Welcome to the Amadeus First Half twenty twenty one Presentation Webcast. The management of Amadeus will run you through the presentation, which will be followed by a question and answer session. I'm now pleased to hand over to you Mr. Luis Maroto, President and CEO of Amadeus. Please go ahead, sir.
Thank you.
Hello, everyone, and welcome to our Q2 results presentation. Thank you very much for being with us today. Till is here with me. And as usual, I will focus on our most important developments in this quarter, and Till will elaborate on the key financial aspects. So let's start with an overview of our results in the quarter.
In the Q2 of the year, Our group revenue amounted to EUR 624,000,000, decreasing by 56% with respect to the Q2 of 2019, advancing from the evolution we saw in the Q1. This progress is driven by improvements in our volumes evolution, coupled with cost efficiency, Supported EBITDA generation. EBITDA excluding cost savings implementation costs expanded to EUR 100 and EUR 45,000,000 in the quarter, also comparing favorably to last quarter's result. Free cash flow performance amounted to a $79,000,000 cash outflow in the 2nd quarter, excluding cost saving program implementation costs paid, Impacted by unexpected working capital effect. For the 1st 6 months of the year, we have had a minus EUR 47,000,000 free cash flow Supported by further volume progress and positive working capital dynamics, we expect free Cash flow generation to continue to strengthen in the second half of the year, but still we'll explain later.
We had an adjusted profit loss of EUR 24,000,000 in the quarter, also demonstrating a positive trend from prior quarter. Finally, our cost optimization efforts continue to yield results and will accelerate our profitability and cash generation as volumes recover. In aggregate, to date, in the year and compared to 2020, Our total fixed cost reduction amounted to EUR 168,000,000 We'll go to the next slide, Slide 5 for a market update. Throughout the Q2, our volume performance has to improve with an acceleration in the month of June, the best performing month to date since the start of the pandemic. Our travel agency bookings declined by 67.6% in the quarter compared to the same period in 2019, advancing from the minus 79% reduction that we saw in the Q1.
For the 1st 6 months of the year, the Amadeus monthly air booking growth rates versus 2019 gradually improved its months with a step up in the month of June, where our bookings By regions, North America continued to be the best performing geography followed by our Eastern Europe region, which includes Russia. All regions showed improvement in volume performance in the second quarter versus 1st quarter with the most notable advances taking place in North America followed by Western Europe. In the Q2, distribution revenue declined by 66.4% versus 2019, progressing with respect to the minus 77 Percent revenue evolution in the Q1. Our passengers boarded contracted by 67.7% in the quarter compared to the Q2 of 2019, representing an improvement over the minus 71% growth we saw in the Q1. Monthly growth rates versus 2019 improved sequentially through the quarter, most notably in June, where passengers Border declined by 63.4%.
Our best performing regions were North America and Latin America. In the Q2, led by North America across the board, practically all regions reported improvements in the And yes, border performance relative to the Q1's evolution. IT Solutions revenue contracted by 42.8% in the quarter versus, again, the period of 2019. This result, A continued improvement over prior quarters was supported by revenues across our business portfolio not directly linked to airline traffic are not driven by transactions, particularly in the area of hospitality and airport IT. Most recently, in the first half of July And compared to the same period in 2019, in relation to our bookings, we saw an evolution that remained very much in line with evolution in June, despite some changing mobility restrictions in different geographies.
With respect to passengers boarded, we saw a relevant uptick in the first half of July compared to June as this was seen across regions led by Western Europe and North America. To recap on volumes, I would like to say that we see clear demand and intention to travel as Restrictions and quarantines requirements are lifted or listened. We have seen some progress to date in volumes, and we are optimistic that as vaccination programs Advance across the world and travel protocols and rules also evolve, it should translate into a more consistent and stronger recovery over time. In addition to this, I will add that we continue to see commercial momentum in our conversations with existing and potential new customers, and the business pools is good. Please turn to slide 6, which gives you a business and corporate update for the quarter.
In the Q2 of the year, in distribution, we signed 16 new contracts of renewals of distribution agreements with airlines, including Virgin Australia, amounting to 37 signatures in the year to date. We continue to make good progress in relation to our NDC strategy through agreements signed on the airline front with United Airlines, Qantas, Qatar Airways, LOT and Kenya Airways as well as on the travel agency side with ticket.com in Southeast Asia and Sera Group and Saraf Travel in the Middle East. In relation to Airline IT, we had a number of developments. LOT Polish Airlines signed a renewal agreement covering a wide range of state of the art solutions related to passenger services, Airline operations, revenue management, merchandising, passenger disruption management and digital experience. Istara, the Indian carrier contracted for Amadeus network revenue management.
