution of the industry. It's part of our solution. It's part of our evolution. It's part of what our customers are requesting. And again, NDC for Altéa is also a solution that we have, and we are signing on an ongoing basis. And then we are embarking in order management, and we have announced the deal with Finnair and hopefully, this will be One of the deals that will be there, but will be more to come.

[Operator]

There are no further questions in the conference call. I will now give back the word to Mr. Luis Maroto for the final remarks. Thank you.

[Luis Camino, President, CEO and Executive Director]

Thank you very much again for joining us for your interest and the questions and looking forward to the next quarter, hopefully, as good as the first one. Thank you very much.