Amadeus It Group Sa Ord

keypad at any moment during the presentation. I am now pleased to hand over to you, Mr. Luis Maroto, President and CEO of Amadeus. Please, sir, go ahead.

Good afternoon. Welcome to our 23 first half results presentation, and thanks a lot for joining us today. I'm joined by Till. I will start with an overview of our most important developments. Till will elaborate on the key financial aspects. Stand to slide four to review our performance in the period. In the first six months of this year, our group revenue increased by 28% over prior year. The EBITDA grew 41%, adjusted profit expanded by 85%. This positive financial performance supported a 57% increase in free cash flow, resulting in net financial debt of 1.870 million, which represented one times last 12-month EBITDA. Our results in the first half of the year were driven by our segments' strong operating performance, which were supported by the continued strengthening of the travel industry. Global traffic continued to advance to the second quarter, with domestic traffic posting positive growth over pre-pandemic levels and international traffic advancing steadily. Additionally, we have remained highly focused on our R&D efforts and capex programs in the period as we are investing for the future. Our key areas of focus include the evolution of our hospitality platform, partnership with Microsoft and our seed to the cloud, the implementation projects of new customers across our business, NDC-related solutions and capabilities, including our next-generation airline retail offering under the Offers and Orders initiatives, and portfolio enhancements and expansion, including airline IT, digitalization, and enhanced shopping and retailing, and evolution of our portfolio for travel sellers, airports, and in-payments. Finally, we were pleased to resume shareholder remuneration in full at Amadeus, an important piece of our capital allocation strategy. In June, we announced a shared repurchase program of over 430 million, and in July, we made payment of our ordinary dividend at 74 euro cents per share amounting to a total of 333 million. Let's now review the key developments of each of our reported segments. Please turn to slide five, starting with our distributions. In the past quarter, we signed 16 new contracts of renewals of distribution agreements, taking the total to 36 for the first half of the year. We continue to advance with our NDC strategy to expand our customer base and to upsell technology to a number of our airline, travel agency, and corporate customers. With regards to our volume evolution, in the first six of the year, Amadeus Booking grew by 17% relative to prior year. Please remember that the recovery experience by the travel industry throughout 2022 impacts our booking growth rates in 2023. Relative to 2019, Amadeus' booking in the second quarter improved for the first quarter performance by 3.4 percentage points to minus 21.7 versus 19. This resulted in a minus 23.5 versus 19 performance for the first half of the year, outperforming our industry-supported market share gains. Our best performing region remains North America, which grew 4% in the first half relative to 2019, and was Amadeus' largest region in the period, accounting for 29% of our bookings. Over the first half, APAC has been the region experiencing the strongest improvement in growth relative to 2019. Finally, into July, we continue to see an improvement in our booking evolution. Let's turn to slide six for a review of Air IT solutions. In terms of business developments, we recently signed a new Altea PSS contract with an undisclosed airline carrying 25 million passengers annually. Also, several airlines' customers signed for additional solutions, pre-implemented new solutions such as Tunisair, Vistara, Air Corsica, and KLM. In Airport IT, we continue to expand our reach through new agreements with several players, including Noida, International Airport, the operator of Terminal 4 at John F. Kennedy International, Munich T1 Airline Club, a group of carriers operating from Terminal 1, and Spokane International Airport. In relation to our volumes, Amadeus PV was 37% higher in the first half of the year than in the same period of 22, driven by continued progress in travel industry and new customer implementations. Please remember that the recovery experienced by the travel industry through 2022 impacts our PV growth rates this year. While those passengers boarded for the months of the year were 5% below 19%. This was composed of organic growth of minus 6, planning organic growth from customer implementations, the more recent ones being Etihad, ITA, and Hawaiian Airlines in 2023, and Air India in 2022, partly offset by airline customers ceasing or suspending operations or demigrating from our platform, including the demigration of Russian carriers during 2022. In the first half of 2023, North America remains our best-performing region, delivering 28% growth over 2019, and Western Europe was our largest region, representing 32% of Amadeo's passengers' borders. Over the first half, North America and Asia-Pac were the regions reporting the strongest improvements in growth relative to 2019. Into July, based on the most recent data that we have, our PV performance versus 2019 has continued to advance. Slide 7, we have an update on our hospitality segment. Hospitality and other solutions continue to advance well, supported by new customer implementations and volume expansions. As a result, our revenues in this segment grew by 24% in the first half relative to prior year. Both hospitality, which generates the majority of the revenues in this segment, and payments deliver strong growth versus prior year. We also saw continued interest in the video from customers for solutions across our portfolio. With this, I will now pass on to Till for further details on our financial performance.