Nordica Small Spanish Airlines contracted and implemented the full Altea PSS suite as well as other solutions. And will implement Amadeus Digital Experience Suite. Uganda Airlines implemented Altia DCS and additional solutions. And finally, Briess Airways in the U. S.
Implemented Naviterneo Skies. In Hospitality and in Airport IT, we continue to renew contracts and to grow our respective customer bases. I will listen. In hospitality, commercial activity included Marriott signing for an expansion of our partnership by adding the Man360 Business Intelligence Solution. Also Swire Properties, Hotel Management, Si'am World and Millennium New York signed for Amadeus Digital Media.
CIGI, a leading hotel information Systems player in China has partnered with Amadeus to add hotel accommodation options in China to the Amadeus travel platform. In Airport IT, Pristina International will automate the checking and backdrop processes with Amadeus Solutions in the U. S. Siracuz Hancock International Airport, contractor for Akus also Kansas City International Airport contracted for Amadeus Biometric Solution and Pittsburgh International Airport signed for the deployment of FEEDS. Finally, from a corporate update perspective, we welcome the European Commission's decision this month to close the investigation into our agreement with Travel Agent Airlines opened in November 2018.
I will now pass on to Till for further details on our financial performance.
Thank you, Luis. Hello, everyone. Please turn to Slide 8 for an overview of our revenue in the period. As Luis has explained, our group revenue by 56% in the Q2 of 2021 relative to 2019. This evolution represents an improvement over the Q1 performance and resulted from distribution revenue declined by 66.4% versus 2019.
This was driven by the lower volumes in 2019, distribution revenue per booking diluted impacted by negative cancellation provision and local booking weight effects. These impacts were partly offset by contractions in other revenue lines, such as revenues from travel agency IT solutions at softer rates than the travel agency bookings decline. IT Solutions revenue decreased by 42.8% versus 2019, driven by the lower PB volumes than in 2019. IT Solutions revenue outperformed passengers boarded growth, supported by non transactional revenues and revenue streams not directly linked to airline traffic, mostly in hospitality and airport IT. Please note the following with respect to our unitary revenue metrics.
In the current situation, our quarterly Distribution and IT Solutions unitary revenues, that is distribution revenue per booking and IT Solutions revenue per PB, are distorted by the lower than usual volumes and by other factors such as the revenue mix from different businesses, the different evolution of transactional versus non transactional revenues or of revenues linked to air traffic versus non air traffic linked revenues. As volumes continue to advance Towards 2019 levels, we expect our unitary revenues to trend to 2019 levels. During this period, Our unitary revenue metrics will continue quarter on quarter impacted by the effects mentioned. For 2021, we expect dilution and distribution revenue per booking relative to 2019 levels, driven fundamentally by the booking aspect. We expect this distribution revenue per booking dilution to likely be in the single digit percentage range.
And we expect the revenue per PB, which remains abnormally high at the moment, to expand less in relation to 2019 in the following quarters than it did in the prior quarters. SPVs continue to grow and non transactional revenues or revenues not linked to air traffic are not impacted by this TV growth. Please turn now to Page 9. In the Q2 of 2021, our EBITDA, excluding implementation costs, amounted to €145,300,000 a 75.3% contraction versus the same quarter in 2019, resulting from the combination of the revenue decline just explained, a 72% cost of revenue reduction, very much linked to the Booking volumes evolution and a 19.4% decrease in our combined personnel and other operating expenses cost line supported by our cost efficiency plan. Below EBITDA, in the second quarter, D and A expense declined by 33.1% relative to 2020, resulting from less PPA amortization and no impairment losses accounted for in half 1, partly offset by a small increase of 5.3% in ordinary D and A.
Despite an increase in interest expense, Driven by the new financings in 2020, net financial expense declined slightly by €400,000 compared to 2020 due to a reduction in exchange losses. Income taxes adjusted for the tax impact from the cost saving program implementation costs amounted to an income of €11,400,000 The group income tax rate was at 28.0%. Supported by the EBITDA evolution, adjusted profit improved to a loss of 20 €3,600,000 in the Q2 of 2021. Turning to Page 10 to review our cash flow evolution. Let's start with CapEx.
