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TravelSky jumps into second place in the projected 2020 PSS market share table
TravelSky currently holds 20% of the PSS market placing them in second position up from fourth and 14% in 2019. The Chinese based PSS provider has overtaken Sabre and Navitaire in the T2RL PSS market share table and is now only 2% behind leaders Amadeus reflecting the quick recovery of Chinese carriers during 2020. For more details see the T2RL report section.

Jeju sign with Amadeus Navitaire PSS
Jeju Air has signed with Navitaire for their New Skies PSS and is expected to migrate from SITA later in 2021. Jeju processed over 13 million PBs in 2019 and is predicted to process just over 7 million in 2020. SITA will be retiring their PSS in 2022 and T2RL currently record over 30 airlines still needing to migrate from the platform.

Blue Air Extends Partnership with Navitaire
Blue Air has reversed their decision in migrating to Hitit earlier in the year and has extended their agreement with Navitaire. Blue Air, who were a long-standing customer of Navitaire for over 10 years, processed 4.2 million PBs in 2019. T2RL is of the understanding that the airline has recently undergone changes to their workforce and shareholders and as they were considered being in financial difficulty before the coronavirus outbreak, needed to meet strict criteria to receive a limited 62 million euro government-backed rescue loan. The airline started flying again in July after being suspended for more than three months and intend on focusing on an ultra-low-cost self-service strategy flying into large European airports from Bucharest.

ATPCO CEO Rolf Purzer to retire and technology savvy Alex Zoghlin founder of G2 Switchworks and Orbitz to take over.
T2RL have been waiting for the news on the new CEO of ATPCO for some time. Rolf Purzer led the transformation of the company from fare re-distributor to positioning ATPCO such that it remains relevant in direct and indirect airline marketing and retailing through the acquisition of Route Happy and support for new techniques in revenue management. Alex Zoghlin was a founder of G2 Switchworks and Orbitz. Both companies were a little ahead of their time in terms of business model and technology. Zoghlin is truly a savvy technologist that intimately understands the challenges and constraints of the airline industry. This is a great hire by the board at ATPCO led by the Chairman and industry veteran Jerry Foran from British Airways.

Hitit signs its first US airline
Hitit has signed its first airline based in the US. Contour Airlines an ex-SITA customer will cutover in November undertaking a remote migration to Hitit's PSS, Loyalty, Operations and Revenue Accounts platforms. The relationship with Contour, who interline with American Airlines, should help Hitit open the doors to other US-based regional airlines.

Accelya gets regulatory approval to buy Farelogix and completes the acquisition.
Accelya have been given regulatory approval and concluded their acquisition of Farelogix. T2RL believed that approval would be granted. The reality is this was completed quickly. This reduces uncertainty and provides customers with comfort after the period of uncertainty following the failure to secure regulatory approval of the CMA of the UK by Sabre for the transaction following a successful judgement in the US.

Amadeus wins a 40M passenger carrier but does not name the airline - T2RL believe it is likely to be ANA
Today Amadeus published their H1 2020 results. The management call included a slide and statement that "a 40M PB carrier"..."contracted for the Altea PSS. T2RL believe this carrier is likely to be ANA. Amadeus already provide Altea to ANA for the international business and have been negotiating with Amadeus to replace the in-house developed, Unisys based solution. T2RL would expect the migration to take place over more than 24 months, although post-Covid this may be accelerated. Amadeus have significant knowledge of the Japanese market following Japan Airlines migration which should accelerate the time to deployment.

Sabre dissolves PSS and GDS organisation and merges them into a single organisation under Dave Shirk
Today Sean Menke, President and Chief Executive Officer announced a restructuring of the Sabre business. The announcement is significant in that Sabre have removed the separation of the airline IT and GDS businesses and merged them into a single organisation. From T2RL's perspective this makes sense and something T2RL have been seeking for many years in terms of procuring services from Sabre that cover IT and distribution.

Blue Air migrates to Hitit PSS
Hitit has migrated Blue Air from Amadeus Navitaire to their Crane Solution Suite on 10th June 2020. Blue Air is the largest Romanian carrier and boarded 4.2 million passengers in 2019. Blue Air suspended all operations on 21st March 2020 due to the Covid-19 outbreak and their migration to Hitit was completed during this period.