Thank you, Luis, and hello, everyone. Please turn to slide nine. Before starting with the review of our financial evolution, let me clarify that for purposes of comparability between 2023 and 2022, there are a number of non-recurring elements impacting our performance on the P&L. In the second quarter of 2023, we changed our tax provision fundamentally due to the positive resolution of certain proceedings with the Indian tax authorities. As a consequence of this change, Our income taxes were impacted positively by an amount of 29.2 million euros and our net financial expense increased by 6.6 million euros together combined resulting in an increase in adjusted profit of 22.6 million euros. Let me also clarify EBITDA is not impacted by any of this. Also, as you know, in the second quarter of 2022, we received a non-refundable government grant amounting to 51.2 million euros pre-tax or 38.9 million euros post-tax, which reduced our fixed cost base and resulted in an increase in our EBITDA. In order to facilitate the understanding of the evolution of our business in 2023, we've excluded these effects from the performance overview we are providing you with in this presentation. Further details on these effects and the full reconciliation to the reported figures can be found in the half one 2023 management review. Now, to review our revenue evolution, in the first half of 2023, our group revenue grew 28.2% versus half one 2022, supported by revenue growth across our segments. In air distribution, revenue in the first six months of the year was 31.1% above 2022, primarily driven by the booking evolution Luis described. And by a revenue per booking, which was eleven point eight percent higher than in half one twenty twenty two fundamentally driven by a lower weight of local bookings in the first half of twenty twenty three compared to twenty twenty two and pricing effects, including impacts from inflation and yearly price adjustment. With regards to RIT solutions, revenue in the first half of the year was 26.2% higher than in half 1, 2022, driven by the PB volumes evolution, coupled with a 7.7% lower revenue per PB. The decrease in the revenue per PB in the period was expected and was primarily driven by a proportion of RIT revenues not linked to PBs growing at a softer rate than PBs. more than offsetting positive pricing impacts from the Altea-Navitea customer mix, 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 have implemented Etihad Airways, Ita Airways, and Hawaiian Airlines, and continue working to implement Allegiant and Bambu Airways during the second half of 2023. As we said in February, This should bring us an approximate incremental 45 to 55 million PBs 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 PBs. Regarding hospitality and other solutions, revenue in the first six months of the year was 23.6% above half one 2022, driven by strong performances of both hospitality and payments on the back of new customer implementations and volume expansion. Within hospitality, hospitality IT reported healthy growth, mainly driven by sales and event management, service optimization, and Amadeus CRS revenues. supported by new customer implementations and higher reservation volumes. Media distribution revenues increased notably, backed by an increase in media transactions and bookings. And business intelligence revenue also expanded in the period, driven by customer implementations. Within payments, all its revenue lines reported strong growth rates, supported by higher payment transactions and customer implementations. Please now turn to slide 10 for a review of segment contribution and net indirect cost evolution. Air distribution's contribution grew by 33.2% in the first six months versus 2022 as a result of the revenue growth I've just described and by a 29.3% net operating cost increase which resulted from higher variable cost driven by the bookings evolution and other effects such as customer and country mix and an increase in fixed costs largely caused by R&D investment expansion and a higher unitary personnel cost. R&D investment in the period was mainly focused on the implementation of NDC contracts on the airline and travel agency side, as well as the evolution of our portfolio for airlines, travel sellers, and corporations. The contribution margin of the segment in the first half was 47.4%, an expansion of 0.7 percentage points from the first half of 2022. With regards to AI IT solutions contribution in the first half of the year, this was 28.5% higher than in half one 2022, resulting from the revenue evolution described before and an increase in net operating costs of 21%, which was fundamentally driven by the expansion of our development teams focused on the enhancement of our portfolio for airlines, customer implementations, and services, and the unitary personnel increase. ARIT solutions contribution margin in the first half