Amadeus IT Group, S.A. (AMS) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Amadeus Full Year 2020 Link Presentation Webcast. [Operator Instructions] I am now pleased to hand over to you, Mr. Luis Maroto, President and CEO of Amadeus. Please, sir, go ahead.

Good afternoon, ladies and gentlemen. Welcome to our full year 2020 results presentation, and thank you very much for joining us today. Till is here with me as well. I will focus on our most important developments in the quarter, and Till will elaborate on the key financial aspects. Let's start to Slide 4. I will start with a brief overview of the market's evolution in the fourth quarter and how our segments have performed. As you know, in the last months of 2020, air traffic remained constrained as the pandemic gained momentum in the fall. Overall, during the fourth quarter, global air traffic declined by 70.2% relative to prior year, improving over the 76% traffic contraction we saw in the third quarter. The progress we had seen each month since May stabilized in November, with traffic down in the month by 70.3% year-on-year, broadly unchanged from October at minus 70.6%. In December, traffic modestly improved by declining 69.7%, supported by a temporary easing of the pandemic. We have concluded the full year period with a global air traffic contraction of 65.9% relative to 2019. With regards to our volumes, Amadeus air travel agency booking growth in the fourth quarter continued to improve gradually each month, supported by both the gross booking evolution and a continued normalization of the cancellation ratio. In January of 2021, we saw a worse monthly performance when compared to December, driven by the spike in cases earlier in the year. However, we are now seeing a better trend in February and a further improvement this week. Overall, in the fourth quarter, Amadeus air travel agency bookings decreased by 79.4% relative to 2019, and Distribution revenue declined 77.9% versus prior year. Excluding the effect from cancellations associated with COVID, our underlying Distribution revenue evolution in the fourth quarter was negative 71% in the year 2020. Our air travel agency volumes and Distribution revenues decreased by 81% and 77%, respectively, a 62.6% underlying revenue evolution, excluding COVID cancellation effects. Amadeus Passengers Boarded performance continued to improve month-on-month until the end of the year across regions, with the exception of November driven by Europe and a heightened virus incidence rate. Our January '21 PB performance saw an improvement over the month of December, supported by the tail of the holiday season. Although in February, we have seen month-to-month -- month-to-date has slowed down comparatively. During the fourth quarter, Amadeus PBs declined by 72% versus 2019, following a decline of 75% in the third quarter, resulting in an evolution of minus 65% for the full year. Our Hospitality CRS transactions continue to outperform air volumes. And overall, our Hospitality business has delivered a strong performance in relation to air travel market conditions. IT Solutions revenue in the fourth quarter contracted by 48% and outperforming our Passengers Boarded negative growth, supported by revenues across our business portfolio not directly linked to airline traffic or not driven by transactions, particularly in the area of Hospitality. In the full year, IT Solutions revenue experienced a 40% revenue decline relative to the prior year. On Slide 5, to briefly review our group financial performance in the quarter. Please note that this performance excludes the implementation costs related to our cost saving program. In the fourth quarter of the year, driven by the dynamics I just described, our revenues declined by 65% or by 61% excluding the COVID-related cancellations effect. EBITDA in the fourth quarter amounted to EUR 31.6 million, a 93% decrease relative to prior year or a decline of 85% if we exclude cancellations and bad debt effects linked to COVID. Our free cash flow result in the fourth quarter amounted to EUR 214 million cash outflow, and we had an adjusted profit loss of EUR 88 million. Over the full year period, our revenues declined by 61% or 52.8% excluding COVID cancellations effect. EBITDA had a negative evolution of 90%, impacted by COVID cancellation and bad debt effects, excluding which, our underlying EBITDA performance was minus 75%. We had an adjusted profit loss of EUR 302 million, which had an evolution, excluding cancellation and bad debt effects as well as upfront financing fees in relation to the new financing, of minus 104%. Free cash flow in the full year amounted to a cash outflow of EUR 542 million, with net financial debt closing the year at EUR 3.074 billion. Our performance in fourth quarter improved a bit over the third quarter on the back of improved volumes, driving better revenues; and on the back of continued fixed cost optimization, further supporting EBITDA generation. Supported by our diverse revenue base, Amadeus has benefited from the resilience of our nontransaction revenues, which in 2019 were 15% of our revenues. Additionally, as I mentioned, our Hospitality volumes, which are not so directly affected by air traffic, had continued to outperform air volumes. Furthermore, we have continued to focus on our enhancement plan, and it has continued to yield important savings. Till is going to review this matter in detail shortly. Thanks to the savings and our revenue resilience this quarter, in spite of low air traffic volumes, we achieved positive EBITDA, excluding the cost saving program implementation costs. I'll finish my results overview by reiterating our confidence that we have a large enough liquidity headroom to face a severe scenario through '21 and '22. Before this, I will share an update on all our