Michael McCloskey of GreensKeeper Asset Management presents Amadeus IT Group (AMS.MC; ADR: AMADY), a B2B technology provider to the airline and travel industry with a roughly €22 billion market capitalization and listings in Madrid and on the US OTC market. The business spans three segments. Air IT Solutions supplies mission-critical operational software to around 200 airlines, holds roughly 50% global market share, and runs on 7-10 year contracts (with one-to-two-year implementations), contributing about 36% of revenue at 71% EBITDA margins. Air Distribution, the global distribution system, pushes fares to some 60,000 travel agencies and 600,000 agents across 400 airlines at a ~40-43% share and 50% margins, accounting for roughly half of revenue, ahead of Sabre (30%) and Travelport (22%). Hospitality, a natural extension of the existing platform, is scaling at 16% of revenue and 36% margins. Overall EBIT margins sit near 38%, and because Amadeus charges per passenger boarded, its revenue base is less cyclical than the underlying industry. Revenue and margins are at record levels, supported by €1.4 billion of R&D and capex last year, a migration to Google Cloud, and a data deal with Google Flights.
McCloskey frames the opportunity around a de-rating from 22-23x to roughly 15x earnings driven by three fears he views as overstated: AI disruption of airline IT (unlikely given 99.99% uptime requirements, latency, liability, and duty-of-care obligations), NDC disintermediation of the GDS (OTAs that attempted direct connections found them too complex and costly and are returning to the GDS), and the oil price and Iran conflict weighing on travel volumes (a single weak year leaves the long-term tail value intact). He notes the look-to-book ratio with agents runs around 10:1, with Amadeus now charging for excess searches above 1,000 per booking, and points to Sabre’s broken balance sheet and absence of free cash flow alongside Constellation Software’s quietly accumulated 12.5% stake as evidence the business model remains intact. In Q&A, he addresses ongoing travel-agency consolidation that pressures smaller agencies while OTAs still rely on the GDS for breadth, Amadeus’s relative strength in Asia and Europe versus Sabre’s in North America, dynamic pricing under NDC as a revenue opportunity rather than a threat, and hospitality as a natural extension he regards as peripheral to the thesis.
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