Good morning, and welcome to the Sabre First Quarter 2019 Earnings Conference Call. Please note that today's call is being recorded and is also being broadcast live over the internet on the Sabre corporate website. This broadcast is the property of Sabre. Any redistribution, retransmission, or rebroadcast of this call in any form without the express written consent of the company is strictly prohibited. I will now turn the call over to the Senior Vice President of Investor Relations and Corporate Communications, Mr. Barry Sievert. Go ahead, sir.
Thank you, Skyler, and good morning, everyone. Thanks for joining us for our first quarter earnings call. This morning, we issued an earnings press release, which is available on our website at investors.sabre.com. A slide presentation, which accompanies today's prepared remarks, is also available during this call on the Sabre IR webpage. A replay of today's call will be available on our website later this morning. Throughout today's call, we will be presenting certain non-GAAP financial measures, which have been adjusted to exclude certain items. All references during today's call to EBITDA less capitalized software development, operating income, EPS, and net income have been adjusted for these items. The most directly comparable GAAP measures and reconciliations for non-GAAP measures are available in the earnings release and other documents posted on our website at investors.sabre.com. We would like to advise you that our comments contain forward-looking statements.
These statements include, among others, disclosures of our guidance, including revenue, EBITDA less capitalized software development, operating income, net income, EPS, cash flow, and CapEx, our medium-term outlook, our expected segment results, the amount and effects of changes in capitalization mix, and depreciation and amortization, the effects of customer financial conditions and new or renewed agreements, products, and implementations, our expectations of industry trends, and various other forward-looking statements regarding our business. These statements involve risks and uncertainties that may cause actual results to differ materially from the statements made on today's conference call. Information concerning the risks and uncertainties that could affect our financial results is contained in our SEC filings, including our 2018 Form 10-K. Participating with me on today's conference call are Sean Menke, our President and Chief Executive Officer, and Doug Barnett, Executive Vice President and Chief Financial Officer.
Dave Shirk, our Executive Vice President and the President of Travel Solutions, and Clinton Anderson, Executive Vice President and President of Hospitality Solutions, are also with us today and will be available for Q&A after the prepared remarks. Sean will start us off and provide a review of our strategic and commercial performance and our business outlook. Doug will offer additional perspective on our financial results and forward outlook. We will then open the call to your questions. With that, I'll turn the call over to Sean.
Thanks, Barry. Good morning, everyone, and thank you for joining us. Today, I am pleased to report solid first-quarter results that provide continued evidence we are progressing against our initiatives. We delivered 6% revenue growth and excluding an insurance reimbursement payment in the prior year, a 13% growth in free cash flow. With our technology-led leadership team in place and strategic focus on the retailing distribution and the fulfillment of travel, we have continued to meet and exceed our internal milestones and are gaining velocity in our technology transformation and evolved customer engagement approach. We are unlocking savings that fund investment in the delivery of new innovations that we believe will help advance the marketplace and drive future growth. We believe our strategy, technology transformation, and customer engagement will lead to long-term shareholder value creation. Let's look at our Q1 accomplishments.
At Travel Network, we gained 140 basis points of share in the quarter, the fifth quarter in a row where we have gained share. We believe we are well-positioned with the investment in our Sabre Red 360 next-generation agency desktop, new Lodging Content Services capabilities, and global cloud deployment of our shopping complex to continue winning share. As the trend continues for large global travel management companies to consolidate their technology footprints on best-in-class platforms, similar to Flight Centre and CWT, we expect to continue to benefit. We've released our first set of NDC APIs with United Airlines, enabling shopping, pricing, booking, and payment workflows. Our NDC solutions will allow United to offer new fare options and additional flight amenities for a more comprehensive shopping experience for customers to choose to book through Sabre.
This development is a significant step forward, advancing the pan-industry vision developed alongside our Beyond NDC partners and moving NDC closer to becoming an everyday reality for airlines, agencies, and travelers. We are taking a collaborative approach to define and deliver a next-generation retailing experience to our airline and agency customers. Most recently, Delta Air Lines joined our Beyond NDC program, and we announced the launch of our Next Generation Storefront. The Next Generation Storefront evolves the retailing experience and answers the industry's challenge for how to display complex and diverse offers in an easily comparable way, clearly communicating the value of a specific offer and creating additional upsell opportunities early in the sales process. We are working with Delta and other partners to test this new approach.
At Airline Solutions, we received official certification as IATA ONE Order capable for Air Flight transaction as an order management system and delivery provider, making us the first passenger service system to reach this designation. ONE Order is a component of our order management vision in the Sabre Commercial Platform, critical to ensuring the promise of targeted and personalized offers are fulfilled when the day of travel arrives. At Hospitality Solutions, we successfully completed the SynXis central reservation system and property management system implementations at La Quinta in the beginning of April, adding 900 properties to our platform. This marks the full completion of the Wyndham implementation, the industry's first large-scale migration to an enterprise-grade platform. Within technology, we continue to progress our cloud migration and mainframe offload. We increased the percentage of our total open systems footprint with over 90% of our processing power now on open systems.