was 71.2%, expanding 1.3 percentage points from prior year. Regarding hospitality and other solutions contribution in the first six months of the year, this was 42.3% above path 1, 2022, as a result of the revenue growth described before, and a higher net operating cost of 15.8%. And growth in net operating costs resulted from higher variable costs, primarily driven by volume expansion at our B2B wallet payment solution, as well as at our media distribution and CRS hospitality business, and an increase in fixed costs fundamentally caused by expanded R&D teams, dedicated to the evolution of our hospitality and payment solution portfolio and to customer implementations and by and by a higher unitary personnel cost as well hospitality and other solutions contribution margin in the first half was 34 which is 4.4 percentage points higher than the same period of 2022. finally Net indirect costs expanded by 11.8%, mainly resulting from an increase in transaction processing and cloud costs as a result of the volume expansion and our progressive shift to the public cloud and a unitary personnel increase. Please now turn to slide 11 for a review of our EBITDA running machine. In the first half of 2023, our EBITDA was 41.3% higher than in 2022. EBITDA margin expanded by 3.6 percentage points to 38.9. Our EBITDA performance resulted from the revenue evolution explained before and the higher cost of revenue and an increase in our combined personnel and other operating expenses cost lines. Cost of revenue grew by 35.3% in the six-month period versus 2022, resulting from volume expansion across our segments particularly in air distribution, in our media distribution and CRS hospitality businesses, and in our 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 half of 2023 compared to the same half last year were 12.7% higher, excluding the government grant in the second quarter of 2022. This cost evolution resulted from increased resources, particularly in our development activity to support our R&D investment, as Luis has described, coupled with higher unitary costs resulting from our global salary increase, growth in non-personnel-related spend like travel and training, among others, driven by the business expansion relative to prior year, and higher transaction processing and cloud costs caused by the volume expansion and our shift to the cloud. Just to recap on what we said in February, our P&L fixed cost growth in 2023 should range between 10 to 40% over 2022, excluding the 51.2 million Euro government grant received in 2022. We expect fixed cost growth to have in half two, a similar growth pattern than we saw in half one. To review the evolution below the EBITDA line briefly, in the first half of 2023 compared to 2022, DNA expense decreased slightly by 2.2% 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 55.3%, driven by an increase in financial income and exchange gains. Interest expense was in line with prior year as a result of higher average cost of debt relative to last year, offset by a lower gross debt. Income taxes increased by 92.6% in the six-month period versus prior year, largely driven by higher taxable income. And finally, resulting from all of these effects, adjusted profit grew 85% in the first half versus 2022. Please turn to page 12 to review our R&D investment and capex. R&D investment grew by 20.2% in the first half versus 2022. And as Louis has described, we are investing for the future and focusing on several strategic areas, hospitality, cloud, and VC, one order to highlight a few. as well as on new customer implementations across our businesses. In the first six months of 2023, our capex increased by 52.8 million euros or 20.6% compared to the same period in 2022, mainly driven by higher capitalized R&D investment and represented 11.5% of revenue in the first half. Please turn to slide 13 for a review of our free cash flow generation and leverage. With regards to free cash flow, we generated 482.4 million euros in the first six months of the year. And in the second quarter of 2023, we collected 42.8 million euros from the Indian tax authorities linked to the positive resolution of the proceedings I mentioned before. Excluding this collection, we generated 439.6 million euros free cash flow in the first half of the year, driven by our EBITDA evolution, by a change in working capital outflow as expected, and higher capitals in taxes. Relative to prior year and excluding the government grant and cost saving program implementation costs paid in 2022, as well as the collection from the Indian tax authorities in 2023, our free cash flow was 56.9% higher than in 2022. Free cash flow generation in the six-month period supported our net debt evolution. Net debt amounted to 1.870 billion euros at the end of June, with leverage amounting to 1.0 times net debt to EBITDA. And with this, I'll pass back to Luis for final remarks.