In line with our cost optimization goals, CapEx declined by €50,300,000 or 19% in the first half of the year versus the same period of 2020 on the back of a lower CapEx on intangible assets and a reduction in CapEx on property, plant and equipment. The decrease in CapEx on intangible assets over the first half of the year was mostly due to a lower capitalization from software development, resulting from a 23.4% decline in R and D expenditure, where we followed a selective approach and prioritized our investment into the most strategic projects. Free cash flow in the first half amounted to an outflow of EUR 47,000,000 excluding cost saving implementations cost paid. This performance was mainly driven by our EBITDA evolution, by reduced CapEx amount relative to last year and a cash inflow from change in working capital. Free cash flow in the Q2 deteriorated versus prior quarter as expected, impacted through working capital by scheduled personnel related and interest payments in the second quarter as well as timing differences between collections and payments versus revenues and expenses accounted for in the quarters.
We foresee that free cash flow generation will improve in the 3rd and the 4th quarters of the year from the Q2. In the second half of the year, we expect free cash flow to be positive, excluding implementation costs and based on further volume performance progress. Please turn to Page 11 to review our fixed cost optimization progress. In the first half of twenty twenty one, we achieved a fixed cost reduction relative to 2020, together in the P and L and in capital expenditure combined of €167,900,000 As explained before, Our cost savings definition refers to the change in costs, excluding cost saving program implementation costs and bad debt. This fixed cost reduction is according to our plans, and it supports our confidence in achieving the €50,000,000 and cost efficiency target.
We've set ourselves in 2021 over 2020 in achieving the €550,000,000 cost saving versus 2019. Going forward, as per our plans in Q3 and Q4, we We will allow for some discretionary costs to increase compared to these quarters in 2020 related to salary increases, no more voluntary and leave programs as we had in the last year amongst others. So please note that for the next quarter, you should expect higher P and L costs 2020 and broadly stable CapEx relative to Q3 2020. With regards to the broadly €200,000,000 of implementation costs related to our cost saving programs, we estimated when we launched them in First half of twenty twenty one, we incurred implementation costs amounting to EUR 25,600,000 thus totaling €294,800,000 incurred to date. The balance to the expected total €200,000,000 will be incurred throughout the remainder of 2021.
Finally, Of these implementation costs, €74,800,000 were paid out in the first half, totaling to €108,900,000 so far. The balance will be paid out through 2021 in early 2022. With this, we have now finished the presentation, and we are ready to take any questions you may have.
Thank you. Ladies and gentlemen, the Q and A session starts now. The first question comes from Adan Wood from Morgan Stanley. Please go ahead.
Hey, Louise. Hey, Tayo. Thanks very much The questions, I've got 2, please. First of all, it's interesting to see the lot deal. Maybe around that, you could just talk more generally around what the appetite is And engagement you have with airlines around not only renewing, but also that big broadening of PSS.
And whether it's not specifically or more generally, it looks as if there's a decent uplift there as they take a lot of the new products that you have on offer. It's been a there's been a big progress since the last Capital Markets Day in terms of the breadth of that. Could you maybe just remind us how big of an uplift do you It could be for an airline that goes from reservation inventory to taking that much broader portfolio in terms of revenue per PB. That's the first one. And just secondly on NDC, I think we always have a lot of discussion around disruption that could cause some change.
But it looks clearly as if there's opportunities for you around IT solutions with Altair NDC to bring a lot of value and help airlines and travel agents construct offers. Could you maybe just talk a little bit again in the context of what you're making with an existing airline or travel agent today. If they took a broad MDC offering from you, Again, what kind of uplift you could get from that process? Thank
you. Okay. Hi, Alan. Thanks for the questions. Okay.
With regards to renewals and negotiation, of course, in any single renewal discussion that we have with all our customers, We don't limit the discussion to the current portfolio of solutions, but of course, we are looking forward To really convince our customers to take a broader scope of solutions. And This is a case of lot, but I will say it's of many, many cases, okay? It's not just a lot, but in many cases, It is an important milestone to really have this discussion. So overall, we feel confident that we have opportunity to upsell. It's not the same for each airline for many reasons.
On the one hand, many airlines have already taken An important part of our portfolio and therefore the upside could be less. Other airlines are coming from just the core PSS and therefore there is opportunities of upselling at that moment. But as I have reported before, there are airlines that are taking our revenue management, our digital suite and other parts of our Later, and we continue pushing for that. When you talk about appetite, I mean, again, it's very difficult to generalize. But I believe in general terms, our customers are open, of course, after working with us to really consider additional functionalities that we can offer to them.
