Amadeus owns the skies
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Amadeus owns the skies

Amadeus IT, Europe’s second most valuable software business, has become so powerful that its customers – the world’s biggest airlines – are in open rebellion. Some analysts and investors are questioning whether this rebellion – which centers around the price Amadeus charges airlines for processing airline ticket bookings – might at last push it off its perch. The only problem with that theory: no one has any idea how it could actually happen. Amadeus is indispensable to air travel, and runs almost all of the backend IT services the industry relies on. And new innovations are making it harder to displace every day.

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If you fly on even a semi-regular basis, then you’re probably an Amadeus customer. Even if you’ve only flown once there’s a good chance you’ve used its services: Amadeus handles half of airline bookings globally, and for the big legacy airlines like Lufthansa AG, that figure rises to near 70%.

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This year, the company is seeing incredible profitability from its business. It’s expecting net income of almost €1 billion – a 28% return on sales. And many of the airlines that use its service are grumbling about the extent to which that profitability eclipses their own. Ironically, some of them helped to set Amadeus up – but now, the company they started (and sold their stakes in) is much bigger than they are.

The stage is set for revolt. There’s just one problem: Amadeus is entrenched in the industry, and air travel is booming. Its holdings are also diversified across that industry. The result is that, wherever airlines want to go, they’ll be sharing their profit with Amadeus in one way or another.

Dominion holds Amadeus IT in its Global Trends Ecommerce Fund.

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