Thank you very much. As you have seen, we had a good progress in the first half and we are advancing well on our strategies across our business areas. We remain confident and excited for the future and the breadth of opportunity for Amadeus. With this, we have finished the presentation and are ready to take any questions you may have.

Ladies and gentlemen, the Q&A session starts now. If you wish to ask a question, please press star one on your telephone keypad. Thank you. The first question comes from Adam Wood from Morgan Stanley. Please go ahead.

Hi, good afternoon, and excuse me, sorry, thanks for taking the question. I just wanted to start off, there was a win away from you on the CRS in the hotel business this quarter. Again, I understand that you probably won't want to comment directly on that, but can you just comment more broadly on of the competitive landscape around CRS. Our perception was that coming out of COVID, your technology lead had widened significantly given other competitors came out in a lot weaker position. Are we maybe being a little bit too optimistic on that or is pricing more of a factor in those deals than we might have thought? And then secondly, on the distribution side of the business, we've traditionally talked about your competition with the other GDSs, but I guess with MDC, We now see other aggregators in the market who have, we think, a decent share on the MDC volumes. Could you talk a little bit about, as volumes scale, how you're seeing market share shifts happen on the distribution business? Are you seeing share move away from them back into the traditional GDS market as you expand the MDC offerings? Thank you.

Okay, let me try to cover. I don't know if I got completely the last part, Adam, but I will try to cover what I understood, and if not, just let me know. With regards to the CRS, no, I think we are still optimistic about the CRS. Of course, there is always competition, but we keep talking to customers. Of course, our biggest project today, as you know, is the migration of Marriott, but there are There are prospects there, and we keep being optimistic about the future of the CRS, and hopefully we'll be able to really get attraction and sign additional customers. But so far so good, and we keep complementing the platform, and I'm pretty optimistic about that. Again, there will be solutions in the market that would compete with us, definitely, yes. But we feel what we have developed is a state-of-the-art system with a lot of capabilities to compete. With regards to the GDS, competition is always there, of course. You have different dynamics, as you said, per country, per region. Our goal is to keep increasing sales. And then NDC, we see an increase of volumes on the GDS, but still small, as we keep implementing customers. And we keep this journey. I mean, for me, NDC is a journey where you have... Still, despite the fact that there are standards, there are different versions of the connectivity, different APIs in the way you connect to the carriers and also how we integrate in the system. We believe what we have makes sense. But of course, we also expect our competitors or whoever is dealing with content aggregation will compete with us in the future. We are confident about our investments in this front that we have been doing for years. We have signed 40 customers already, 20 have been implemented. And again, we see an uptake of bookings, but still low levels that probably in the coming years will definitely increase.

I guess where I was coming from was, if you look at the aggregators that are kind of new entrants into the market when MDC came on, do you believe that you're growing more quickly on MDC volumes than they are as MDC scales?

Well, look, this is difficult to say. Of course, there has been a number of aggregators that were getting into some pieces of the volume, because when you need to connect, you know, especially when you have connectivity, which is one by one, we can also provide that, but our Our approach is to really integrate and provide the travel agencies with the alternatives to really connect content from different airlines and from different technologies to do that in an economic way. And therefore, as soon as this gets traction, we expect to really grow faster. But at this point, as I said, the volumes are still small. I mean, of course, we are growing fast, but from a very small base. There are some travel agencies that are more advanced than others, especially when we talk about the online space, but the business side of the business is behind. And we will try to really provide a solution that is serving the different needs of the different travel agencies. So there are some aggregators that are doing some connectivity directly to the airlines. For us, this is a long-term journey, but I believe the GDSs are very well positioned to really do that in the proper way where you can integrate the different actors.