And again, I mean, as you can imagine, it's part of our goal to really keep upselling and including More functionalities as part of our relationship with them. So more than talking about the specific cases, I will say the general trend is positive and overall we see an increase of our upselling capabilities with the carriers. With regards to NDC, I mean, again, difficult to really talk about the specific agreements. We feel NDC is here to stay. As You know well, we have been engaging with airlines and travel agencies to really allow this capability to be part of Our negotiations on the market, we continue signing deals with airlines.
This is part of overall negotiations with them, And it can be on EDIFACT or NDC, and therefore, we are including NDC as part of the discussions. And again, integrating travel agencies On a ongoing basis, improving our technology, allowing them to integrate in a way that can be valid for the overall industry and economically viable. And we are pretty pleased with this evolution, and we consider that we have the capability and the technology to really move this process forward. Therefore, for us, It's good. I mean, as you mentioned, it's not just about the GDSP, so the distribution piece, but also on the IT And we provide technology to really implement this technology on both sides.
Therefore, yes, I mean, as far as we can Provide this technology is an additional plus that we need to bring to the market and allow the airlines to really merchandise better their products in both the indirect So this should translate into more capabilities to sell, more capabilities to serve The travelers and in principle an upside for the airlines and an upside for the people that are providing this technology including us.
Thank you, Luis.
Next question. There are no questions. No, no.
The next question comes from Stacy Pollard. Please go ahead.
Yes. Hi. Thank you for taking my questions. So one quick follow-up on NDC since you were already on that topic. What would you say is the customer penetration at this point?
And do you think eventually everyone will go to MDC? Is it that compelling? Or That never really going to happen all the way. So that's one. Number 2, can you just talk more about the reduction in R and D?
Remind us again what you've kind of taken out and maybe what you are prioritizing? And do you think that pushes out your hospitality plans at all? And then third question, just from the competitive side, we didn't hear that much from Travelport for a while. And then suddenly, they seem to be coming out more aggressively as they kind of consolidate their customers onto a single platform. Do you see are you seeing anything particular in terms of pricing or market pressure from them.
Okay. Let me start with the last one. I always say, but that's the reality. Of course, competition is there. We respect them, including Travelport.
And look, they will compete with us as they have done in the past. This is our expectation. Yes, They have announced 2 things, as you know, that they will engage with Amazon to really move to the cloud. And they are also moving to the single platform, but they also announced It will take some years to really go into that single platform. We know all these technology projects are complex, so it will take some time To remove there, but I will expect them to keep competing as they have done in the past.
We have less information They are not a publicly quoted company any longer, so we have less public information, but I will expect them to keep competing. On the priorities of R and D, again, we have reviewed our portfolio. We are not Reducing anything that we consider is fundamental or strategic for us, hospitality being one of the cases. So by no means, we are pushing back hospitality. The same as NDC and other areas that we consider are important, but we have also done a review of our portfolio.
And in some areas, We have decided that, okay, this is not going to be so strategic moving forward. But again, it's the normal portfolio review that We have done during many years. And in this specific situation, we have taken a view of what will be fundamental In the future and what are the changes that the industry may bring to us after this pandemic and therefore things that we consider are nice to have but not so fundamental for So by no means, as you mentioned, hospitality, this has impacted our hospitality business where we feel Quite confident and optimistic about our future. And with regards to NDC, I lost exactly what was the question.
It was really just penetration where we are today. Yes, if
he's here to stay, yes. I mean, I think NDC is here to stay, yes, as airlines are going to move. Look, NDC is providing new capabilities to the carriers That it depends how you want to use. So of course, some carriers are more keen to move into that or faster. Of course, the bigger you are, the more capabilities You have to optimize the technology that NDC is offering.
So some people are more keen of moving into that. But I would say with time, NDC, probably with time, we'll not be talking about NDC any longer. There will be new technologies that allows you to really Mercedes Benz, it's better your product. So look, NDC has been here, as you know, for many years. Still, the penetration of NDC is low, okay?
Again, it depends what you call NDC, but the pure NDC integration and moving Forward with that worldwide is still low. I will expect this to increase in the years to come as technology evolves, standards are clearer And company like us provides the capability to integrate that in the proper way. So I will expect this to increase. What is going to be the speed per airline? I think this is going to be independent of each airline.