This means less than 10% of our total compute footprint is on our mainframe environment. We offloaded over 80% of our agency security and session management functionality, which was our largest single mainframe workload that accounted for 15% of mainframe transactions. Additionally, we now have offloaded over 70% of Airline Solutions shopping, availability, and pricing transactions. Within our open systems footprint, we continue to migrate open systems applications to the cloud that increase our open systems cloud footprint by 14 percentage points since 2018 year-end. For the first time, I'm pleased to report that over 50% of our entire compute is now in the cloud. Our shopping complex is now running in two AWS locations and our private cloud environment. We expect a sunset of the legacy Tulsa shopping environment next quarter.
We continue the global distribution of our computing infrastructure with the implementation of our CoreConnect networks in Frankfurt and Amsterdam now complete. This enables us to start running shopping capabilities in EMEA to further increase speed and conversions. We implemented our next generation platform foundation in the quarter, which we believe will increase our speed to market through tools and automation that streamline and accelerate how we develop, test, deploy, and run applications. Seven applications, including our innovative NDC offer and order capabilities and schedule change updater, are now live on this new platform and deployed in the AWS public cloud. These applications are fully containerized, leveraging the Red Hat OpenShift platform and built using microservices. Today, I am pleased to report that we announced an increased focus in the payment space, supported by our new Sabre Virtual Payments partnership with Visa.
With seamless integration into travel systems and workflows for fast, easy, and safe payment solutions, we expect that our enhanced payment solutions will be an integral part of our retailing, distribution, and fulfillment platform. We believe our new partnership with Visa gives us an enhanced competitive offering in the B2B and C2B payment space. Visa card products help ensure better supplier acceptance. Our payment hub allows a more comprehensive, flexible, and evolving approach to payments oriented around capability. Our multi-scheme, multi-issuer network delivers a broad range of payment options for maximized supplier acceptance, global operability, and regional relevance. Our range of prepaid and credit options provide a broad range of funding methods to allow a better match to the specific needs of the customer. It is our strong belief that our enhanced proposition will resonate with customers.
We already have a few large B2B customers in the pipeline that we expect to close in the near future. Before I turn it over to Doug, I wanted to take a moment and address our 2019 financial outlook. We believe the underlying business is solid, and the factors that are in our control are performing in line with our expectations. However, as you have seen and read about, a customer in India, Jet Airways, has recently suspended flight operations. We expect this to impact our results going forward, specifically in our SabreSonic revenue stream since we host Jet Airways' reservation system. While our GDS footprint in India is relatively small, we have already seen this impact overall GDS industry bookings in the Asia-Pacific region. Additionally, our deepest sympathies are with the families and loved ones impacted by the recent accidents involving the 737 MAX aircraft.
We support our airline partners' top priority for safety. Although our airline partners are largely able to rebook passengers on alternative aircraft, there is a modest impact from grounded planes across the industry. There is a more obvious near-term impact to Airline Solutions business as the two airlines involved with these incidents, one in Asia and one in Africa, are SabreSonic reservation systems customers. Accordingly, we have lowered our full year 2019 guidance in line with our estimated impact of Jet Airways' suspended flight operations and the carrier-specific and market challenges associated with the 737 MAX aircraft. As I previously stated, we saw strong GDS share gain of 140 basis points in the quarter. Our investment in Sabre Red 360, lodging innovations, and shopping capabilities are clearly resonating with customers. We feel good about the strength of our regional and customer mix relative to the overall industry.
With our strong booking fee growth in the first quarter, we have confidence to raise our expectations for full-year average booking fee. Within this, we continue to expect incentive fee growth to moderate in the second quarter, as previously discussed. In fact, incentive fees in the first quarter were below our forecasted level going into the year. As expected, our share gains and regional footprint enabled us to post solid booking growth in the quarter. In North America, where our biggest book of business is, GDS industry bookings continued to be solid. We have seen supportive commentary from the airlines on the strength of the corporate channel. Furthermore, we've outperformed the industry with 6% growth in the region, bolstered by our continued share gain at large travel management companies, including our expanded partnership with CWT.
In North America, we have increased our booking share with large TMCs to approximately 80% of their bookings. In Asia Pacific, bookings were flat due to the impact of Jet Airways. Excluding Jet Airways, our bookings increased about 1% in the region, slower than previous quarters as we anniversaried the completion of a Flight Centre migration. In Latin America, bookings declined 3.5% in the quarter, reflecting macroeconomic weakness in the region and our agency mix. On a volume basis, Latin America is the smallest of our four regions we report and makes up only 8% of our total worldwide volume. In EMEA, our bookings declined 1% due to a decline in low-margin rail bookings. Air bookings grew 3%. The region has seen some channel shift due to continued growth by low-cost carriers and the three legacy carrier groups experimenting with different distribution strategies.
Our exposure to the impact of the three legacy carrier groups is less than other GDSs due to the fact that over 50% of our bookings from the carrier group are made from outside of Europe and are typically for longer haul, higher yield traffic. Our share gain, regional and customer mix and average booking fee growth more than offset a bit of macro slowing in the first quarter. With our solid first quarter results, I remain confident in the underlying performance of the business, despite the two previously described events and a modestly softer macro environment. For the full year 2019, we now expect revenue growth of 3% to 5% and free cash flow growth of 3%. These revised expectations reflect Jet Airways' suspended operations and the impact of the 737 MAX aircraft situation.