Excellent. Thanks, Luis. Appreciate it.

Thanks, Helen.

Thank you. The next question comes from Victor Chang from Bank of America. Please go ahead.

Hi, Luis and Teo. Thanks for taking my questions. Two, if I may. Just pressing on the kind of latest US airline commentary, there seems to be a trend of pushing faster the NBC adoption. And they also talk about unmanaged corporate travel recovering faster than managed corporate travel. Do you see any impact from this in Q2? And what are your expectations on this going forward? And the other question is, again, on hotel. Obviously, you commented about it just now. But can you talk a bit about the dynamics on both the CRS and PMS pipeline? Like Adam said, it's a pricing pressure with the peers. And on the PMS side, obviously, you have developed a very all-around solution, but probably still looking for a marquee customer. Is there any update on that front? Thank you.

Let me start with the last one and then I cover the first one. On the CRS, no, it's not that we feel any price and pressure about that. Not at all. It's a matter of competition, value proposition, functionality, and timing of sales and implementation. As I said before, I mean, we are confident and optimistic about that. And look, hopefully this will continue to be in the journey, but it's not that we have changed our prospects for this part of business and that we are being, you know, more pessimistic than before. I mean, I always mention this is a growth area for the company. We have two big chains and we hope to really keep increasing ourselves with big chains around the world and then move progressively to medium size chains to really complement this offer. So I don't think or I don't see any price pressure or anything that is comparable to what we are saying that of course there are solutions in the market that can be an alternative depending on what people are looking for and the sophistication that you have. With regards to the first point, as you know, and as I mentioned, we have contracts with many airlines, including some of the U.S. carriers for NDC, and we try to really provide the functionality that is needed. And therefore, we are not expecting short term. I mean, again, we will need to see if the volumes are coming through the GDS. but our assumption our expectation is that we are going to really be able to really benefit from the ndc moving forward again there will be competition there may be some cases of content that is going to be managed but not different from what in my view has happened during many years as the airlines trying to push their direct sales to the market and therefore we keep our confidence that the volumes in the coming years will be here as they have been in the past i mean it could be in some cases to volume that is getting out and volume that is coming back to the system, depending on the conditions and depending on the regions. But we are not assuming a negative impact in the coming quarter. Definitely not.

Got it. Very clear. I think the last part of my question was in hotel PMS, property management systems. I mean, you had obviously signed, I think, a premier in many years ago. But just wondering, obviously that didn't happen for some other reasons, but any kind of visibility into the potential kind of pipeline?

I mean, as you know, our strategy for the PMS is very linked to the CRS. So we are, I mean, we have a PMS solution that works, but our focus is much more on the CRS than on the PMS. So the PMS, as I understand it all, we are not approaching the market. We are approaching more in combination with our CRS. And if this happens in the future, and hopefully this will be the solution, because we believe that the CRS and the sophistication that we have there is going to really have a different way of dealing with the PMSs in the future. And therefore, a combination of both may make sense. But the PMS for us is a consequence of the CRS more than the PMS trying to compete completely independent with the players that are around in the market. So the integration of the different functionalities is what we are doing. And therefore, of course, we keep conversations with different players around the world when we talk about CRS and PMS. Got it. Thank you.

Thank you. The next question comes from Sven Merkt from Barclays. Please go ahead.

Great. Good afternoon. Thank you for taking my questions. First, a question on the revenue outlook. Are we able at this stage to provide some further color where within the range you expect to end up, especially after Yata recently raised their 2023 forecast? And the second question is really just a clarification on the comment that fixed growth will follow a similar pattern to H1 in the second half. Do you mean it should be, again, growing around the 12.7 level? Did I understand this correct? So in the upper end of your 10% to 14% fixed growth guidance. And if so, what has changed? What drives that?

