Air tech supply under pressure, Sabre stays Market-Perform

Overview

This report discusses the fundamental changes facing global air-tech companies amid the Middle East conflict, higher jet fuel prices, and airline capacity adjustments, with a particular comparison between Amadeus and Sabre. The report argues that AI is no longer the most hotly debated topic in earnings season; investor attention has shifted to near-term airline volume trends. Airlines have begun cutting or dynamically adjusting capacity. Global second-quarter capacity is roughly flat year over year, while third-quarter capacity is up about 3.9% year over year. However, if fuel prices stay elevated or demand deteriorates, winter capacity still faces the risk of further downward revisions.

Core views

The core view is to maintain Outperform on Amadeus and Market-Perform on Sabre. Amadeus can partly offset pressure on bookings and passenger enplanements thanks to its leadership in Air IT, lower leverage, scale, R&D spending, Nevio contract progress, and modular upselling. Sabre delivered better-than-expected first-quarter results, and recent renewals with key customers reduced near-term churn risk, but roughly 80% of its revenue is exposed to the low-growth GDS market, its IT Solutions business is concentrated among a small number of large customers, leverage remains high, and its long-term competitiveness and financial flexibility are weaker than Amadeus's.

Analysis framework

The report is built around three threads: first, it analyzes how the Middle East conflict and jet fuel prices affect airline capacity, routes, fares, and booking cancellations; second, it compares Amadeus and Sabre across Air IT, Air Distribution, GDS, and passenger enplanement financial and operating performance; third, it assesses the two companies' medium-term investment appeal through valuation multiples, earnings forecasts, target prices, and leverage trajectories.

Methodology notes

• equity_researchRelative rating and target price framework

  Combination of rating, target price, valuation multiples and earnings forecasts

  The report uses Outperform, Market-Perform and similar ratings to express relative-return views, and bases target prices on Amadeus 2027 EPS and Sabre FY+1 EV/EBITDA multiples, respectively.

• industry_analysisAirline capacity sensitivity analysis

  Pass-through of fuel costs, fares, capacity and bookings

  Air-tech company revenue primarily comes from bookings and passenger enplanements, while airlines can manage profits through fare and capacity adjustments, so higher fuel prices indirectly pressure air-tech volumes through capacity cuts.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• SABR.US

  Core coverage name

  Strengths

  First-quarter bookings grew 6%, and both revenue and EBITDA beat expectations; direct exposure to the Middle East conflict is lower than Amadeus's; renewals with key customers such as American and LATAM extend into the mid-2030s, reducing near-term churn risk.

  Weaknesses

  About 80% of revenue is exposed to the low-growth GDS market; IT Solutions depends on a few large customers; net debt/EBITDA is expected to remain above 5x by the end of the decade; the balance sheet limits R&D and M&A capacity.

  Comparison

  Compared with Amadeus, Sabre has stronger short-term performance in North America and corporate travel recovery, but weaker long-term product mix, scale, R&D spending, balance sheet, and Air IT competitiveness.

  Risks

  Downturn in the airline cycle, winter capacity cuts, GDS being weakened by AI or airline direct-connect, customer churn, slower-than-expected deleveraging, and continued negative free cash flow.

• Amadeus IT Group, SA

  Peer comparison and preferred name

  Strengths

  Leader in Air IT, with Air IT and Hospitality contributing more than 60% of EBITDA and an increasing share; low leverage, scale and high R&D spending support product differentiation; Nevio is progressing with customers such as British Airways, Air France-KLM, and Lufthansa Group.

  Weaknesses

  The Middle East accounts for a high-single-digit percentage of bookings and passenger enplanements, so it is more exposed to conflict-related cancellations in the short term; Air Distribution may remain low growth or decline over the long term.

  Comparison

  The report prefers Amadeus, believing its product mix, balance sheet and compounding ability are superior to Sabre's.

  Risks

  Downward revisions to airline capacity, concerns about AI disruption, the long-term weakening economics of GDS, and a recovery in the second half of 2026 that falls short of expectations.

Key data

• Sabre target price$1.75Based on 7.0x FY+1 EV/EBITDA and rated Market-Perform.
• Sabre current price$1.83Closing price shown in the investment impact table.
• Sabre first-quarter revenue$760m8% above consensus; Marketplace was up 9% YoY and Airline Technology was up 7% YoY.
• Sabre first-quarter adjusted EBITDA$159mAbove the company's guidance of $130m.
• Sabre first-quarter booking growth+6% YoYThe strongest airline booking growth in more than two years.
• Sabre 2026 EBITDA guidance$585mFull-year adjusted EBITDA outlook unchanged.
• Sabre 2026 free cash flow guidance-$70mThe company still expects full-year free cash flow to be negative.
• Amadeus target price€75.00Based on 2027 EPS of €3.7 and a 20.1x multiple, with an Outperform rating.
• Global second-quarter capacity+0.4% YoYAbout mid-single-digit percentage points below pre-conflict expectations.
• Global third-quarter capacity+3.9% YoYThe report believes downside risk remains for Q3 and winter if conditions persist.

Impact & implications

The implication for investors is that near-term earnings resilience does not equal a long-term re-rating. Sabre showed strong booking growth and revenue elasticity in the first quarter, but the rating is still constrained by high leverage, declining long-term pricing power in GDS, weaker product-investment capacity than Amadeus, and the risk of a cyclical downturn ahead. Amadeus is more like a medium-term compounding asset, with Air IT and Hospitality growth, Nevio orders, R&D investment, and capital returns all supporting a higher rating.

Risks

• The Middle East conflict persists, leading to route cancellations and below-normal regional airline activity.
• Jet fuel prices remain elevated, forcing airlines to cut capacity further.
• Winter seasonal margins are lower, making capacity cuts more likely than in summer.
• AI, NDC, or airline direct-connect could erode the economics of GDS distribution over the long term.
• Sabre's high leverage and negative free cash flow limit its investment capacity and cyclicality resilience.
• If demand weakens further, bookings and passenger enplanements at air-tech companies could come in below the current 2026 assumption of about 3% growth.

What to watch

• Whether actual airline capacity in Q2 and Q3 2026 comes in below current schedules.
• Whether additional cuts appear in winter flight plans.
• Jet fuel prices and airlines' ability to pass them through in fares.
• Whether Sabre can deliver its 2026 adjusted EBITDA guidance of $585m and free cash flow guidance of -$70m.
• Whether Sabre net debt/EBITDA can fall below the report's expected above-5x range.
• The pace of conversion for Amadeus Nevio and Order Management contracts.
• Whether the real impact of AI on distribution economics moves from concern to quantifiable churn.