Amadeus Global Report 2016 A business, financial and sustainability overview. Business lines and highlights 2016

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1 A business, financial and sustainability overview 4 Business lines and highlights 2016

2 28 4. Business lines and highlights 2016 > 4.1 A quick look at Amadeus history 4.1 A quick look at Amadeus history 4 Business lines and highlights A quick look at Amadeus history 4.2 Distribution 4.3 Airline IT 4.4 Diversification into new areas 4.5. Financial performance Amadeus was founded in 1987 by Air France, Iberia, Lufthansa and SAS to develop a standard system for connecting airlines with travel agencies. We created the world s leading Global Distribution System, a platform that connects travel providers and travel sellers all over the globe, offering unmatched search, pricing, booking, ticketing, transaction and servicing capabilities. Anticipating the revolution the internet was about to bring, in 1996 we launched our e-commerce division. In the year 2000, we pioneered the development of a revolutionary reservation technology that provided airlines and travel agencies with a shared view of travellers and allowed for truly seamless reservation servicing across direct and indirect channels. The same year, we formally launched our Airline IT business line, partnering with British Airways and Qantas to create a state-of-theart airline Passenger Service System, 1 currently known as Altéa. Building on this success, we have continued to expand our IT portfolio to include a variety of other applications, including merchandising, revenue management, travel intelligence and travel expense management, as well as a number of other segments involved in the travel sector: airports, ground handlers, hospitality, corporations, tourism boards, railways and more. Additionally, at the beginning of 2016 Amadeus made the largest acquisition in its history, purchasing the US-based company Navitaire, allowing us to broaden the scope of our services, particularly for low-cost carriers. From leading the creation of a common travel platform and promoting the adoption of e-commerce, to bringing big data, cloud and mobile technologies to the travel industry, Amadeus remains a consistent innovator. Today, we are exploring the potential of artificial intelligence, augmented and virtual reality, the Internet of Things and other emerging technologies to add value to the business and experience of travel. After nearly 30 years of providing solutions to the travel industry, we believe that innovation has been, is and will be key to our growth, and to helping our customers and partners thrive for years to come. 1 Passenger Service System (PSS). A series of mission-critical IT systems used by airlines. The PSS usually comprises a reservation system, an inventory system and a departure control system (DCS).

3 Amadeus history and key milestones 4. Business lines and highlights 2016 > 4.1 A quick look at Amadeus history 29

4 30 4. Business lines and highlights 2016 > 4.1 A quick look at Amadeus history GRI G4-4 G4-8 Amadeus business lines Amadeus powers commerce and mission-critical operations for the entire travel ecosystem through its highly synergistic business lines. _Distribution Amadeus offers a full range of commercial services and complementary technologies that: Connect sellers, buyers and partners across the global travel industry and beyond Create opportunities to increase revenue by maximising existing and new sales channels Provide economies of scale and unparalleled efficiency in delivering higher-margin bookings _Airline IT Amadeus offers airlines integrated PSS, standalone software, analytics and consulting solutions that: Grow revenues by helping travel businesses reach more potential customers more profitably through direct sales and merchandising Optimise costs by streamlining marketing, sales and business operations Increase customer loyalty with better brand differentiation and data-driven personalisation _Diversification into new areas Complementing our offer in the travel industry, we diversified our business, providing cutting-edge technology to other key sectors in the industry like airports, hospitality and railways, as well as to transversal segments that are relevant to all travel industry players: payment systems, mobile solutions and travel intelligence. As the graph on the next page shows, the dual-sided business model (with travel providers on one side and travel sellers on the other) of the Amadeus Distribution business line places Amadeus at the heart of the travel ecosystem, in a unique position to add value to customers and providers and to diversify into related solutions for the travel industry.