commercial progress and customer wins this quarter. On Slide 6, in Distribution. Our commercial activity progressed well through the quarter of last year and included the signing of 11 new contracts or renewals of distribution agreements with airlines, amounting to a total of 67 in the full year. In December, we were pleased to announce another NDC agreement through which Singapore Airlines will start offering its NDC content through the Amadeus Travel Platform from January 2021, including ancillary services and additional content like special fares and personalized merchandising offers. Furthermore, we recently renewed our content distribution agreement with American Airlines, which also includes American Airlines' NDC-enabled content, which will go live globally on the Amadeus Travel Platform in the coming months. We are very pleased also to announce this morning our new distribution agreement with IHG to drive advanced travel retailing through NDC. Through the agreement, IHG's content will be made available for travel sellers, agents and corporations through the Amadeus Travel Platform via Amadeus NDC-enabled solutions. We believe NDC is becoming growingly important for the airline industry in this environment and will continue to gain traction as the airlines starting to pursue higher yields through merchandising techniques, particularly in a low-volume scenario. Amadeus is strongly positioned to support the industry in this ambition as it can today, holistically delivering [ through ] an integration, allowing travel sellers to search, compare, book and service NDC source contained in one merge display. On the travel agency front, in January 2021, Amadeus and Expedia reinforced their strategic partnership with the renewal of their long-term global distribution agreement, covering air, car, hotel and rail distribution. Expedia Group will also leverage Amadeus' latest technology and IT solutions to innovate in searching and booking travel globally and to optimize its business performance and experience for travelers. During 2020, we also signed our first distribution agreement with Priceline, one of the North America's leading online travel agencies. In Airline IT, we continue to expand our PSS customer base with Air Senegal, Air Burkina and Uganda Airlines contracting for the Altéa PSS, among other solutions. Additionally, we remain active with our upselling efforts with Gulf Air, Kenya Airways, Airlink, among others, contracted for additional Amadeus Airline IT solutions in the fourth quarter. In Hospitality and Airport IT, we continue to renew contracts and to grow our respective customer bases. For example, in Hospitality, among others, we signed an agreement with Meeting Point Hotels, part of the FTI Group; and with Azalai Hotels to adopt the Amadeus Integrated Booking Suite. We also renewed our partnership with IHG for business intelligence solutions. And we have a number of contracts wins in Airport IT, including Abu Dhabi's Afroport, Salt Lake City International Airport and Havas Ground Handling in Turkey. Finally, on Slide 7, I may elaborate on the important recent developments with respect to our technology strategy. We are pleased to announce our strategic partnership with Microsoft, which, on one end, is going to boost our technological capabilities and which we also believe has a strong potential for us to innovate together. Let me give you some background. Amadeus' vision for many years has been to run an open ecosystem platform that delivers end-to-end traveler experience. Our ambition is for Amadeus to become the long-term partner to the travel industry, enabling an ecosystem with third-party providers and partners. We have deployed a highly consistent and focused investment plan over the years. We decommissioned mainframes. We were running open systems. We launched our platform layer, Amadeus Cloud Services. Our more recent technology has been built cloud-native and the rest of our technology was on a road map being progressively migrated to the public cloud. To further advance on our vision, we have decided to accelerate the effort we had underway, and we aim to be operated in the public cloud in the next years. Further leveraging on public cloud will continue to bring advantages you are well familiar with, better response time, higher flexibility, heightened resiliency and stability, faster innovation, time to market, talent attraction, the ability to better serve our customers from geographically diverse regions and many more. We have embarked on our migration process, which we expect to take between 3 and 5 years. It will involve R&D efforts over this period, all of which are contemplated within our CapEx budgets for the next few years. And after this, we'll be generating some savings. However, you should expect that these savings will be reinvested back into our technology. Furthermore, teams from both Microsoft and Amadeus are going to collaborate together, bringing expertise and agile development capabilities to envision, design and deliver travel solutions offering better end user experiences. This will also mean coordinated go-to-market strategies that leverage Amadeus and Microsoft's respective footprint and capabilities. It is early to be very specific, but I would like to say that we are excited about the opportunity to team up with such a strong partner with whom we have got a strong cultural fit from the beginning. We are convinced there are many areas where we can create value together for the travel industry. Partnerships form a part of our strategy. We seek for partnerships centered around a sustained commitment to innovate together in travel and target a deep collaboration to bring more value to our customers at an accelerated pace. I will now pass on to Till for the more financial explanations of this quarter.