Accelya to acquire Farelogix
Accelya have announced an agreement to acquire Farelogix. Following on from the Competition and Market Authority ruling in the UK that prohibited the Sabre Farelogix deal, Accelya and their owners Vista Equity Partners Perennial have seized the opportunity to step in and acquire Farelogix. Whilst there is nothing in the press release on the value of the deal, T2RL believe it will be close to the original price offered by Sabre perhaps less a portion of the Sabre paid break up fee. This is undoubtedly a bold move from Accelya and their backers Vista given the current industry crisis. For T2RL this means Accelya and their backers have confidence in their role and the recovery and the long-term health of the airline industry. From T2RL's perspective Accelya Farelogix have no overlap in capabilities and the sales and marketing teams work with different groups inside the airlines. T2RL believes this should ensure that the regulators approve the deal and are able to deliver on their vision of a single end to end platform that supports offer creation through to settlement. With capabilities in revenue management, merchandising, order management, ticketing and revenue accounting functions on offer one of the key challenges will be the economics and contractual issues associated with integration with the existing PSS/GDS providers, Amadeus, Sabre and Travelsky. In the past this forced Farelogix to develop capabilities associated with ticketing and legacy EDIFACT messaging, now they may want to develop inventory and departure control capabilities too, or acquire them.

Bahamasair migrates to Hitit PSS
Hitit continues to grow their customer base with the national carrier of the Bahamas - Bahamasair, who is also their first airline customer in the Americas. Hitit migrated Bahamasair from Sabre to their Crane Solution Suite on 11th March 2020. The migration took 4 months and was completed just before the Covid-19 travel restrictions were introduced.

Lufthansa Group gives notice to Sabre and Abacus for withdrawal from end of June 2020
In line with T2RL's current position that some airlines will not want to participate in all of the Global GDS providers, the Lufthansa Group have indicated they will discontinue participation in the Sabre and Abacus GDS from the 30 June 2020. No information was provided on how agents will service bookings that depart after that date. Lufthansa have been very careful to state they are willing to negotiate with Sabre so one possible outcome is that Lufthansa and Sabre agree terms. This could be seen as a negotiating tactic, one that is quite likely to be effective in T2RL's view. With Sabre reporting a 45% reduction in GDS revenues for the first quarter of 2020 Sabre will have to think carefully about their position in Europe. Lufthansa have secured government support and have started to sale and lease back aircraft to maintain liquidity. The reality is there has been an ongoing set of issues with Sabre for sometime, so this should not be a surprise given the relationship dynamics. T2RL believe that more airlines are likely to terminate their relationships with all GDSs and pick those that will agree to negotiate on terms that are more acceptable to the airlines. The most challenging issue with GDS agreements has been and continues to be that of non-discrimination. T2RL's view is that airlines should be able to reward efficient points of sale that generate revenue at the best cost. By signing a GDS agreement with non-discrimination it means all points of sale have to be treated equally even if they are more costly in terms of system use or fees and charges for lower revenues generated. T2RL believe that the current crisis will drive a new generation of GDS agreements with more variable content. Domestic distribution tends to rely more on the airline's own website and this will be the focus for most carriers in distribution for the short and medium term.

Warren Buffett sells all of his shares in Delta, American, Southwest and United Airlines
Billionaire investor Warren Buffett says his company Berkshire Hathaway has sold all of its shares in the four largest US airlines. Speaking at the annual shareholders' meeting, Mr Buffett said "the world has changed" because of the coronavirus.

Airlines Grapple With The Impact Of The Covid Pandemic
As the industry grapples with the impact of this pandemic, the following airlines have announced actual or potential reductions in workforce, as approx. 2 thirds of the global fleet is grounded for the foreseeable future; Ryanair 3,000, EasyJet 4,000 laid off for 2 mths, BA 12,000 (nearly 30% of total employees), SAS 5,000, 700 American Airlines pilots have taken early retirement, Norwegian Air 4,700, Air Canada 5,100, Air New Zealand 3,500, Transat AT 3,600 and Lufthansa predicts it may need 10,000 fewer employees in the future. Boeing is laying off 10% of their workforce through voluntary measures and Airbus has furloughed 6,000 production workers, indicating further announcements in June.

Sabre and Farelogix deal is dead
Sabre and Farelogix have agreed to terminate the agreement. Sabre CEO, Sean Menke citied the UK's Competition and Markets Authority as the primary reason for the agreement's termination. Whilst there is little doubt Farelogix would have helped Sabre compete more effectively against Amadeus, the reality of the current liquidity crisis in the travel industry has affected and will continue to affect both Sabre and Farelogix. T2RL believe, that even with the current crisis there will be other suitors for Farelogix should the shareholders still wish to dispose of the asset. However the price will not be $360M. Potentially the current Farelogix shareholders may wish to wait until better times for a better price.

Aeromexico extends Sabre PSS and confirms participation in Sabre's GDS Services
Aeromexico have renewed and extended their PSS and GDS agreements with Sabre. T2RL supported the process on behalf of Aeromexico and are therefore unable to provide any additional insight or commentary.