5 4. Business lines and highlights 2016 > 4.1 A quick look at Amadeus history 31 GRI Amadeus at the heart of travel G4-4 G4-8

6 32 GRI G4-4 G Business lines and highlights 2016 > 4.2 Distribution 4.2 Distribution Distribution includes our Global Distribution System 2 (GDS) business (comprising airline, hospitality and rail content, amongst others). We also provide solutions and services related to the distribution of content through the GDS to travel providers (such as solutions for the display and management of merchandising content), to travel sellers (such as search solutions and integrated front-, mid- and back-office solutions) and to corporations (such as self-booking tools and travel and expense management solutions). In addition, Distribution includes our Travel Intelligence business and part of our Payments offering (the Payer Hub, through which we help travel agencies and corporations pay travel providers). The travel distribution industry The needs and expectations of travellers are rapidly evolving, particularly driven by the increased use of technology and connectivity. Accordingly, the way in which travel is bought and sold is also changing quickly. And as the industry adapts, so does Amadeus Distribution. Today we are a vibrant and innovative technology and business partner for airlines, travel agencies and other players in the industry. We connect the dots of the travel industry. We enable the flow of data and empower partnerships between travel providers, intermediaries and travellers. Our technology and services now encompass the full customer experience, from travel inspiration and search through to post-trip evaluation and sharing. And at the centre of everything we do is the most important element in travel: the traveller. Amadeus Distribution business forms part of the indirect distribution, meaning that it enables the relationship between the travel providers and the travel intermediaries. In the indirect distribution industry, there are four main players: 1_ Travellers 2_ Travel providers: airlines, hotels, car rental companies, railways, insurance providers, cruises, ferries, airports, etc. 3_ Travel intermediaries: online and retail travel agencies, travel management companies, metasearch companies, etc. 4_ Travel technology providers: IT companies enabling interaction between the different players 2 A Global Distribution System is a computer network containing travel-related information such as schedules, availability, fares and related services, which also enables automated travel-related transactions between travel providers and travel agents. In addition to providing a Computerised Reservation System, GDSs offer travel-related content to a broad range of agents worldwide, making global reach an important element of their value proposition.

7 4. Business lines and highlights 2016 > 4.2 Distribution 33 When Amadeus was first created, it provided the technology that allowed travel providers content to be sold by intermediaries (for example, a return flight from London to Oslo, on pre-defined dates, and a room-night at a business hotel near the airport). This required the search and booking of the trip and the issuance of the travel documents. Today, the role of our Distribution business has grown significantly. We now provide technology that encompasses the full traveller experience, with the ability to create personalised trips from inspiration, shopping, booking and fulfilment, to a whole range of pre-, in- and post-trip services. To enable such personalised trips through indirect distribution, our technology needs to allow for seamless and real-time interaction between all players, from the time the traveller looks for inspiration for their next trip, to the business traveller returning from a trip and needing to settle their travel expenses, or any traveller writing a review regarding their travel experience. The Amadeus Distribution unit offers products, solutions and services for travel providers and intermediaries in order to first attract all relevant travel provider content to our Distribution platform, and then make it efficiently accessible and manageable to a broad worldwide network of travel intermediaries, which in turn sell this travel content and provide counsel to travellers. Amadeus total bookings* (figures in millions) * Bookings processed by travel agencies using the Amadeus distribution platform. Big Rocks infographic and bridge to the future (Distribution Leadership Meeting event giveaway) with Acceleration behaviours: Focus on the business challenge -Be better with what we have, Engage, Persevere to the extra mile, Rethink the businessand Think from the customer.