With that, I'll turn the call over to Doug to get into more of the details of our first quarter results and expectations going forward. Doug?
Thank you, Sean. Looking more closely at our Q1 results, revenue was up 6% year-over-year, driven by growth across each of our business segments. Over the period, recurring revenue represented 93% of total revenue. We continue to make good progress on the execution of our technology transformation efforts. As previously disclosed, the cost associated with our cloud migration, mainframe offload, and the utilization of agile development methods are not capitalized. As expected, this reduced the capitalized portion of our total technology spend in the first quarter. This shift in capitalization mix resulted in an increased percentage of technology costs hitting operating expenses in the quarter with a corresponding decline in CapEx. Additionally, as we accelerate our technology transformation, more products are being placed into service, leading to an increase in depreciation and amortization from previously capitalized technology spend.
As we discussed last quarter, although this has no impact on our level of total technology spend or on free cash flow, there is obviously a near-term impact to our income statement from this shift. We continue to expect recovery to previously forecasted profitability levels in 2021, which means we continue to expect accelerated earnings growth next year when we begin to anniversary this impact. Accordingly, our first quarter results are as follows. EBITDA declined 13%. EBITDA less capitalized software development decreased 4% and was in line with our expectations. The decline was primarily due to Travel Network incentive pressure. Remember, EBITDA less capitalized software development is the metric we introduced last quarter to normalize for the change in capitalization mix and reflect total technology spend growth, which as I will describe later, was below the rate of revenue growth.
Operating income declined 21%, and earnings per share declined 23% to $0.34. On a like-for-like basis, excluding the shift in capitalization mix and increase in amortization of previously capitalized technology spend, which I will discuss more in detail shortly, the underlying performance of the business was as follows: operating income decreased 3%, and earnings per share were flat year-over-year. Finally, we generated $114 million of free cash flow in the first quarter. As expected, free cash flow declined year-over-year due to an unfavorable comparison to a $29 million insurance reimbursement settlement received in the prior year quarter. Excluding this, free cash flow grew 13%. Looking a bit closer at Travel Network in Q1, total revenue grew 7%. Revenue growth was driven by 3% bookings growth and an increase in average booking fee of 5% in the quarter.
About half of the average booking fee growth was driven by the net positive impact from customer pricing at specific carriers experimenting with different distribution strategies in Europe, and about half was driven by normal course contractual increases. Due to the strong first quarter booking fee growth, we now expect full-year booking fee growth of approximately 1% compared to previous expectations for flat booking fee on a full-year basis. As a reminder, we will anniversary the benefit from customer pricing at specific European carriers next quarter, as well as the mixed impact from the completion of the Flight Centre migration that has benefited recent quarters. Excluding the increase in technology operating expenses, primarily driven by the shift in capitalization mix, Travel Network operating income increased 2%, and operating margin decreased 150 basis points in the quarter. Including the shift in capitalization mix, Travel Network operating income decreased 9% in the quarter.
This was in line with our expectations coming into the year. The 440 basis point decline in operating margin was driven by approximately 300 basis points from increased technology operating expenses due to the change in capitalization mix, and 150 basis points from the net impact of average booking fee and incentive fee growth. Taking a closer look at incentive fee growth in the quarter, about two-thirds of the increase was from new commercial deals and agency conversions, and one-third was due to normal incentive growth consistent with historic growth in the low to mid-single digits. As we have said, starting next quarter and over the balance of the year, we expect incentive fee growth to normalize to historic growth rates.
Total bookings increased 2.7% in the quarter, a bit of a slowdown versus prior quarters as we anniversary strong 2018 growth that included the completion of the Flight Centre migration. As Sean described, we see a bit of a slowdown in macro trends. Within our total bookings, air bookings grew 3%, and lodging, ground, and sea bookings grew 1%. Within the lodging, ground, and sea, higher value hotel bookings grew double digits, supported by the initial rollout of Lodging Content Services capabilities, as well as our expanded agreements with TMC customers. Growth in hotel bookings was primarily offset by a decline in lower margin rail bookings. Q1 bookings growth was supported by an increase of 6% in North America, driven by increased share at large global travel management companies, including our expanded strategic agreement with CWT.
As Sean said, we have increased our booking share with large TMCs to approximately 80%. In Asia Pacific, as a reminder, our bookings growth was slower than previous quarters as we begin to anniversary the completion of the Flight Centre migrations. Additionally, bookings were impacted by the situation at Jet Airways. Excluding Jet Airways, bookings grew 1%. Our EMEA bookings declined modestly in the quarter due to a decline in low margin rail bookings. Air bookings grew 3%. As Sean said, the region is going through channel shift due to low cost carrier growth and distribution strategies at the three legacy carrier groups. Because over 50% of our bookings from the three legacy carrier groups are made from outside of Europe and are typically for longer haul, higher yielding traffic, the impact of our business is relatively modest compared to competitors.
Our bookings decline in Latin America is due to unfavorable macroeconomic factors and our agency mix in the region. Latin America is the smallest of our four regions and makes up only 8% of our global bookings. In total, global booking share increased 140 basis points in the quarter to 38.3%. Consistent with our expectations coming into the year, Sabre Airline Solutions revenue increased 3% in the quarter. SabreSonic revenue grew 6%, driven by solid passengers boarded growth of 7%. AirVision and AirCentre declined 1%. In line with our expectations, as we have mentioned previously, both of our SabreSonic and AirVision and AirCentre revenue streams were impacted by the de-migration of Pakistan International Airlines. Excluding the impact of Pakistan, Sabre Airline Solutions revenue grew 5% in the quarter.
