Amex GBT losses highlight incredibly slow recovery in business travel

Amex GBT losses highlight incredibly slow recovery in business travel

Skift grip

Transactions are still around 75% lower than in 2019, but the agency hopes an increase in winter bookings will reflect the pace in the year ahead. This is a risky assumption.

Matthew Parson

A significant gap still exists between business travel volumes before and after the pandemic, according to the latest annual results from American Express Global Business Travel. Amext GBT, due to its magnitude, is often an indicator of business travel trends.

Amex GBT Released sales of $34.1 billion in 2019, while for the 12 months ended December 31, it notched about a quarter of that figure.

“We ended 2021 on a high note despite the impact of Omicron in December, with financial results for the full year well ahead of our adjusted guidance (earnings before interest taxes, depreciation and amortization) driven by a 119% increase in fourth quarter revenue and efficiency driven by continued cost discipline,” said Paul Abbott. “We believe the business travel recovery is well underway and gaining momentum. magnitude with transactions reaching 51% of 2019 levels in the last week of February 2022.”

This is an improvement of 23 percentage points from mid-January. Yet business travel is still far from pre-pandemic levels.

And the numbers can get a little murky, due to Amex GBT’s acquisition of Egencia as well as the surprise purchase of Ovation Travel in January last year, but headlines from the biggest agency in business travel to the world include a loss of $340 million (based on adjusted EBITDA or earnings before interest, taxes, depreciation and amortization), including two months of ownership of Egencia. That’s after $763 million in revenue, based on a total trading volume of nearly $7.8 billion.

Pro forma for 12 months of Egencia ownership, Amex GBT reported a full year 2021 loss of $520 million based on adjusted EBITDA, with revenue of $889 million.

Amex GBT plans to go public by merging with an Apollo Management-backed blank check company in the first half of the year, and said the $520 million loss was $37 million higher than forecast provided in the registration statement of Apollo Strategic Growth Capital. Its financial results are preliminary and unaudited.

Moderate recovery ahead

The results are a marginal improvement from the $363 million loss in 2020, which came after $793 million in revenue, and just over $5.9 billion in total trading volume. But speaking at an online conference call last week, several travel executives revealed only a slight rebound in business travel, including Bank of America. It has 140,000 employees and has only recently come back to 20-30%. Software company Automation Anywhere accounted for just 10% of 2019 travel levels, while Snapchat’s head of travel said its corporate travel was up around 40%.

Acquisitions pay off

By acquiring Ovation and Egencia, Amex GBT said it doubled its presence with small and medium-sized customers, which now account for 45% of its total revenue. They are now its fastest growing and most profitable client segment, but the agency also expects to save money from its deal with Egencia and realize $109 million in total synergies. , including $25 million in 2022.

Owning Egencia also means offering these customers the special fares that Amex GBT has negotiated with the airlines. “Since the closing of Egencia’s acquisition by Amex GBT in November last year, we have been focused on using our new ownership structure to deliver tangible, bankable value to customers,” said Mark. Hollyhead, president of Egencia. “In a short time, we’ve brought even more choice to the Egencia Preferred Rate program for greater savings opportunities and differentiated content.”

In terms of larger customers, Amex GBT secured $3.7 billion in total value from new contracts, including Hewlett Packard, Standard Chartered and Palo Alto Networks. And so far in 2022, it has secured contracts with Raytheon Technologies and Ferrero Group. At the end of January it was secured a place in the new Crown Commercial Service procurement framework so that it can provide government departments and the wider public sector with business travel.

How do the numbers compare to other travel management companies? Australia’s CTM reported underlying EBITDA of $13.2 million for its first half of 2022 (covering the six months to December 31, 2021), compared to $11 million for the same period last year. He said he won new business deals worth $3.27 billion.

The next few months will be crucial for the agency as it prepares for its IPO, having spent the year laying the groundwork for the future.

In December 2021, Amex GBT bolstered its liquidity by establishing a $1 billion term loan facility under its amended credit agreement, and it plans to raise $1.2 billion in gross proceeds under of his blank check agreement. “We expect our pending business combination with Apollo Strategic Growth Capital to provide us with access to the capital needed to accelerate our growth strategy,” Abbott said in a conference call Monday.