8 34 4. Business lines and highlights 2016 > 4.2 Distribution Distribution business model The business model for indirect distribution is straightforward: when a travel intermediary shops/books travel content from a travel provider, that travel provider pays Amadeus a transaction fee. Travel intermediaries purchase value-added products, solutions and services from Amadeus, for which they pay IT fees. Amadeus provides significant economies of scale for travel providers and travel sellers. The value of distribution Travel providers The indirect distribution business model extends the reach of travel providers not only to the world s largest network of travel agencies, but to partners and new intermediaries, such as metasearch companies, in all distribution channels. On average, this model delivers a higher revenue per ticket compared to the direct channel, such as the airline website, without the associated high traffic-acquisition and servicing costs, making it a highly efficient, cost-effective global sales and marketing channel. Travel intermediaries Travel intermediaries connecting to Amadeus are instantly linked to the world s largest and most comprehensive source of travel content, all aggregated in a consistent format. This allows them to more efficiently fulfil the needs of their customer the traveller. Travellers Indirect distribution gives travellers the ability to compare offers from multiple providers quickly and effectively. And it also offers them the freedom to shop and book their travel how and where they choose, without the need to check multiple sites. Our Big Opportunity, including signatures from 180 employees on the commitment to delivering growth for Distribution. Amadeus and Sure Fish Hoek Travel in Cape Town at an ASATA Conference. They have been a customer of Amadeus for over 10 years.

9 4. Business lines and highlights 2016 > 4.2 Distribution 35 The Amadeus Distribution offer GRI G4-4 G4-8 Today s traveller is more demanding and less loyal than ever. They are connected 24/7 and have a fragmented approach to shopping, using different channels and multiple devices interchangeably. Travel providers and intermediaries are responding to evolving traveller needs with a renewed focus on brand, retailing and customer experience. Awareness and demand generation: targeted advertising solutions allowing providers and intermediaries to reach potential travellers and offer a product tailored to their profile. Lead generation: creating win-win partnerships between travel providers and intermediaries, including metasearch companies, to generate reliable referrals resulting in high conversion ratios. Conversion refers to desired action results, for example when a user makes a purchase or registers for a newsletter. Buyer: innovative shopping, booking and ticketing solutions for retail and online travel agencies, airline ticket offices and self-booking tools for corporates. Travel agency solutions include the world s first fully cloud-based solution offering secure access 24/7, flexibility and ability to customise according to preferred workflows. Consumer: a portfolio of solutions and services designed to allow travellers to personalise their trips, such as the purchasing of ancillary services (i.e. baggage, seats) during or after the reservation. Travel providers and sellers have the ability to differentiate their offers through images, text and more, promote personalised offers according to customer profile and benefit from enhanced up- and cross-sell opportunities. Our addressable markets Amadeus Distribution is well positioned to help our customers respond to new trends and new requirements. One of the most important changes has been the move from processing demand (executing transactions on behalf of providers) to creating demand (generating business for providers). Today we offer business solutions to help travel providers and intermediaries find and cater to this empowered traveller, regardless of which stage of the travel experience they are at. These innovative business solutions allow both travel providers and intermediaries to understand the traveller better and improve the process of finding and retaining customers.