Thank you, Luis. Hello, everyone. Please turn to Slide 9. Before I get into the financial details of Q4, I would like to review the progress we've made this quarter on achieving savings through the implementation of actions within our enhancement plan. As you know, our enhancement plan is well underway. It aims to strengthen Amadeus for the future. It involves the workforce reduction and actions to improve the way we operate, serve our customers and foster innovation. Let me remind you of the key vectors of this plan. It includes the acceleration of digital programs, process simplification and standardization, M&A integration, acceleration, speeding up our adoption of agile, lean and SAFe methodologies as well as internal reorganization set. In the fourth quarter of 2020, we achieved a fixed cost reduction, excluding bad debt, relative to 2019 together in the personnel and other operating expenses lines in the income statement and the capital expenditure caption in the consolidated statement of cash flows combined of EUR 195.8 million, totaling EUR 506.1 million for the 2020 full year period. The fixed cost reduction in 2020 versus 29 (sic) [ 2019 ] was larger than originally anticipated from the programs announced earlier in the year. These incremental savings have been supported by other initiatives taken in parallel, such as voluntary unpaid leaves and other expenses also temporarily reduced. For 2021, as you know, we target to maintain the EUR 500 million fixed cost reduction achieved in 2020, plus expanding it by another EUR 50 million in 2021 to achieve EUR 550 million in total. This is all excluding bad debt and implementation costs. Some fixed costs that were reduced short term in 2020 will be coming back in 2021, but savings will continue to phase in throughout the year as we progress on our enhancement plan from actions put in place in 2020. The phasing out of tactical savings and the phasing in of structural savings may affect savings by quarter. But for the year, we expect the additional EUR 50 million in savings to be achieved. Finally, with regards to the broadly EUR 200 million of implementation costs related to our cost savings program, in the fourth quarter of 2020, we incurred implementation costs amounting to EUR 93.4 million, thus totaling an amount of EUR 169.1 million for the 2020 full year period. The balance to the expected total implementation cost of approximately EUR 200 million will be largely incurred in Q1 2021. Finally, of these implementation costs, EUR 31.6 million were paid out in the fourth quarter, amounting to EUR 34.1 million in the full year 2020, and the balance will be paid out throughout 2021. Please turn to Slide 10 to review our liquidity. At December 31, liquidity available to Amadeus amounted to approximately EUR 3.5 billion, represented by cash of about EUR 1.5 billion, short-term investments of EUR 900 million and an undrawn revolving credit facility of EUR 1 billion. Our main financial maturities over 2021 include a EUR 500 million bond maturity in November 2021 and a EUR 500 million bond maturity in March 2022 and several maturities in aggregate amounting to EUR 62.5 million of our older EIB loan whose covenants, by the way, have been waived until September 2021 and commercial papers of EUR 622 million outstanding as of December 31, 2020. We've been able to refinance our commercial paper maturities during the second, third and fourth quarter of 2020. However, with the aim to extend the duration of our debt, we issued a EUR 500 million floating rate note on February 2, 2021. This floating rate note has a 2-year term with an option for us to redeem within 370 days after the issuance date. This new financing instrument will gradually replace all our commercial papers, which had maturities until the end of July of this year. As Luis has stated previously, we believe we have a robust liquidity headroom, and we are confident we can sustain a severe scenario during 2021 and 2022 of minus 80% air traffic compared to 2019. Again, that is a hypothetical scenario for the purpose of stress testing. In such a scenario or in that traffic scenario at minus 80% versus 2019, we see our monthly cash burn ranging between minus EUR 50 million to minus EUR 100 million. Now moving away from the stress test scenario. As a reminder, monthly free cash flow in Q3 was close to minus EUR 50 million. In Q4, our free cash flow was reduced due to social security and payroll tax payments that had been delayed from previous quarters as well as the cash-outs related to cost saving implementation costs. Excluding these effects, in Q4, our monthly free cash flow was close to minus EUR 20 million. This is monthly free cash flow that is less -- that is EBITDA, less CapEx, less change in working capital and cash interest and taxes. Depending on the context, we may or may not refinance our bond maturity in November 2021. However, with the EUR 3.5 billion of liquidity available today, together with the monthly cash outlook considerations I have made, it allows us to face 2021 and 2022 with confidence from a liquidity perspective. Now let's please turn to Slide 11 to review our financial performance in Q4 in more detail. On Slide 11, as we did in the previous quarters, let me briefly explain what we've done to facilitate the detailed understanding of our financial evolution this quarter. Firstly, P&L figures displayed across this presentation exclude onetime costs incurred in the third and fourth quarters of 2020 associated with the implementation of our cost savings plan launched in the second quarter of 2020. These costs mainly relate to severances amounted to EUR 93.4 million or EUR 66.4 million post-tax in the fourth quarter and EUR 169.1 million or EUR 120.9 million post-tax in the full year. Secondly, as we did before, we have calculated an underlying performance view to exclude certain COVID-19 associated effects on our P&L. These are namely cancellations, bad debt, impairments and upfront financing transaction fees. So if we go to the slide, as you can see, we have a table with our key P&L captions where we display in column A, the reported figure evolution resulting from comparing Q4 