Excluding the year-over-year increase in technology operating expenses resulting primarily from the shift in capitalization mix, operating income increased 8% and operating margin expanded 70 basis points. Including the shift in capitalization mix, operating income declined. Passengers boarded increased 7% in the quarter, driven by 3% passengers boarded growth on a consistent carrier basis and the completion of the SabreSonic implementation at LATAM Airlines in the second quarter of last year. As Sean mentioned, two of our SabreSonic reservation system customers were impacted by the unfortunate events related to the 737 MAX aircraft. Additionally, as Sean talked about, Jet Airways, a large customer in India, has recently suspended flight operations. Excluding these three carriers, passengers boarded grew 10%, and passengers boarded growth on a consistent carrier basis was up 6% in the quarter.
At Sabre Hospitality Solutions, SynXis software and services revenue increased 7%, driving overall revenue growth of 7%, consistent with our expectations. Digital marketing services increased in the quarter. Sabre Hospitality Solutions central reservation systems transactions increased 36% in the quarter, which includes the benefit of migrating certain Wyndham hotel brands in the first half of 2018. Excluding the increase in technology operating expenses, primarily driven by the shift in capitalization mix, an increase in amortization of previously capitalized technology spend, Sabre Hospitality Solutions operating income doubled, and operating margins increased 2.7 points. Including the shift in capitalization mix, Sabre Hospitality Solutions operating income declined significantly in the quarter. In the first quarter, total technology spend was $261 million. As a reminder, this includes the cost that we incur, whether capitalized or expensed, for hosting third-party software and R&D.
Total technology spend increased 5% in the quarter, in line with our expectations, was driven by 150 basis points from the impact of third-party hosting service provider credits that benefited the prior year, but went away this year. 150 basis points from new strategic investments supporting cybersecurity, corporate systems, and platform enterprise agreements. Lastly, 200 basis points from core infrastructure and computing growth, primarily related to the public cloud. Total tech spend grew slower than revenue growth in the quarter. Sean spoke about a number of accomplishments we have made that enable us to reap savings for reinvestment in further transformation efforts and new innovations to create an even more competitive offering. The scale and leverage we are already gaining is enabling us to continue to strategically invest in new infrastructure and capabilities and are what help fund an acceleration of current and future innovations.
We continue to expect full year 2019 technology spend growth of 3%-4%. As discussed on our last earnings call and today, the cost supporting our cloud migration, mainframe offload, and utilization of agile development methods are not capitalized. This resulted in a 13-point decline in capitalization mix from 23% in the first quarter last year to 10% in the first quarter of this year. Although neutral to free cash flow, this shift significantly impacts operating income and EBITDA. Additionally, the increase in amortization of previous capitalization resulted in a $3 million headwind to first quarter operating income. This is, of course, neutral to both EBITDA and free cash flow. As a result of the capitalization shift and increased amortization, the amount of total technology expense running through our income statement in the quarter increased by $45 million or 17%.
Remember, this refers to our total technology spend, less capitalized software development, plus amortization of previous capitalization. First quarter free cash flow generation of $114 million was in line with expectations and represents a 13% year-over-year decline due to an unfavorable comparison to an insurance settlement payment received in the prior year quarter. Excluding this, free cash flow grew a strong 13% in the quarter. Our cash flow supported the continued strength of our balance sheet with leverage of 2.7 times as of quarter end. In the quarter, we repurchased 1.5 million shares for approximately $32 million. Including our dividend, we returned $71 million to shareholders in the first quarter. As we have said, we expect to repurchase enough shares to offset dilution from equity plans while maintaining flexibility to be opportunistic beyond that. Let's level set and review the 2019 guidance we provided on our last earnings call.
Mid-single-digit revenue growth and free cash flow growth of approximately 10%. How are we tracking against that in Q1? We performed in line with or better than our expectations coming into the year. As we discussed, we are taking significant steps in our technology transformation this year. As a result, we expect the capitalized portion of our total technology spend to be lower. This is a near-term impact on our income statement, as you've seen in our Q1 results, but has no impact to free cash flow or on the level of total technology spend. We continue to expect recovery to previously forecasted profitability levels in 2021. In fact, because of the increased efficiencies we are achieving, we were previously able to increase our expectations for accelerated free cash flow growth over the medium term from 2019 to 2022.
As we look over the balance of this year, the underlying business is solid. The factors within our control are performing in line with or better than expectations. However, as Sean Menke mentioned, there are external factors outside of our control that have caused us to revise our full year 2019 outlook. In mid-April, Indian carrier Jet Airways suspended operations. Jet Airways is both a PSS and a GDS customer. In addition, the tragic accidents at Lion Air and Ethiopian Airlines, two of our PSS customers, and the overall impact of the grounded 737 MAX aircraft are also a headwind. As a result, we expect these events to reduce our rest of year results by the following: $40 million of revenue, $30 million of EBITDA and operating income, $25 million of net income, $0.09 of EPS, and $30 million of free cash flow.