But I will say the technology that is allowing NDC, in my view, is here to stay, but it will take years, okay? It will take years to have the traction and the penetration, okay, worldwide. Yes, go ahead.
Luis, just to confirm, that is a value uplift for you as well from a pricing perspective a little bit or?
I mean, look, it depends, okay? I cannot be very, very concrete about that, okay? So it depends. Each negotiation is going to be different. We feel that NDC, as I mentioned, could bring incremental volume, okay, in terms of Because look, one of the questions always is, look, how the indirect channel is going to offer capability for the carriers to differentiate themselves and to really bring The offer, okay?
You have always the direct channel and the indirect channel. I believe if NDC works in the proper way and allows the carriers To really merchandise their products and differentiate their products, there is no reason to believe that this cannot be done in the indirect channel. I mean, as you know, this is Not exactly the same, but similar to what we were talking about ancillaries, okay? Many carriers at the beginning were pushing for ancillary solutions In the direct channel more than through travel agencies or the indirect place, but then it become part of the alternative channels that At the end of NDC, it could be similar if we do the right things. Volumes that could be more Outside of the channel should bring back to the channel because the capabilities will be there.
So look, We don't expect our assumption is that should be neutral, okay, or positive for us in the medium term, not negative, okay? This is not our assumption. But then in terms of pricing and how you deal with that, I think it's very difficult because look, we have individual negotiations, not just about MDC, but about the defect. And as part of the overall negotiations, we are talking about this alternative technologies. Look, again, technology and business model is not Exactly the same, okay?
And they are 2 different things. But as part of the debate, we include now the capability to manage the volumes in NDC. And in any fact, and with its carrier, The discussions are quite different, I will say, okay? For some carriers, it's neutral completely because they Look, for me, the technology is not changing. The way I operate in terms of paying for the channels with other carriers, they consider we are talking about So it's difficult to generalize.
But if I talk about how we see that, our sales, We are not assuming this will be detrimental to our P and L in the medium term.
Great, thanks. Thank you. The next question comes from Michael Briest from UBS. Please go ahead.
Yes. Thank you. Good afternoon. 2 for me as well. Till, just looking at the headcount trajectory, I think year to date, it's down about 4%.
In terms of average employees, it's down 2%. So we would expect in the second half that you'd see a cost benefit from that. I mean, firstly, is that headcount now a trough? Are there no more employees leaving? And you talked about costs coming back in the second half.
Can you sort of say What it is that you're spending on, because presumably the personnel costs will be lower. And then just around The airline IT installed base, you've got 208 Airlines contracted, Luis. I mean, I appreciate there's a Bit of a status while airlines wait to see what happens. There's maybe a few bankruptcies and a few small ones joining, but it doesn't feel as though there's Really a dramatic change there. Can you talk about what sort of level of engagement you have with non customers That might drive that number up more meaningfully as we get into a recovery phase?
Or is this still something which might take
Let me start and then You can cover the other part. I mean, look, of course, we expect this number growing. It's very difficult to really be very concrete, As you can imagine, Michael, but I mean, it's our objective to really keep signing contracts with deadlines. And we are we engaging with them? The answer is yes.
Can we confirm when we will announce a contract? The answer is no. But I really hope that this number will increase. It's our goal to really keep engaging and increasing. And it's not about airlines waiting and see.
It's about the process that it takes to really For Verones to take a final decision about moving and then the migration that they need to really face. So I will say, look, we have a healthy pipeline. And of course, we expect that some of this pipeline Will become a reality, so more than that is difficult to say. What I can tell you is that we are engaging and engaged with Customers as we speak, and I really hope that we will be able to really sign some of these contracts.
I mean maybe, Luis, just a follow-up. Could you say, quantum wise, Are you in a lot more discussions today because of the crisis than say in 2019 when it was business as usual for you, your competitors and customers? Is there actually more engagements today than in normal? I
mean, there are more engagements, yes. There are more, but simple as Of course, we have taken this opportunity of the crisis to really try to prove our value. And therefore, There has been activity in approaching customers and showing them our value for two reasons. I mean, first, because, of course, They were in a difficult situation as we were, but okay, our model is very variable, as you know, based on transactions. And probably was the right time to really prove to them that they can verbalize their costs and not having fixed costs internally, especially when we talk about people that are still keeping The systems in house, okay?