and full year 2020, both excluding the cost reduction plan implementation costs, with the same period in 2019. In column C, labeled underlying change, we show the resulting evolution from excluding the COVID-19-associated effects that have impacted this quarter and the full year performances. And in column B, we've quantified these COVID-19 effects by caption. Let me walk you through each of them. The largest one comes from the cancellations of bookings. Given the disruption in travel as the health crisis developed, we've had a very high cancellation ratio to gross bookings in the second quarter. And although now it has reduced, it is also still elevated in the third and fourth quarter relative to normal levels. As you know, the cancellation implies a negative revenue as we return the booking fee and also a negative cost as the incentive is returned to us. In Q4 and the full year, this negative revenue and this negative cost of revenue were, in turn, offset by the respective cancellation provision effect. Due to the increase in cancellation levels across the travel industry, we increased the cancellation provision during Q1 to cover for cancellation risks in the following quarters of the year. During Q2, Q3 and Q4, we applied the cancellation provision, which partially mitigated the negative revenue and the negative cost of revenue from cancellations in the quarter. Together, combined, first, the negative revenue or negative cost of revenue from cancellations that have exceeded the normal situation cancellation ratio net, second of the respective cancellation provisions in the period had a negative impact of EUR 49 million on revenue in the fourth quarter of 2020 and a positive impact of EUR 10.7 million on cost of revenue in the fourth quarter of 2020. We also saw an increase in the bad debt provision negatively impacting the combined personnel and other operating expenses cost line, driven by the reassessment of the credit risk of some customers that became high-risk customers in accordance with our default definition and the changes in the provision matrix in the context of COVID-19. The bad debt provision increased by EUR 5.2 million and EUR 70.1 million in the fourth quarter and in the full year of 2020, respectively. So excluding bad debt, the combined personnel and other operating expenses declined by 23.9% and 14.5%, respectively, in the fourth quarter and the full year 2020, respectively. Another effect has been an impairment charge amounting to EUR 58.8 million in the fourth quarter and EUR 139.6 million in the full year. I'll explain this shortly, but the charge related to some customers ceasing operations or canceling contracts as well as some assets not delivering their expected benefits over the same time frame as before. If we exclude impairment charges from 2020 and 2019 results, D&A expense declined by 18.8% in the fourth quarter and 5.2% in the full year 2020. And finally, upfront fees for the financing transactions undertaken in March, April, May 2020 raised the net financial expense caption by EUR 0.9 million and EUR 5.9 million in the fourth quarter and the full year 2020, respectively. Please turn to Slide 12 for an overview of our revenue in the period. Firstly, by segments. In the fourth quarter of 2020, Distribution revenue declined by 77.9% relative to the same quarter last year, driven by the evolution of volumes. Distribution revenue per booking increased supported by a positive revenue impact from the cancellation provision and from solutions supporting processes related to ticketing and cancellation and contractions in other revenue lines, albeit at softer rates than the travel agency bookings decline, such as revenues from travel agency IT solutions. These positive effects offset the negative impact from the higher weight of local bookings, impacted by the faster recovery in domestic air traffic compared to international air traffic. If we exclude the combined effect from the higher-than-usual air booking cancellations relative to gross bookings and the cancellation provision, the underlying Distribution revenue declined by 71.2% in the fourth quarter of 2020 compared to the fourth quarter of 2019 and by 62.6% in the full year compared to last year. In IT Solutions, revenue in the fourth quarter of 2020 decreased by 48.5% versus the same period of 2019, driven by minus 72.4% airline PB volumes. IT Solutions revenue outperformed Passengers Boarded growth, supported by revenues not directly linked to airline traffic or not driven by transactions, particularly in the area of Hospitality and Airport IT. In 2020, IT Solutions revenue decreased by 40.2% compared to 2019. And per caption, IT transactional revenue declined by 47.2%, resulting from a reduction in PB volumes, coupled with the unitary IT transactional revenue increase in the year, which was supported by the performance of revenue lines not directly linked to volumes and new customer implementations in Airport IT and Payments IT and the positive contribution from upselling activity in Airline IT. Direct Distribution revenue contracted by 67.9%, driven by the booking volume contraction. Finally, airline services and Hospitality IT revenue decreased by 21.3%, impacted by the COVID situation but supported by the resiliency provided by nonvolume-driven revenues and customer implementations. Our group revenue declined by 64.6% in the fourth quarter of 2020 or by 61% in the full year versus 2019. Excluding the COVID-19 cancellation-related effects, our group revenue decreased by 61% in the fourth quarter of 2020 versus the same quarter in 2019, driving a reduction of 52.8% in the full year relative to last year. Now please turn to Page 13. In the fourth quarter of 2020, our EBITDA, excluding implementation costs, amounted to EUR 31.6 million, a 93.4% contraction versus the same quarter in 2019, driven by a 64.6% revenue decline relative to last year, combined with fixed cost savings achieved in the quarter. Excluding also cancellation and bad debt effects associated with COVID-19, EBITDA declined by 84.8% in the fourth quarter of 2020 compared to the same quarter in 2019. In the full year, EBITDA, excluding implementation