To be clear, we are lowering our guidance in line with the expected impacts of these two discrete events only. Excluding these impacts, our updated 2019 expectations are unchanged. As such, for the full year 2019, we now expect total Sabre revenue growth of 3%-5%, to $3.965 billion-$4.045 billion, EBITDA of $945 million-$985 million, EBITDA less capitalized software development of $850 million-$890 million, operating income of $485 million-$525 million, net income of $245 million-$285 million, EPS of $0.89-$1.03, free cash flow generation of approximately $455 million, representing growth of 3%, or 11% excluding the impact of a $29 million insurance settlement payment received last year, and CapEx of $130 million-$150 million. Taking a closer look at the segment level, at Travel Network, we continue to expect full year 2019 revenue growth of 4%-6%.
Due to the strong booking fee growth we saw in the first quarter, we are raising our full-year booking fee growth expectations to approximately 1% from initial expectations for it to be about flat. We expect continued share gain and booking fee growth to offset expectations for a softer macroeconomic environment and now expect full-year bookings growth of approximately 3%-5%. As a reminder, we expect incentive fee growth to normalize to historic growth rates in the low to mid-single digits beginning in Q2. Airline Solutions, we now expect full-year revenue to decline 2%-4% versus previous expectations for 1%-3% growth. These updated expectations reflect Jet Airways' suspended operations and the impact of the 737 MAX aircraft situation. Excluding these, our underlying expectation for the business is unchanged.
As a reminder, excluding these impacts and the customer attrition discussed last quarter, expected revenue growth would have been 5%-7%. We have successfully navigated a significant renewal cycle in 2017 and 2018 with our existing Airline Solutions customers. With our new innovations like the Sabre Commercial Platform, we believe we are well-positioned as we switch from defense to offense going forward. At Hospitality Solutions, we expect 7%-9% full-year revenue growth consistent with our previous expectations. As we look at the rest of 2019, we believe our business is on solid footing with the factors within our control performing as expected. Addressing Q2 specifically, please remember we expect the following items to impact our results.
Although we expect continued strong GDS share gain, we anniversary the completion of the Flight Centre migrations at the end of the first quarter and expect a softer macroeconomic environment to result in bookings growth to be about half of the level we saw in Q1. Although we expect our incentive fee to normalize to historical growth rates beginning in Q2, we will have a tough comparison on average booking fee as we anniversary favorable pricing that went into effect at a certain European carrier on August 1st last year. As such, we expect average booking fee to decline about 0.5 point in Q2. At Airline Solutions, more of the customer attrition discussed in detail on our last earnings call will begin to be reflected, as well as the impact from Jet's suspended operations and the 737 MAX situation.
In closing, we believe our business is solid as we look at the rest of 2019 and beyond. I have confidence in our revised outlook and remain confident in the underlying performance of the business. Back to you, Sean.
Great. Thanks a lot, Doug. I'm pleased with how we've kicked off the year and would like to thank my many colleagues and team members all around the world for their hard work and dedication. We are delivering on our strategic focus, making progress across the board, specifically in our technology transformation and evolved customer engagement approach. Despite external challenges, our solid first quarter results provide a strong foundation to build on over the balance of the year. I want to once again thank you for joining our call today and for your continued interest in Sabre. With that, I will ask the operator to open up the call for your questions.
Thank you. Ladies and gentlemen, if you have a question at this time, please press the star, then the number one key on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Our first question comes from John King of Bank of America. Your line's now open.
Yeah, great. Thank you for taking the questions. I've got one and a follow-up. The first one, Sean, I guess, just would like you to, if you can, address some of the news flow we've seen around the outages on the platform, I think yesterday, but also a few weeks back as well. What has happened there and how much of that is a Sabre issue versus a third party or airline issue? I just wonder if you could couch that in the context of some of those opportunities you've talked about and whether that is going to have an impact, do you think, in your standing in those negotiations?
Yeah, happy to address it, John. Thanks for being on the call this morning. First, the number one priority is our customer. For any outage that we have, we understand the impact that it has on their customers at the end of the day, and that is our primary focus. Even though we have made some measurable progress on our technology transformation, we have had two recent incidents. I'll share a little bit on this. The first one was related to surge in volumes that really slowed the system, and we've been able to rectify that. The second one that we're working through yesterday, we're really finalizing our root cause analysis.
Before I talk about that, John, we want to make sure that we're communicating with our customers on what's taking place. I think the more important thing is, as we continue to look at the investment, again, going back to our customers and the importance of supporting our customers, there is an evolution that's taking place within the organization on the technology front. In each of those two incidents, the investment that we did relative to our global operations center, one in Bangalore and here in Southlake, really allowed us to respond a lot quicker than we would have been historically. With that, we'll continue to move forward on our technology transformation. We've been in contact with the customers on what's taking place, and we'll continue to do that going forward.
Thank you. I guess given there's nothing called out, we should assume no material impact in terms of SLA penalties. I guess that would all be in the guidance anyway.
Yeah. Everything, if you look at it, John, relative to the guidance and what's taking place, it's in the course of business.