I don't know. With regards to revenue guidance, I mean, look, so far, things have evolved positively. We see, again, July being positive, but it's too early to really change the full year outlook. I mean, as you know, look, we see capacity being positive, too, for the months to come. I mean, overall, the capacity, which is an important driver for us, but at the same time, I mean, you see some advice being more prudent than others. You see the current economic environment that may impact volumes in the future. So at this stage, I mean, we stay with the guidance we provided you at the beginning of the year, and we feel confident that we will achieve that. I mean, of course, things may evolve, but if this is the case, we'll provide you with further updates in the next quarter results. So up to today, things are positive, but there are enough doubts over the coming months to be a bit prudent. That's the way I would describe.

And on the cost question, so look for the full year. We, of course, expect to be within our fixed cost growth range outlook that we gave the 10% to 14% at the beginning of the year. But you're right. So I do expect that from a growth rate pattern, probably a similar figure for the second half of the year, which is relating more to the evolution of our headcount ramp up. And we have seen an opportunity in particularly service businesses, which is high in demand on the airline side, and we consider it as good business, and that is driving a little bit of that cost element.

Okay, that's clear. Thank you very much.

Thank you. The next question comes from Michael Priest from UBS. Please go ahead.

Yes, thanks. Good afternoon. Apologies if you covered this in your opening comments, Luis, but I had a bit of an issue getting online. But on the GDS business, the European and American trends year on year don't look great. What are you seeing there specifically? And what are you expecting for the second half of the year? Till, just coming back to the last question, do you also mean that from a seasonality point of view, we'll have the same as Q1 and Q2 in Q3 and Q4, i.e. Q3 growth rates are going to be much higher than Q4? And then just finally on the new airline win on Altea, was that from a competitor platform or a legacy migration? Can you give any more colour around that? Thank you.

Let me start with the last one. I mean, we cannot disclose. I mean, we have been asked by the customer not to talk about this, so I cannot give you more color. What I can tell you is that we are very pleased with that. It's a growth, it's in a growth market, so it's an airline that is having a good growth, but for the time being, we are not allowed to really provide you with more information because of the relationship with the customer. With regards to the GDS in Western Europe, I mean, one of the factors, of course, that we have been mentioning to you is that still the growth of low-cost carriers have been stronger. I mean, in Western Europe, definitely, you know, I mean, and I'm talking about traffic. I mean, the growth of Ryanair compared to some of the more full-service carriers, I mean, there's a big, big, big gap in terms of growth. So, of course, as traffic recovers and international traffic and business traffic recovers, hopefully, there could be further growth in Western Europe and, therefore, impacting positively our volumes. Again, I mean, Ryanair is a customer of us, as many of the locals, and, therefore, in terms of volumes for our TVs and our IT, this is positive. But, of course, they are less intermediated, and, therefore, they are having problems. There is less volume overall on the EDS. This is why the bookings are behind. So look, I will expect also the full-service carriers to keep recovering in the coming months. But again, it needs to be seen because definitely locals have been moving well ahead and laser travel has been doing much better than business travel during the last quarters. And the last question.

So first half of the year, we had a fixed growth excluding the ground of the 12.7, which you see in our numbers. And yeah, for the second half, I would expect the figure similar to that from a gross rate point of view, which leads you then to kind of the full year gross rate as well in that range.

Right. But till it was 14% odd in Q1 and 11.5 in Q2. So we're not...

There's no reason to do that repeat. Look, there's seasonality between the quarters. So, therefore, I'd rather take the first half kind of as a reference and then kind of what I said for the second half. Again, you may also have between the quarters certain seasonality or differences. But I think the objective and the purpose was to give a full year view. And again, as I said before, within the range of 10 to 14, but probably similar to what we've seen in the first half of the year in terms of overall growth rate.

Thank you. Thank you. The next question comes from Toby from JP Morgan. Please go ahead.