costs, amounted to EUR 222.8 million (sic) [ EUR 227.8 million ], which represents an 89.8% decline versus 2019 or a 70.4 -- a 74.9% decrease if cancellation and bad debt effects associated with COVID-19 are excluded. Let me share the details of our cost structure evolution over the period. In the fourth quarter of 2020, cost of revenue amounted to EUR 56.6 million, an 83.7% decline versus the same period of 2019. Cost of revenue was impacted by the reduction in air booking volumes as well as higher-than-usual air booking cancellations relative to gross bookings due to the COVID-19 pandemic, partially offset by our booking cancellation provision. Excluding the effects from the higher-than-usual cancellations and the cancellation provision, cost of revenue declined by 80.6% in the fourth quarter driven by the air booking evolution. In the full year 2020, cost of revenue declined by 80.7% (sic) [ 80.6% ] compared to 2019 or by 67.8% if we exclude the COVID-19 cancellation-related effects. Supported by our cost savings plan and excluding the implementation costs and bad debt effects associated with COVID-19, our combined personnel and other operating expenses cost line decreased by 23.9% in the fourth quarter of 2020 compared to 2019 and by 14.5% in the full year compared to last year. Including bad debt, our net fixed costs decreased by 24.7% in the fourth quarter of 2020 and by 12.5% in the full year. In terms of our contribution margin and cost evolution by segment, Distribution contribution amounted to EUR 152.6 million in 2020, the contraction of 89.1% versus 2019, resulting from the decline in Distribution revenue we just explained; and a 67.4% reduction in net operating costs driven by the decrease in both variable costs, which [ flex ] with the booking volume evolution and fixed costs impacted by our cost reduction measures. IT Solutions contribution amounted to EUR 719.4 million in the year, declining by 54.2% versus 2019 as a result of the revenue decrease we have described in IT Solutions and a 15.1% reduction in net operating costs supported by cost saving measures. Also impacted by our cost saving measures, net indirect costs decreased by 14.3% (sic) [ 13.3% ] in 2020 versus prior year. Below the EBITDA line, D&A increased by 8% in the fourth quarter and by 9.6% in the full year. Both increases were mostly driven by higher impairment charges versus 2019 in the context of a high reduction in travel volumes brought about by COVID-19. We identified impairment losses related to specific development and implementation efforts carried out for customers that have either canceled contracts, suspended or ceased operations and to assets that may not deliver the expected benefits over the same time frame as before. As a result, an impairment charge of EUR 58.8 million, EUR 42.6 million post-tax, was accounted in the fourth quarter; and EUR 139.6 million, which is EUR 101.2 million post-tax in the full year 2020. D&A in 2020 decreased by 5.2% relative to last year if impairment losses are excluded, mostly due to a decrease in amortization from purchase price allocation exercises driven by certain assets which reached the end of their useful life at the end of the second quarter of 2020. In the fourth quarter, net financial expenses increased by 104.7% versus the same period of 2019, driving a full year growth of 72.4% versus 2019. The increase in net financial expense in the year was mainly driven by a higher interest expense, which grew by 70.4% (sic) [ 84.4% ] in 2020 compared to 2019 as a consequence of both a higher average gross debt outstanding and a higher average cost of debt driven by the new financing in 2020 under the COVID-19 situation. Also in the full year period, net financial expense was impacted by upfront financing fees in relation to the bridge to bond facility signed in March and the convertible bond issued in April this year, excluding which, net financial expense grew by 62.5% in 2020. Okay. Turning now on to Page 14 to review our cash flow evolution in the period. Let's start with CapEx. In the fourth quarter of 2020, CapEx declined by EUR 76.5 million or 39.8% versus the same period of 2019. CapEx in intangible assets decreased by EUR 59.9 million or by EUR 36.7 million (sic) [ 36.7% ] in the fourth quarter of 2020 compared to the same period last year as a result of lower capitalization from software development as well as a reduction in the amount of signing bonuses paid. Lower capitalization from software development were due to a decline in R&D expenditure of 33.5% in the fourth quarter relative to 2019, resulting from a selective approach to our investments in the context of COVID-19, prioritizing investment in strategic projects while postponing efforts devoted to more long-term initiatives. CapEx in property, plant and equipment declined by EUR 16.6 million or by 57% in the fourth quarter of 2020 compared to 2019, impacted by the cost saving measures put in place. In the full year, CapEx decreased by a total amount of EUR 234.6 million or by 31.9% relative to 2019, driven by a decrease of both CapEx in intangible assets by EUR 184.5 million and CapEx in property, plant and equipment by EUR 50.1 million versus 2019. Moving on to free cash flow. Amadeus free cash flow amounted to an outflow of EUR 213.5 million in the fourth quarter of 2020 and to an outflow of EUR 541.9 million in the full year. The free cash outflow in the fourth quarter was driven by the impact COVID-19 has had on our EBITDA evolution, which has been already largely described throughout the presentation; a reduced CapEx amount relative to last year, as I just described; the cash outflow from change in working capital; higher interest paid; and lower tax payments compared to the same period of 2019. Please note that free cash flow in the fourth quarter was reduced due to EUR 120 million in personnel-related cost payments delayed from previous quarters and EUR 31.6 million implementation costs paid in the year. Therefore, the free cash outflow adjusted for these effects in Q4 was just EUR 61 million, an improvement over the third quarter. On this note, I will now pass on to Luis for some final remarks.