Thank you for that. The follow-up was going to be just on the Sabre Travel Network business. Obviously, very impressive share gains going on there, and you continue to do well from a booking standpoint. I'm wondering a couple of things. First of all, obviously, I guess the overall industry would have been dragged down by India, and I guess you probably under-indexed a little bit there. Maybe you can talk to your kind of share gains before the India impact, if that's materially different from the 140 basis points. Then I guess more specifically with the pricing you've called out, and that was a really helpful commentary. You called out the 5% boost in pricing. I'm just wondering why not more of that hasn't flowed through to the margin, because notwithstanding that, the margin's still under pressure.
I know you've detailed some of that, it feels like the issues there are just a bit more significant than we've seen in the last few quarters in terms of the incentive fee pressure. I'm wondering if there's any mechanics around how you pass on that pricing that's flowing through to the customer in a bit of a greater way this quarter than in prior quarters.
Yeah. John, on the incentive fee, the one thing I did call out is relative to what we provided as guidance, we actually outperformed, or we were actually from an incentive perspective, we were below, which is good, what we expected to be in the first quarter. The trends that we had set up or think that are modeled out for the year are actually in place. I feel good about that. If you look at really more of the global GDS marketplace, I think there's some things that you sort of got to take a step back and go up to maybe 35,000 feet and look at what's taking place, not only as it relates to the GDSs, but what we're doing on technology. I'll even throw Farelogix in here as it relates to NDC and what's taking place.
This goes back to just how I believe we are resonating in the marketplace on how we're looking at content, not just historical content, but how content is evolving. Our ability to develop this Beyond NDC program, I'll be honest with you, is blowing me away with the level of engagement, both from airlines around the world as well as agencies around the world. One of the biggest supporters that we have gotten with the announcement of Farelogix has actually been the agency community because of their focus on content. I think this begins to flow back into what we're seeing in the marketplace. More specifically to the first quarter and what we're seeing around the world, we have seen, and I'd say more in the second quarter, in the summer, we are seeing some capacity pullback throughout the region.
That's one thing that does sort of weigh into what we see from a growth perspective. On Jet Airways, the impact of Jet Airways, and you're correct, we index low in India, so it's not a meaningful impact on us from a GDS perspective versus the competitive GDSs. What's happening with the European marketplace, and as I mentioned there, if you look at it's been interesting as we track our data because of the away bookings, meaning rest of world at being over 50%, we find that we are being less impacted than the other two GDSs that have a higher concentration within the marketplace. If you actually exclude Jet Airways, and I'm going to exclude the three European carriers, I think the GDS booking growth for the quarter would have been up about 240 basis points, if I remember correctly.
We are seeing growth in the marketplace, but it was held back there and what's going on. The other thing that I like relative to what we've been doing from a strategy in taking place is if you really begin to break down the market, we talked about the strength in the North American marketplace and actually growing share. With that, if you look at our entire booking footprint, over 50% of our bookings are in North America. We had the CWT conversion that helped from a share perspective. The other thing that I like to point out is we've now really approached or a little bit over 80% of TMC bookings in Sabre, which is very important. The other thing that we continue to look at is just the continuing claim, like I said, of the impact of Jet, what's happening in the European marketplace.
As I look ahead, and this gets more into what the teams have done a great job of doing in thinking about just GDS contracts, not only on the agency side, but our engagement with airlines. On the agency side, I feel good about the pipeline that the team has out there. We're in numerous discussions, and a lot of it revolves around our technology, Sabre Red 360 and what we're doing there. It goes back to the facilitation of the conversations that we're having between airlines and suppliers. This really does drive into the Beyond NDC program because it allows us to think about the historic content and the NDC content. With that, I think we are a clear leader in how this distribution is just changing, and I'm hearing that day in and day out.
Over the first four months of the year, I was on the road a lot, and I probably had 20-plus visits with airline and travel agency CEOs as well as hospitality, and it's resonating in what's taking place, and we're getting audiences at the highest level trying to understand the direction of what's going in our technology strategy, but more important, the foundation of what we've built over the last couple of years and where we're driving this business. I feel good.
It's very helpful. Thank you.
Our next question comes from Jed Kelly with Oppenheimer. Your line's now open.
Great. Thanks for taking my question. Just a quick question on the guidance change. Can you help us unpack why there was an outsized impact on taking down free cash flow versus what you reduced your revenue by?
If you think about the vast majority of the revenues that we're going to lose are going to be from a SabreSonic standpoint, which are very high profit flow through. That's why we lose $40 million worth of revenue and $30 million worth of earnings, which basically flows right down into cash flow.
Okay. Makes sense. Can you give us an update just on the Airline Solutions pipeline, how quickly do you think that segment can start to grow back in line with what the airlines are spending on technologies?
Yeah, Jed, I'll kick off, then I'll pass it over to Dave to give a little more color on what's taking place. This does go back to, if you look at the book of business that we renewed, the teams involved in doing all that's all baked into the forward guidance and what's taking place there. Part of it, and this goes into my comments that I just made relative to the visits, I have been visiting a lot of what I consider to be opportunistic airlines, opportunistic from our perspective, but working with airlines for them to understand the scope of what we're doing from a strategic perspective. Many of these carriers are not Sabre PSS carriers. They reside on other PSSs.
As it relates to that, it gets into a meeting that we had a couple of weeks ago that is a non-Sabre PSS carrier that Dave was actually traveling with me, and we spent about two to three hours walking through a large contingent of their executive organization on what's taking place. Dave, I'll let you pick it up from there.