So of course, we have approached the customers. Of course, we are engaging with many of them, as we did in the past. I would say probably we're open to listen. But again, I mean, I wouldn't say that in 2019, we were not doing that. We We have taken a little bit, I would say, a bit more aggressive tone in talking to customers that are not our customers today, but Nothing really new because, of course, the commercial team is chasing as many customers as possible around the world.
So That's the reality. But again, how this is going to be translated into contracts, then at the end, this is always difficult.
Just on the cost saving program. So in essence, we have delivered according to our plan. And you've seen we've achieved now in the first half €170,000,000 of savings in total. It's true that a substantial part, obviously, this year was Expected to come from the manpower side. You had also last year some manpower related savings, but they were more of short term nature, Like the voluntary leave program that we benefited from last year.
And this now has all turned into Structural cost savings for this year. So we've done well on that side. Actually, probably if you look at Just the quarterly split. Again, Q1 was high compared to 2020 in terms of cost savings, but that's what you would Because we started to reduce cost only at the very end of Q1 2020. In Q2, we are actually a little ahead in terms of the cost savings that we wanted to achieve.
And for Q3 and Q4, I expect that the increases that I've been talking about, that they are coming from more on the discretionary side still, which is in essence on the travel side, the training side, the consulting side. I think the position the way I would describe it is it does give us Flexibility, we will be delivering, I'm confident, about the EUR 550,000,000 structural cost savings for 2021. And as we are tracking now, in terms of overall cost savings, we have got some flexibility in relation to the discretionary cost savings side.
Thank you.
Thank you. Your next question comes from Sven Mert from Barclays. Please go ahead.
Great. Good afternoon and thank you for taking my questions. Restrictions for travel are slowly coming down in But we obviously have now all these new requirements like test, proof of vaccination, personal location forms. And The rules are also changing all the time, and it remains clearly a major impediment for the return of travel. I know you talked to your Sabre Travel solution, But more broadly, why don't we see the industry adopting more tech solutions to address these pain points?
And what role could you play here? And secondly, I was wondering if you could comment on your partnership with Hopper. I know they offer a cancel for any reason solution, but I I was wondering if you could comment just how the business and financial agreement looks like of the partnership and how this might be integrated with your own offering.
Okay. Look, we have been active in trying to really support the trial recovery with our technology and also With some integration in what we call safe travel, where we are supporting The carriers with our technology to integrate health information into the departure control and the Board has been passed to really automate these processes. So we are Trying to do our best in dealing with that. Again, I mean, look, what you mentioned is true. There are a lot of Regulation and complexity around that, and we are trying to integrate the different certificates and validation to really support our customers as much as we can.
I mean but I mean as an industry, there is collaboration. Definitely, there is a common interest Pushing for travel, but again, this is not at all preventing the restrictions that are happening between governments. So it's difficult to really manage that, okay? But what I can tell you is that we are very active, more in Europe than in the rest of the world as We are based here at all levels to really try to support the discussions that we have with governments, with carriers about how we can simplify and improve the travel processes and try to really It's in the interest of Air Liquin to try to recover travel. I mean one of the things I mentioned at the beginning or in my presentation is that there is clearly And interest of travel around the world, I mean, we see with the domestic traffic, okay, when you don't have The recovery of domestic traffic, and you have seen the latest figures from Ayata, are good.
I mean, the recovery in some countries is not very far From the figures of 2019, so domestic traffic has recovered, I will say, quite quickly. But still, international is very low. So of course, This has an impact, and this is related to what you mentioned at the beginning, restrictions, changes, The fact of the certificates and so on and so forth. So look, we are trying to do our best at all levels. But again, this is not exactly what is going to really change the picture.
I think one important matter is what governments are really And the second question is related to Hopper. Hopper. Okay. Look, this is a very small matter, okay, very, very small. We have deals around the world.
I mean, I didn't even mention that. I mean, this is an Okay. And very often, we have APIs and we have connectivity with very local providers around the world. So this is very, very, very small. I mean, it's not that we have a new business model.
I mean, we work with a lot of companies around the world, again, as part of our open Platform where people can really use our technology and partner with us, but this is extremely small at this point.
Okay, fair enough. Thank you.
Thank you. Your next question comes from Guillaume Sampayo from CaixaBank BPI. Please go ahead.
Hello. Thank you for taking my questions. So 2, if I may. The first one, and I apologize if I missed your earlier comments. Can you provide a bit more color on how the delta variant of the virus is impacting bookings?