10 36 GRI G Business lines and highlights 2016 > 4.2 Distribution Trends and opportunities in the distribution business Change is a constant. At Amadeus, we view change as an opportunity an opportunity to evolve, expand and re-imagine how we can bring more collaboration and value to the industry. Here are just some of the emerging requirements and trends we see, and how we are turning them into opportunities: Search is increasing exponentially With increased demand for personalisation, comparison shopping and real-time results, this is a critical area for travel consumers, sellers and providers. At Amadeus, we have created the technology that allows online search results to be returned in milliseconds with no compromise to accuracy. Amadeus Master Pricer Instant Search, which has been implemented by the world s leading online travel agencies and metasearch companies, leads the industry. Merchandising As travel providers become travel retailers and strive to replicate the best practices in online consumer experience, merchandising represents the biggest opportunity for the industry. Amadeus solutions allow airlines to differentiate their offer to the traveller by providing personalised services with different service groups and fares. And with Amadeus Rich Merchandising, we enable providers to distribute graphic content to better market their products to customers and travel agents. Merchandising solutions are easily accessible by travel intermediaries through either the world s most used professional travel retailing platform, Amadeus Selling Platform Connect or our upgraded Amadeus Web Services solution, which is an advanced Application Programming Interface (API). Low-cost carriers Low-cost and hybrid carriers now account for 25% of airline seats flown, and have traditionally sold only directly (i.e. via their website). They are projected to continue to increase their share of the market. Low-cost carriers are increasingly partnering with Amadeus to gain access to highvalue travellers like business travellers, and to extend both their geographical reach and their partnership opportunities through indirect distribution channels. We now have over 90 low-cost and hybrid carriers selling through Amadeus, and with our recent acquisition of Navitaire, we are delighted to offer the most comprehensive 1 portfolio of solutions for low-cost carriers and hybrids. Multimodal trips Travellers are looking for not just a flight but a complete travel experience, and travel providers are looking to extend the range of products they sell beyond their core offer. Amadeus already integrates content from multiple providers including rail, hotel, insurance, car rental and more. Our rail content is displayed alongside our air content in one merged display, so travel agencies and travellers can compare travel options quickly and easily. We are also adding ground transport service providers such as local private chauffeur and taxi services at major cities across the world, and we use the travel intermediary channel to help airports distribute their content, such as airport parking spaces. Increased access to distribution platforms With mobile searches and interactions exceeding desktop usage, having a quick response time and optimal results for minimal space on the screen is now more important than ever. Travel providers and sellers are being challenged to keep up with a more demanding customer in order to sell to and service them before, during and after the trip. Amadeus invests heavily in mobile technology and now offers a comprehensive range of solutions so travel providers and travel agencies can service travellers throughout 2 the trip. In addition to this, travellers can receive offers and updates relevant to their specific situation and context. With our main professional booking platform for travel agencies Amadeus Selling Platform Connect being fully in the cloud, it means that travel agencies can do business when, where and how they want. Customer insight Customers today are looking for personalised offers, and in exchange are willing to share some personal data. Big data and customer profiling is the key to successful customer experience and retailing in the new economy. Amadeus has teams of data scientists working with our customers to provide 3 actionable insights from both our data and our customers own data. We are re-imagining the possibilities for distribution in tomorrow s travel landscape. We envisage an open, dynamic travel ecosystem fast, flexible and innovative, where all players have the freedom to choose and personalise the way they work with partnerships, suppliers and technology where Amadeus simplifies the complexity for both travellers and travel players, and focuses on personalised consumer value. 1 2 See Airline IT, p. 40. See Mobile, p See Travel intelligence, p. 54.

11 4. Business lines and highlights 2016 > 4.2 Distribution 37 Evolution of Amadeus bookings Industry growth In 2016, the travel agency air booking industry increased by 3.1%. Asia-Pacific experienced robust growth, fuelled by the strong performance of South Korea or India, among others. Despite an improvement in the second half of the year, Central Eastern & Southern Europe was the weakest region, dragged by unfavourable macroeconomic conditions. The remaining regions Western Europe, Middle East & Africa and the Americas grew moderately overall during the year. Amadeus bookings In 2016, Amadeus travel agency air bookings rose 5.9% outperforming the GDS industry growth of 3.1%. Our competitive position 3 improved 0.8 p.p. to 43.2% and led to a 5.9% increase in Amadeus air bookings. Amadeus volumes grew fastest in Asia-Pacific (16.7%), benefitting from robust industry growth and the enhancement of our competitive position. Our air bookings in North America and Middle East & Africa increased solidly while volumes in Western Europe and Latin America closed the year with healthy growth rates. In turn, Central, Eastern & Southern Europe suffered from the industry weakness in the year. Non-air bookings declined by 1.3%, due to lower rail bookings, which more than offset the positive evolution of hotel and car bookings. Amadeus travel agency bookings (Figures in millions) Change Air bookings % Non-air bookings (1.3%) Total % Amadeus air travel agency bookings by region (Figures in millions) Change Western Europe % Asia-Pacific % North America % Middle East & Africa % Central, Eastern & Southern Europe (2.5%) Latin America % Total % 3 Competitive position is measured as our travel agency air bookings in relation to the travel agency air booking industry, defined as the total volume of travel agency air bookings processed by the global or regional Computerised Reservation Systems. It excludes air bookings made directly through in-house airline systems or single country operators, the latter primarily in China, Japan and Russia.