Yeah, Sean, just to build on what you're saying, I think Doug and Sean both highlighted the last two years were a massive renewal cycle for us. We were able to secure 94% of the total contract value out of that. That's 75% of the revenue locked up in Airline Solutions for the next several years as a result of that. The team was very focused on the install base. Now, switching from that defensive mode to the offensive mode to the visits and some of the engagements, I feel very positive about the pipeline. We've launched the new digital Commercial Platform in the fourth quarter. The interest level in what we're doing, and some of the newer innovative technologies for Sabre, that is the largest innovation release in over five years of the reservation and commercial platform capability set.
We have people interested, as Sean Menke was highlighting, the NDC movement around our retailing distribution fulfillment pieces have made it even more interesting to them to check out what we're doing in the shopping area, a lot of our mobile-based capabilities, new pricing and offering systems that are out there in the market. I feel pretty good about that. I feel pretty good about the interest level that's there. We're going to continue to move to a much more offensive stance as we move through this year and into next year. Very positive outlook.
Okay, just one more. This is probably hard for you to comment on. I'm going to ask it anyway. How should we be thinking, in terms of how it relates to Sabre, on a potential unfavorable outcome between United Airlines and Expedia? How you're thinking about it internally?
Yeah. As you would expect, we spend time looking at that. The one thing that we look at is, I think this goes back to, in all fairness, why our focus on Farelogix and content and how content is changing is so important because be it an airline customer or a hotel customer, they're very focused on how do they drive additional revenue. As the marketplace continues to evolve, on one hand, you could say it's bad. On the other hand, I actually say this is what we're trying to enable is what it boils down to, is the capability of be it airline or hoteliers being able to sell the products and services the way that they want. In doing that, you're going to find that there's going to be gyration in the marketplace, be it Expedia or others that we'll continue to assess.
I think it drives more into our strategy and what we're trying to accomplish is that players are going to continue to look at this. At the end of the day, the other thing is they're going to need the underlying technology that allows for those products to be sold. It's going to be required for those products to be serviced. I think that's one thing that we're just going to deal with in the marketplace going forward. We're seeing it in Europe with what's taking place with the three carriers, that we're going to continuously see this moving forward, Jed Kelly. Again, I think this is bigger picture where we position ourselves really well to be able to work both sides of this because Expedia is a customer as well.
we have to be that technology provider that continues to really connect the two, the suppliers as well as the buyers.
Thank you.
Again, if you have a question, please press star and then one. Our next question comes from Ashish Sabadra with Deutsche Bank. Your line's now open.
Hi. My question was about the Hospitality Solutions with Wyndham completely live on the system. If you can comment on the pipeline, what are you seeing on the prospect pipeline? Are you seeing increased interest from hotels? Then just a quick follow-up on Hospitality Solutions itself. There was an expected impact from some M&A in the sector. I was wondering if that's in the numbers or could we see that impact going forward? Thanks.
Yeah. Two quick thoughts there. First of all, as it relates to what we're seeing in terms of pipeline, Q3, Q4, Q1 have all been very strong sales quarters for us. As we see continued growth in the mid-market space, we feel strongly in maintaining that guidance around 7%-9%. That relates to your second question, which is the acquisition by the larger companies, large hotel enterprise brands acquiring some of our mid-market customers. That does have an impact for us. Without that effect, growth would be in the 11%-13% range, but we are experiencing somewhere in the range of 200-400 basis points of headwind coming from happy customers being acquired off of our existing platforms. As it relates to momentum and pipeline in the enterprise space, we are having conversations with virtually every large enterprise customer.
As you might imagine, they're typically sitting on relatively old technology stacks, and those platforms are, in some cases, 20, 30, even 40 years old. The difficulty, of course, is that this is a very tough decision for them because they've got so many applications intertwined into that base application and base platform. They do recognize to do the kind of things they want to do around retailing and around distribution means that they're having to make some tough choices around technology. We're in those conversations, but as you might imagine, the sales cycle tends to be quite long.
Ashish, this is Sean. The one thing that's pretty similar between, and this is as we go out and we visit with customers is, be it on the airline side or the hospitality side of the equation, the retailing component of this is just so important in what's happening right now. This is, again, we spend a lot of time talking about airlines, but we see the same focus on the hospitality side, and Clinton and team have done a very good job relative to capabilities on thinking about future retailing capabilities and what we can do in that space.
That's helpful.
Doug, I just want to make sure you know the guidance that we gave you, the 7%-9% for the year, one, is consistent with what we gave you in the last quarter and does incorporate the acquisitions and mergers we're just talking about.
Yes. Thanks. That's helpful. Maybe just a quick question on the private channel deals in Europe. It's been within a year. You talked about some of the headwinds to volume because of that. Any kind of lessons learned? As we think about Qantas moving on to the private channel starting, I believe, August of this year, any kind of impact to consider? Thanks.
Yeah. It's been interesting, I've commented on this in the past, it goes back to my own airline days and what I saw when we were going through this at Air Canada a number of years ago. The initial steps, because it's very focused on home country or home region, you have the capability of essentially shifting that. As I mentioned, I think we do have this level of not seeing as much book away taking place because of essentially where we are penetrated, which is outside of that region or away.