DOJ Moves to Block Acquisition of Farelogix by Sabre.
The Department of Justice in the United States has sued to block the acquisition of Farelogix. The DOJ's complaint points to the likelihood of the acquisition resulting in a lessening of competition, an increase in prices for booking services in the United States and a reduction quality, service choice and innovation for booking services. The DOJ also takes the position that Sabre's GDS agreements have restricted Farelogix's ability to compete.

T2RL's view is that there is a broader market to consider in connection with the merger and that a combination of Sabre and Farelogix would permit Sabre to compete more effectively with Amadeus in the provision of IT solutions to airlines outside the United States in particular. Farelogix would provide the ability to replace some of the core technology that underpins the GDS and PSS infrastructure specifically accountable documents including ancillaries, real-time availability processing and commercialization of the schedule. Farelogix would accelerate Sabre's transformation to new generation systems.

At the core of the DOJ argument is a different definition of a market. T2RL does not understand how the DOJ came to assess booking, ticket issuance and the channel chosen by customers as distinct market places. To call out traditional agents and online agents and booking services in those channels as markets will undoubtedly be part of the upcoming dispute. Airlines ultimately appoint travel agents to issue tickets and the GDSs contract with travel agents to supply technology services. Other channels are available to consumers and corporations in the US and other geographies making this part of the argument a little more complex. The channels available to airlines (assuming they have the IT infrastructure to support this) include direct channels and APIs (NDC flavoured or not) and travel agents choose to work directly or indirectly with the airlines according to a set of their own criteria, including customers and passengers needs. It is also clear that some airlines can and have negotiated their GDS agreements which contain the right to charge fees and pass those fees on to the customer to incentivise them to move to the direct channels. This has certainly been the case in Europe with IAG's airlines, Lufthansa Group and Air France / KLM.

Elsewhere airlines are developing private channels which see incentives paid by airlines for bookings to the travel agent. There is no doubt that the market definition will be debated by both parties in the coming weeks and months as Sabre responds to the complaint and pushes to obtain a judgment to go ahead with the purchase. The exact timing of the litigation is not currently known, as the parties will be working on a protective order (i.e., determining what information will be kept from public court filings) and a timeline for the proceedings.

Typically the hearing before the judge in such cases is held within a 2 to 6 month time frame. If Sabre fail to win the battle there will be a long queue as others will seek to purchase Farelogix including a list of private equity houses.

Southwest inventory available in Amadeus and Travelport for industry standard processing.
After years of participating at the lowest functional level in Sabre and Travelport GDSs, Southwest have announced new partnerships with new capabilities to support industry standard processes for TMCs and corporates with Amadeus and Travelport. The announcement highlights the importance of the corporate business by signalling incremental revenue expected in 2020 and a basic timeline for GDS readiness in mid-2020. Southwest Business are focussed on a set of customers that are likely to appreciate Southwest's policies with respect to no change fees and free bags. This complements the recent announcement for participation in NDC and of course builds on the decision to move to Amadeus PSS some years ago. T2RL see this announcement as a win for newly appointed CEO of Travelport Greg Webb and his team. The announcement will also reinforce the value of the GDS business at a time when there has been significant press around the continued demise of the GDS as a result of NDC. T2RL does not share the view that GDSs are end of life particularly given the importance of Amadeus, Sabre and Travelsky in provisioning the PSS solutions that support distribution and will be even more important when NDC receives broad adoption.

Cebu Pacific Renews with Navitaire until 2028
Cebu Pacific has extended their existing agreement with Amadeus' Navitaire until 2028 and will continue to use Navitaire's reservations, inventory, departure control system, e-commerce and revenue accounts platform. Cebu Pacific is one of Navitaire's key customers in the Asia Pacific region undertaking 20.3 million PBs in 2018 including franchisee Cebgo. This renewal follows other key renewals for Navitaire this year including the AirAsia Group, Eurowings and Spirit.

Sabre partners with Cheetah for Loyalty
Sabre have been executing on their plans to rationalise their airline technology product portfolio since Dave Shirk was appointed as the President of Sabre Airline Solutions in April 2017. Shirk has since been promoted and now also runs the GDS business. The deal with Cheetah makes great sense to T2RL as part of the product portfolio rationalisation. Loyalty solutions are now considered mainstream IT platforms "off the shelf" with all of the necessary integration support for all types of merchandising and customer touch points. Ultimately the partnership will only work if the combined Sabre / Cheetah teams win business from the existing players in the market place. T2RL's research suggests that in-house developed systems still dominate the airline loyalty landscape with approximately 27% market share, followed by Oracle with some 19% share and Comarch third with approximately 7%. At first glance this looks like another smart move from Sabre in picking a market place with significant in-house systems and it appears one of the more advanced vendors according to Forrester Research. T2RL will follow this solution and report to subscribers on market performance in our future reports on market share for loyalty solutions in the airline business.

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