Thanks, Till. I want to touch briefly on how we see the future today. We're optimistic about the future of travel and have no doubt that once movement restrictions have lifted, travel will resume and our industry will thrive once more. In the short term, we will likely see trends up and down in the next months, making it not easy to predict air traffic evolution. We are confident things will get better in the second half of 2021 as we continue to progress and the vaccine rollout programs start to have an effect. We have the IATA forecast for 2021 issued this week, which will point in the direction that it's a minus 62% RPK evolution in 2021 versus 2019 and also a downside case of minus 67%. More concretely, for the first quarter of 2021, assuming that volumes stay at current levels, we should see results overall pretty much in line with the last quarter of last year. Our plan for 2021 is to continue to invest for the future and come out stronger. We continue to work with our customers to support them as much as we can. As you have seen, we continue to have customer wins and expand our customer bases throughout our different businesses. We continue to invest. As we have been telling you, through 2020, we have protected all our strategic investments. We continue to support our efforts in important areas, such as NDC, Hospitality, our central technology projects; but we have also continued to invest in other important areas, such as Distribution, corporate IT, Airline IT, Airport IT and Payments. We also remain highly committed to optimizing our cost structure to drive efficiency. With this, we have now finished the presentation and are ready to take any questions you may have.

[Operator Instructions] The first question comes from Julian Serafini from Jefferies.