The one thing that we have seen, we track this, is that for one specific carrier there, if you go back to the 12 trailing months prior to the implementation of a surcharge, you actually look at where they are, this was just done for the 12 trailing months in March, we actually see that our bookings on a 12 trailing month basis are higher. I think this is where I always tell people, you got to get into the data and understand what's taking place because there's a lot of noise and a lot of discussion that takes place, I think numbers don't lie. They tell you what's happening, and that's why it's so important. With each of these carriers, we continue to have levels of engagement.
The things that we're doing as it relates to the evolving of the distribution model, we're smack dab in the middle of it. As you can tell, Ashish, we follow it closely, and we know that things change at its own pace. We're a technology provider that has to help this acceleration that's good for all of our constituents, be it the airlines or be it the agencies.
That's very helpful. Maybe if I can squeeze one more question. This is just about congrats on the partnership with Visa and on the Sabre Virtual Payments. Maybe you can just talk about. You also talked about a good pipeline there. Can you provide some more details on the traction that you're seeing on that front? Thanks.
Yeah. I'll kick off, and then I'll pass it over to Dave. We have believed that there has been an opportunity here for a period of time. For us, it was finding the right partner to be able to do this. As you would imagine, you couldn't find a better partner better than Visa in this space. In doing that, when we look at the virtual payment space and what's happening right now, many of the people that are using virtual payments with a competitive product are actually large Sabre subscribers. As we continue to look at our retailing distribution strategy, we felt that the scope by which we have really outlined this agreement with Visa and what it covers is really good, and I'll let Dave just get into a couple of components.
Yeah. No, Sean, just to build on that, Ashish, to your question. It's a good blend, right?
Mix of a very, very robust gateway, now a multi-issuer, multi-scheme kind of environment. The Visa partnership, which we're very excited about, gives us a very competitive set of virtual card options for that customer set that Sean was referring to on the B2B side that we weren't as easily able to fulfill previously. We feel good about that. The other thing that also comes out in this, which we see as part of the offering competitive landscape, is the whole issue of dealing with global currency and FX. With Visa, we take that entire issue off the table. We're pretty excited about the possibility and the robustness of what that solution set will mean to all of our B2B agency customer set.
Ashish, the one thing that I think is important to note here, the way that we report it now, and it's not a significant revenue stream right now, but we report on a net revenue basis. We do not report it on a gross revenue basis.
The way we manage it.
Thanks and congrats on the partnership.
Great. Thank you.
Thanks.
Again, if you have a question, please press star and then one. Our next question comes from Brian Essex with Morgan Stanley. Your line is now open.
Hi. Thank you. Good morning, and thank you for taking the question. I was wondering if maybe, Sean, you could touch a little bit on some of the headwinds that you noted facing you, and particularly the impact from the MAX issue. Is this material an impact primarily, I guess, just on North America? Have you seen any impact from travel on the commercial versus leisure front?
Hey, Brian. Thanks for joining us. When I look at it, and I'll give sort of a breakdown on what we're seeing right now. If I look at the MAX piece, a large part of that has been able to be redistributed on other capacity. I think as you get into the summer, and this is going to be more impactful for those carriers that are there. If you look at it as a percentage of the total capacity in the marketplace, it's not huge. We do believe that there's the ability for that to be essentially reaccommodated on other flights that are out there. More from just a global capacity perspective, last summer, and the way that we look at it just relative to ASMs or ASK is, we have seen a slowdown, and it has been less pronounced in North America.
We're seeing a little more trimming of schedules in the European marketplace. If you go back to some of the larger carriers there, they were high single digits last year in the summertime on capacity, and we're seeing that trim back a little bit. Just because of what we're also seeing with the economic conditions within Latin America, that we've seen capacity pull back there. All of this is factored into the guidance that we have provided you. Again, as we move forward, we'll provide more color as we see it. Again, it goes back to sort of the diversification that we have in the marketplace, that we continue to see strength in North America. A number of things continue to play out in Europe. Asia Pacific is one that we continue to watch just because of the growth, only having X Jet 1% growth there.
We're watching that and what's taking place. That gives you a little color on what we're seeing right now.
Got it. Thank you for that. Maybe just to follow up, any update on Farelogix and where that is in the process? I know you had another round of, I think, Q&A that you had to address, but wondering what kind of milestones are ahead to kind of complete that deal.
Brian, I'll go back to what we had mentioned before. It's still our expectation that we'll get midyear approval on this. As you would assume, we're heavily engaged with the Department of Justice, working at the staff level to make sure that they understand why we think this is good for the industry. It really goes to the support that we're getting from customers. We have agencies involved and others that are helping them understand what's taking place. Again, a lot of effort to go into something that I think is transformational and good for this industry and for all the parties that are there. Going back to your question, we still expect a midyear approval on this.
Great. Thank you very much.
At this time, we're showing no further questions. I'd like to turn the call back to Mr. Menke for any closing remarks.
I'd just like to thank everybody for joining us again on this morning's call. As you can see, a lot of progress continues to take place. There have been some things that have taken place within the environment that are outside of our control, but I couldn't be happier with how the team is performing and what we're doing in the marketplace and look forward to providing further updates. Thank you very much.
Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.