12 38 4. Business lines and highlights 2016 > 4.2 Distribution Key Distribution highlights in 2016 Airline content agreements More than 70% of airline bookings made through the Amadeus system in 2016 worldwide were with airlines that have content agreements with Amadeus. Last year, Amadeus signed new contracts or renewals of existing content agreements with 46 carriers, including Emirates, LATAM Airlines Group S.A., Air Cairo and Etihad Airways. 90 low-cost and hybrid carriers Growth was also consistent in the low-cost carrier segment during Subscribers to Amadeus inventory data can now access content from more than 90 low-cost and hybrid carriers worldwide, among them the Chinese low-cost airline Spring Airlines. In 2016, bookings of this segment grew 15% compared to the previous year. Among the low-cost carriers that signed or renewed their content agreements with Amadeus in 2016 was easyjet. This renewed long-term partnership will allow Amadeus subscribers continued access to easyjet s range of fares. Corporate travellers will also be able to easily access and book the airline s range of business-friendly products such as Flexi Fares.

13 4. Business lines and highlights 2016 > 4.2 Distribution airlines Contracts for Amadeus Airlines Ancillary Services KAYAK The online travel search engine implemented Amadeus Master Pricer with Instant Search technology, which delivers online search results in milliseconds without compromising accuracy. Every single second of improvement in search response time for consumers can translate into an increase in conversion rates. 66% of the global bookings made through the Amadeus system were eligible to carry a merchandising item The solid performance in Distribution was also supported by new contracts of our merchandising solutions. At the end of 2016, 66% of the global bookings made through the Amadeus system were eligible to carry a merchandising item. More than 120 airlines had contracts for Amadeus Airlines Ancillary Services by the end of 2016, of which more than 90 had implemented the solutions. Amadeus Fare Families Solutions also continued its expansion in At the end of the year, 52 airline customers had contracted the merchandising solution. Of these, 33 had implemented the solution, which allows airlines worldwide to distribute branded fares to travellers. 52 airline customers contracted Amadeus Fare Families merchandising solution Watch video on Key Distribution highlights in 2016

14 40 GRI G4-4 G Business lines and highlights 2016 > 4.3 Airline IT 4.3 Airline IT Amadeus Airline IT solutions and services enable airlines to provide the traveller with a consistent, personalised customer experience throughout every stage of the journey, from inspiration, search and booking, to pricing, ticketing, check-in and boarding. We help full-service, hybrid and low-cost airlines to deliver on their objectives to grow revenue, optimise costs and efficiency and build brand and customer loyalty according to whatever business model they choose to operate. We also offer airlines unique possibilities to collaborate with their alliance, codeshare and other strategic partners to maximise sales, through the largest global network of travel agencies and also through direct channels. In 2016, over 175 Amadeus airline customers processed in excess of 1.3 billion passengers using Amadeus PSSs (Amadeus Altéa or Navitaire s New Skies). Both PSS solutions provide mission-critical, highly complex platforms that cover essential IT functions and airline departure control management with a truly end-to-end, realtime solution that covers the entire customer journey, and optimises revenue growth as well as the ability to effectively manage changes in the event of a disruption to an airline schedule. We serve the largest portfolio of the world s top airline alliances. Two-thirds of Star Alliance members, three-quarters of oneworld carriers and over half of the members of SkyTeam use Amadeus Airline IT solutions. Amadeus facilitates closer integration between partner airlines that need to share availability, fares and passenger and booking information, enabling a seamless passenger experience across members. Amadeus airline customers span all sizes and levels of sophistication, ranging from airlines carrying below 1 million to over 100 million passengers annually, including both well-established airlines and start-ups. The Amadeus Altéa Suite offers full reservation, inventory and departure control capabilities, delivering an integrated solution for full service and hybrid airline carriers. Our expansion into the low-cost carrier segment through the acquisition of Navitaire in January 2016 gives us a strong presence in the fastest-growing airline segments of hybrids and low-cost carriers. Navitaire s New Skies PSS provides a complementary solution and customer base to Amadeus. Navitaire s integrated solutions include reservations, distribution, travel commerce, loyalty, revenue management, revenue accounting and data storage for business intelligence. Navitaire has close to 50 clients worldwide, including some of the fastest-growing, most successful and most innovative airlines in the world, such as AirAsia, Ryanair, IndiGo, SpiceJet and Vueling. Amadeus pricing model for IT solutions is primarily based on a fee per transaction processed. Most of the transactions billed are linked to air traffic volumes; for example, airline Passengers Boarded in the case of Amadeus Altéa PSS, or Passenger Name Records in the case of our e-commerce solutions. By operating a transactionbased revenue model, our returns are linked to the operational volumes of the airlines. In addition, our pricing per transaction has a modular approach, so our airline customers can incorporate specific modules, paying only for the ones used. The complementary offer of our two PSS platforms provides the opportunity to better serve customers with needs both on the full-service and low-cost carrier segments, as well as to better support airlines as they evolve from one business model to another. Passengers Boarded* (figures in millions) * Passengers Boarded, i.e. actual passengers boarded onto flights operated by airlines using at least the Amadeus Altéa Reservation and Inventory modules or Navitaire New Skies.