So I have 2 questions. So number one, Luis, on the Microsoft partnership that you announced. In terms of that partnership, I think you mentioned, if I understood you correctly, that you expect to have a certain degree of savings from that partnership so that you could reinvest it completely. Can you quantify how much the savings may be and confirm that, yes, you will reinvest everything into R&D? And then second question for Till. Thank you for explaining on the unitary economics in the IT Solutions business there. Now related to that, too, also the mix of Altéa versus Navitaire volumes, can you share any information on how that's trending versus prior years? Are you seeing more Altéa versus Navitaire, one or the other? Just some details on that would be interesting.

Let me start with the Microsoft deal. I mean, look, this is an ongoing process of migration. As you know, we have been already migrating to the public cloud. This should allow us to accelerate. So in the coming years, there will be progressive savings as we move forward with this program. But at the same time, as I mentioned before, I mean, our idea is to really keep investing on the technology front. However, we have considered all these effects into our projections and also in the cost savings that we have already provided you for -- at least for 2021. So this is, as I mentioned, an ongoing process. So there will be some savings, yes, as we move forward. But as I mentioned before, this should be reinvested into the core businesses.

Julian, on your question in terms of Navitaire and Altéa, what we've seen -- and this is consistent with what we've observed, obviously, in the market in terms of just domestic, local bookings, et cetera, et cetera, we have seen actually that Navitaire was trending a bit better than Altéa. So that happens in the recent weeks and months. So Navitaire basically stronger than Altéa.

The next question comes from Adam Wood from Morgan Stanley.

I've got 2, please. Just first of all, following up on Microsoft. I think in the past, you've been quite vocal in the benefits of owning and running your own data center versus your competitors who had outsourced. Could you just talk a little bit about how you get yourself comfortable with moving entirely to a public cloud, a Microsoft-dominated environment admittedly in the mid to long term, committing yourself in that way? And also, while you get cost savings in the short term, the confidence you have that once you are locked into that hyperscaler that they won't seek to be more aggressive on pricing in the future, and you kind of have less flexibility around that. And maybe then on the positive side, you could talk a little bit about some of the Microsoft technology innovation that you think could be appropriate and relevant to your business to expand and improve the offerings. So that was around Microsoft. And then maybe just secondly on travel agent consolidation. I think, again, we've seen in the past that some of the smaller agents have been very focused on incentives rather than technology in the GDS space. Is it too early for that consolidation to be playing out and for the shift to tech-focused deals happening and, therefore, for you to be winning a lot more transactions? Or do we need to see more of a rebound in volumes for agents to start to make those decisions?