And the second one, should we expect Positive cash flow both in Q3 and Q4. Thank you.
Okay. Look, what we see and again, I cannot say how this may impact, but what we have seen in July is that bookings were more or less in line with June, Okay. It's true, we were coming from continuous improvement in the majority of the regions, and this delta Varian has impacted in the sense that, okay, the recovery has mainly not continued, but it has not gone down. And again, I caveat because I don't know how things may evolve in the future, but this is what we have seen in July. Some movements per region and per country.
But again, domestic traffic keeps improving around the world, and this is what we have seen. So the overall pretty much in line in July with what we have seen in June, okay? So still to be seen, but it does not seem to have A big impact or at least a negative impact for the time being in the overall figures.
On cash flow, so just remember so we are pleased with what we have achieved in In terms of free cash flow, free cash flow outflow in the first half of this year, which was excluding implementation costs, EUR 47,000,000 But remember that the Q2 carried also seasonally higher cash outflow, which obviously await in the on the Q2. Look, I wouldn't want to be specific on exactly Q3 and Q4 separately. I do expect, Obviously, the cash flow is improving progressively. And for half 2, I do expect with some recovery with some recovery assumed in terms of volumes that we are free cash flow positive excluding implementation cost. Now you may ask the question, okay, what does recovery mean?
And on that point, to just clarify that if you just think of What IATA is assuming for the second half as a directional curve of recovery, I think this is a good guidance to use.
Okay. Thank you very much.
Thank you very much. The next question comes from Neil Steer from Redburn. Please go ahead.
Hi. Thanks very much indeed for taking my question. It's a question, sorry to go back to the topic On NDC, my understanding was that obviously gives carriers opportunity to have much more sort of flexible offerings and make those through the system to the travel agents. I was just wondering how does that change the comparability of those offers as they're actually seen by the travel agents? And the reason I'm asking the question It's obviously American Airlines are suing Sabre for their new merchandising platform as offered to Delta.
I know that wasn't NDC, but it looks as though The crux of the American Airlines lawsuit is the fact that Sabre can incentivize the travel agents to book away towards Delta from America, or at least that's the American view. And obviously, one of the sort of the great opportunities that NDC should offer you in the future Is to be incentivized by the airlines to in turn incentivize the travel agents on the ancillaries. And I'm just wondering to what degree Any lack of comparability of offers actually changes that opportunity to upsell and get better revenues for yourself in the future.
I mean,
it's a bit difficult. I mean, look, and I cannot judge and enter into whatever happens between Delta American and Sabre. I mean, we will offer the capabilities, but it's not our intention to try to promote 1 or the other. NDC is offering Like today, you may have not with NDC, but with fare families and airlines currently use alternative ways of showing their fares. And you have the ancillaries, as you mentioned before.
So in the sale of open more possibilities, how you are going to compare, okay, you will have, as you have today, the Basic fare and then other fares or other kind of ancillaries that can be offered in the system. I would imagine this is quite Similarly, it will evolve. It will have more capabilities. I mean, look, again, from what I read, and again, look, without entering into details because It's more of the reading than the reality. What American Airlines is arguing is that Sabre was promoting You know, Sabre versus American Airlines, and this was not what they had agreed.
But again, I don't know what they have agreed, and I don't know what Sabre is doing, and It's not our role to judge that, okay? But I think NDC is just offering additional opportunities. How the comparison between offers It's going to happen, I would say, not very different from what happens today with more possibilities for the airlines to show alternatives as they do today with the ancillary services. A bit more complexity technically, yes, of course. And this is why we are investing there To really try to provide that in the best way to travel agencies and also in the direct channel.
Okay. But just to clarify, do you think in the future you will be incentivized by the airlines and be able to incentivize the travel agents For the separate ancillary services on top of the basic distribution fee? Or do you think it will always be a basic distribution fee?
I mean, look, I think we need to differentiate between how we offer that and what is the model of business model with airlines. I mean, look, again, The fact that the pricing changes with regards to the sales is one thing, and then we see how we deal with that. Another different thing is, okay, we will offer the same capabilities to the airlines, so we will try to really discriminate in the channel. As you know, One of our roles has been to be neutral in the way we have operated in the past. And therefore, we have not, on the distribution front, promoted 1 career against another one.
I think it has been one of the roles of the GDSS in the past. You're asking me, are we going to change that? I will say not now. I cannot say forever because things may evolve in the industry. But today, it's not our goal to promote or to really try to sell one airline more because of the economics.