Yes, hi, good afternoon, and thank you for the questions. A couple from me, just firstly, just on the gross margin development, so 74% in the quarter, I know there are various mix shift dynamics that are happening across the business segments, as you mentioned earlier, but could you just give us a sense of how you expect those mix shift dynamics to evolve going forward and whether we should expect some continued pressure there on the gross margin or whether you think 74% is an appropriate floor to be thinking about? And then secondly, just coming back on the hospitality side of the business again, the growth deceleration was a little bit more pronounced than expectations. Could you just talk about what you're seeing in that segment on the demand side across the different, and whether you've seen any incremental impact from the macro environment in that segment? Thank you.

Well, let me start off with the just cross-margin question. Maybe just on the components of that, we've got various effects within there, and I've commented on that before, and also during my comments here now, we've seen hotel media distribution business evolving well within the host segment, and this does have also some incentive payments and cost of revenues driven by that. We've seen our B2B wallet business Within the payment space growing well and these are factors which which impact as well the cost of revenue and of course you also have got kind of the traditional the classic incentive site to the travel agencies But again, there are mixed effects in it also still a little bit linked to you know Customer mixes regional mixes and so on and so on but yeah, these are the dynamics within that and I I would expect that these things kind of trend a little bit towards kind of what we have seen in 2019, but nothing that we've seen, nothing different than what we've seen before. The second question, hospitality demand.

Well, I mean, look, in terms of demand, but I don't know if you were referring to different products that we have, but if we talk about the overall demand and overall demand The rates that we see in terms of occupancy, we still see a strong demand in hospitality overall from what we have as statistics. So no change compared to the past. I mean, the occupancy rates are very close to 2019. The demand in some parts of our business and until mentioned distribution and media are doing very well. So we don't see that yet. The same yet is that this may come in the future, but for the time being, the figures are not showing a weakness demand, the figures that we manage ourselves internally.

That's great. Thank you very much.

Thank you. The next question comes from Charlie Brennan from Jefferies. Please go ahead.

Great. Thanks so much for taking my question. We've covered a fair amount of ground already, but Can I just ask a question on pricing? Particularly in distribution, I think you're expecting pricing trends or at least price growth to moderate in the second quarter. It's come in at 11% or 12% growth. That's obviously still a pretty decent number. Was pricing better than your own expectations in the quarter? And how do we think about that evolving into the second half of the year?

Look, pricing has been obviously kind of positively evolving as you can see, but let me also just add, of course, when you look at it quarter on quarter, the first quarter comparing to prior year first quarter was comparing an Omicron quarter, okay? And since then, we've seen positive evolution of booking mix, which was obviously helping us, which again was quite positive. But beyond that, we've seen in pricing, of course, also kind of our yearly inflation increases, price adjustment, and so on and so on. So what I would expect for the second half of the year is a little bit of moderation in terms of pricing growth compared to half one. Again, obviously still staying good and positive compared to prior year. Has this been kind of in line with expectation? I would say pretty much that is what we've been expecting. So, yeah, that's the trend on the pricing side, which is obviously supporting our margin evolution.

Perfect. Thank you.

Thank you. The next question comes from Guillaume Sampaio from CaixaBank. Please go ahead.

Hello. Thank you for taking my question. The first one, a follow-up on the previous question. So according to IATA, looking only at international routes between Europe and other regions, traffic is already 20% below 2019. The GVF performance has been roughly stable at minus 35, minus 40. If you could help us reconcile these figures. And the second question about growth and networking's evolution, if you could provide some further color on this.

Thanks. I struggled a little bit to listen to you well, but if you are talking about the difference between IATA and the GDS, I mentioned part of that. I mean, of course, you have the impact of China that is recovering strongly in the last months, especially on the domestic front. As you know, this has nothing to do with the GDS. It has always happened pre-pandemic, but it has accelerated. in the last quarters with the opening of China. You have the impact of low cost that I mentioned before. And then, of course, the direct sales of airlines that usually the airlines have been pushing for direct sales during many, many years. Again, nothing really different from what we have seen. I would say some acceleration in the China impact in the last quarters compared to what we have seen previously. But I think I mentioned that. But I couldn't hear you well about the numbers you were giving.