Okay. Let me start with Microsoft. I mean things evolve, as you can imagine. We have been in the journey of migrating to the cloud for years. And we have always been assessing our options between private cloud and public cloud. It is clear that the big players in the public cloud space has evolved a lot in the last years, and we have considered that moving more public could bring additional benefits. The fact that we'll work with Microsoft as the main partner doesn't mean that we'll be locked in with Microsoft for the future. I mean it's not exclusive, and it doesn't mean we need to run everything that we do with Microsoft. We have considered to engage more with Microsoft as the main partner for our future because we need to leverage much more working with them to support us during this journey, but it doesn't mean that we cannot work with the rest of the cloud providers, and it is our intention to really keep working with them. In terms of potential additional benefits of this partnership, this is not just about the cloud. I mean, again, Microsoft has very strong capabilities on the technical front, I mean, in the areas of artificial intelligence, machine learning and transversal technologies that we can use for the travel vertical as they have been using that for other verticals. And therefore, it's our intention to leverage their technology, okay, work with them much closer in terms of moving to the cloud, leveraging the technology that they have that can optimize our way of working. But also using our partnership with them to really try to analyze how we can combine efforts with their capabilities, their tools and our capabilities and our tools to really bring to the market new ideas and also optimize part of the solutions that we have with Microsoft technology. I mean it's definitely a very big company with a lot of capabilities, and we are sure we can benefit from this partnership with them. And again -- so there are 3 parts: the cloud migration, the technology that they can bring to us to optimize solutions that we bring to the market and the fact that we expect to innovate together, work together with them and bring new solution to the industry. So it's an overall partnership with them. And saying that we are very pleased of working with them, it doesn't prevent us to really look for alternatives, if needed, on the cloud space. And then the second question was about TA consolidation. Look, again, Adam, this is an ongoing process. You're right, I mean, there could be further consolidation. It is also true that the small retail travel agencies that have suffered during this period more than the big players or the online players. Well, many of them have been able to -- at least to survive for the time being as we are -- as they are small in terms of cost, some of them family owned. So we need to see how many of them are going to really come back as volumes resume because many of them are closed today, not operating. Some of them are already operating. So we need to see how things stay after COVID. Some consolidation will happen, yes, as it has happened in the last years. I think it is a little too early, as you mentioned, until we see the rebound of how the picture would -- will look like and what will be the -- after the COVID situation. Saying that, I really believe that technology will become more and more important moving forward as everybody needs to really move into a world where -- with the digital piece and the optimization and the way to serve customers will be much more [ probably ] than what has happened in the past. So the combination of physical travel agencies with strong technology capabilities will be a must to really be playing in this sector.

The next question comes from Stacy Pollard, JPMorgan.

Can you hear me?

Yes, Stacy. We can hear you.

Okay. Just making sure because I had some phone issues earlier. 2 questions from me, it might be multipart questions. I know there are a lot of moving factors, but how do you broadly think about EBITDA margin prospects for 2021? So let's say, minus 65% air traffic, as IATA says, kind of the midpoint, and all your cost savings come through as planned, where would that put you on the EBITDA side? And then can you extend that to cash? You obviously did some cash burn scenarios. But just where -- at the sort of average midpoint, where does that put you on average for 2021, maybe a range of possibilities? And second question, can you give us a revenue range for Hospitality now? How do you see that developing as compared to air traffic? I know it's a tough environment, but just how are your conversations with your Hospitality customers going? Are they looking at larger packages or only small packages? Any interest in the platform?

I mean, Stacy, you are mainly asking us for a guidance that we decided not to provide, okay, even if we can base that on IATA. The reason why we did not provide that, and you can do your economics because you know very well [ us ], is the fact that there are, as you mentioned, many moving factors. I mean the fact of domestic versus international, I mean you can go with average, but it's much less accurate what we can provide you than what, okay, we provided in the past. So -- I mean to provide you exactly ranges or guidance about that, it's very difficult today. Again, there is a mix effect, the regions effect. I mean, look, we have done a lot of scenarios. I will say the more things recover, the more reliable they are. And hopefully, 2022 will be much easier [ for ] 2021. I mean you know the volumes. The cost savings will be there. This is a commitment of the company, so you can apply that. And then in terms of the rest of the caption, it's quite difficult. I mean what I said in my speech and what should be a reality is that Hospitality has been much more resilient, so it should stay better than the air traffic by all means. It has also been impacted, of course, because at the end, okay, Hospitality is not completely immune to that. We have also provided you color with the fact that some regions have recovered faster. I mean Western Europe has suffered in the last couple of months. To be honest, this week, we have seen a strong recovery in Western Europe. So all these elements play quite a lot into the figures. And that's why at the end, we said, look, even if we have this estimation of IATA, that could be right or could be wrong. As you know, last year, they revised sometimes the projections. Hopefully, this is not going to happen this year, but it may happen depending on the rebound, so the volatility is much higher. But -- so that's why, I mean, it's very difficult for us to provide you a specific number, Stacy.

The next question comes from Neil Steer from Redburn.

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