I mean, you could argue the same Today already based on the booking fee, if you have different booking fees or different economic conditions per airlines That you try to really promote one airline versus the other. And this we have not done that, and it's not our plan to do this, at least I would say, In the short term, again, how this industry is going to evolve in 5 years from now is difficult to see, but it's not our objective to really Excuse me, one airline versus the other based on economics.
Thank you very much. Thanks.
Thank you. Your next question comes from Victor Chang from Bank of America. Please go ahead.
Hi, Louis. Hi, Tim. Thanks for taking my questions too, If I may. So just another question on the NDC side, I appreciate there are a lot of discussions on the Distribution side and we continue to see momentum on that. How should we think about the opportunity maybe just looking from the IT solution side, Is there opportunity for you to add more value to the PSS through NDC and hence, better pricing potential on the PSS side as You may be able to unlock more value through dynamic pricing and customized offerings and whatnot.
And secondly, And a question on the IT solutions side. So I understand there's a sizable piece that's not PB related, But the recovery the revenue recovery quarter on quarter is lower than that in the distribution side. How much is that a function of Late bookings in June, so with PBC realized in Q3. And can you provide a bit more color on the Revenue contraction and new businesses that you have alluded to in the slides. And any color on the appetite for hospitality IT relative to airlines, please.
Okay. Let me start and then Thijs, please jump in. For NDC offering, I mean, look, NDC offers But many of our solutions offer capabilities, okay? And many of them are on the optimization of the operations of the airlines, so cost savings And a very important part of the solutions we are offering on IT are related to revenue opportunities for the airlines, NDC being one of them. So you need to differentiate between value that we offer with our solutions, okay?
And clearly, NDC Technology will offer value. And another thing is how much you charge for this value, okay? And as you know, there are competitors to us that, of course, are offering NDC Solutions and again, they charge for that. So the normal way will be this is an upselling opportunity for us. Then if the argument is, look, based on the potential value that the airlines get, can you get an upside on pricing?
Look, of course, we will try. As always, the more value you offer, the better you can price your product. That's a reality. So we will try to really Look, get incremental value from the capabilities that we offer to the airlines. But again, I wouldn't say this is different from other solutions that we are offering on the digital space or in other areas of our business, okay?
So that's about NDC. Second question is more
On the revenue side, I'll just take you through a little bit of the dynamics. Maast, I think first about the IT solution I can cover as well the distribution side also. So just in terms of the Q2, IT Solutions revenue Was at minus 43%. And with that, it declined at a softer pace than actually the passengers boarded, Which were at minus 68%, and I think that's where I've tried to comment on in relation to what are the elements. Of course, there are elements that are actually not transactional, but you've got literally three factors in that IT Solutions revenue buckets that drive this ratio.
The one thing is that obviously, our new business areas, and that includes Largely hospitality, which at a later point in time, we will obviously also provide you with enhanced disclosure. This has been obviously growing and holding up better during the pandemic And therefore, outperforming as well the PB volumes. The second element is we do have revenue lines that are just not And therefore, they gave us basically a floor, respectively, just support to our revenue performance compared to our PVs. And also, we had certain airline IT Revenue growth underlying. And all of that together was basically establishing this relationship, whereby you had Revenue per passengers boarded in the past couple of quarters actually being a lot higher than the historic levels that we had seen before.
On the distribution side, perhaps just a few comments on the dynamics there. I had explained that also before. We are at the moment in an environment where the recovery It's a little more led by the domestic itineraries. Domestic itineraries, to an extent, drive also the booking mix between local, regional and global bookings, more towards the local bookings. And while we have seen over the past quarters, Again, a bit of a rebalancing also to the regional and global booking mix.
There's still a higher weight of the local booking mix in it. But in our distribution revenue per booking, We also have got non transactional elements, which basically have given us in the past support. And going forward, as a transactional volume expected to come back, Obviously, the non transactional part is and the effect of it is getting relatively smaller. And then it is a question really of the underlying business trend, what is the mix between local regional bookings driven by Got it. Thank you.
Thank you. There are no further questions in the conference call. I now give back the word to Mr. Luis Marotta for final remarks. Thank you.
So thank you very much to everyone for your questions. Thank you for being with us today at the end of July, and we'll talk for the Q3. I'd like to wish you all a nice holiday season. Thank you. Bye.