If I understood you correctly, the second question was about gross and net bookings, if I'm not mistaken. So look, the difference of gross and net bookings we have been actually talking about during last year when we were talking about kind of month-on-month evolution compared to 2019 because it became more relevant. In that context, but what I can tell you is that the cancellations as such things have Things have started to move into a more normalized trend overall Otherwise, we would have highlighted it as something in the numbers. So you can say it's pretty much back to back to normal Of course, this also depends upon kind of now a bit of summer period and the airline's capacity and capability to deliver the schedules and the bookings as they get approached. But so far, I would just say this is all back to normality, more or less.

Okay, thank you. Just on the first question, a follow-up. I was referring specifically to international routes between Europe and other regions. If you could provide some color on why there's such a relevant gap between your performance and the or GDF performance and IATA strategy.

Sorry, we are trying to understand exactly. We have probably a problem to really understand the question. But it's between PVs. I was talking about... Between our PVs and IATA. I mean, look, again, and I don't know, look, we can follow up with you, but of course we have the number of customers. These are purely passengers, the customers we manage. I mean, if we think about Western Europe, of course we have the majority of the airlines. So mainly it should be very close to IATA figures, with some exceptions, of course, because there is no big difference. But we'll need to check exactly what you mean and try to reconcile numbers. But look, we'll follow up with you. The team will call you up to really try to understand the fact.

Perfect, thanks. Thank you. The next question comes from Carlos Treviño from Santander. Please go ahead.

Yes, good afternoon, and thanks for taking my question. Two, if I may, both on profitability. In February, you commented that you were expecting a slight decrease in profitability in the margins in hospitality. However, we have seen a significant increase on an annual basis and year-on-year basis for the first half of the year. So my question is, do you still expect a small decrease for the year as a whole, or do you feel now a bit more positive? And also the reasons for this better than expected profitability. And the second one would be also profitability in I-line and T. Even though your revenues are now above the pandemic level, your contributions margins are still well below the pandemic levels, and I would like to ask you for that. on reasons for this lower profitability than historically, and when do you think that we could see an acceleration in the improvement of margins in IT solutions? Thank you.

Okay, I had some difficulties of understanding, but I think I got the two key points on hospitality, profitability. And you're right, we have seen hospitality margin, contribution margin, evolving positively in the first half of the year. There were a number of moving parts in that that were actually positive and helped. There were more favorable segment mix effects. We also had an element, of course, when you run your business, you also have got bad debt. This year we had less bad debt than we had last year, which is positive. And there was also kind of better operating leverage within the hospitality segment as such. So for the full year, I do think that the gap of more than four percentage points of margin expansion versus prior year may perhaps shrink a little bit or may just narrow down slightly, but I do expect that contrary to our expectation that there would be slight margin contraction, probably we can say that in the hospitality segment we will be seeing slightly positive margin evolutions this year, which is good. on ARIT margin evolution. So a couple of things there compared to the 2019 levels that you are referring to. I mean, there's obviously segment mix, which does play a role. We have highlighted that sub-segments or sub-business lines like airport IT is performing better. Airport IT does have a lower margin within the mix. We have highlighted as well that we have an opportunity and we deem it as an attractive business opportunity, expanding a bit the services business with airlines where we are providing services through competency centers or running part of their operations outsourced to us. There are also certain mix effects that play into, from a customer mix point of view, that play into the margin at ARIT. Remember, there's also between the platform mix between Navitea and Altea. And of course, let me also say that we still have got a certain gap in terms of operating leverage because we are still short by a couple of percentage points in terms of volumes. And having said all of that, I would expect that in a year to go, so for the second half, that this distance versus the 2019 margin starts to narrow a little bit more, but mostly from PB growth, so mostly from volumes coming or we are expecting to come through.

Thank you. Very good.

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

Thanks a lot to everyone for attending the call, for your questions. Looking forward to the next call. And I wish you all a nice summer season. Thank you.