15 4. Business lines and highlights 2016 > 4.3 Airline IT 41 GRI From numerous legacy PSSs to the Amadeus Altéa Community PSS Amadeus is the leading provider of PSSs to the airline industry. We are forecast to serve over 1.6 billion passengers by There are three key reasons for our success. First, technology. Amadeus has always set the focus on innovation, and our solutions are state-of-the-art. In 2000, we started developing a platform for PSSs based on open systems. We provide solutions to airline groups that operate with a variety of business models, and we are a key enabler of much-needed collaboration in the industry. Some examples of our contribution to bring innovation to the market are as follows: We were first to deliver Electronic Miscellaneous Document technology to enable ancillary sales. We continue to lead in airline merchandising, as one of the first to receive the highest level of New Distribution Capability (NDC) certification (level 3), awarded by the International Air Transport Association (IATA). We were also the first to deliver the required business solutions for airlines to explore the merchandising opportunities with ancillaries and fare families, with a coherent offering across all customer touchpoints. We are leading innovation with cloud services, which allow our applications to be run anywhere in the cloud: a real breakthrough that will be critical to supporting the future business evolution of airlines. Second, we work closely with our customers to fully understand key industry trends and traveller demands, and therefore to address their main business challenges. We are investing to support airlines strategic business drivers of: revenue growth, brand loyalty and cost management, with the traveller s needs at the heart of our thinking. Amadeus serves airlines from every part of the world, which has allowed us to understand our customers in more depth, and as a consequence we have better insights into regional trends and challenges. Merchandising, Personalisation, and Revenue Optimisation are our main areas of diversification. We also continue to enhance our Shopping and Retailing solutions, with a particular focus on digital touchpoints, as well as in new PSS functionality, concentrating on major trends impacting the passenger, such as customer selfservice and disruption management. Third, Services is also a key element in our offering. This is how we support our customers through business consulting and process optimisation. There is a significant opportunity in the area of Services, and we plan to build on our strategic alliance with Accenture in the area of digital transformation. Other technology evolutions, such as cloud services and the serviceability of our solutions, will further enhance the value we deliver to our customers. Targeting our customers needs G4-4 G4-8 See Research, development and innovation, p. 64.

16 42 GRI G Business lines and highlights 2016 > 4.3 Airline IT Challenges and opportunities in the airline IT industry For airlines to succeed in today s world, a strong focus is required on cost efficiencies and revenue maximisation.at Amadeus, our solutions portfolio and investment strategy are designed to address these challenges and opportunities in the airline IT industry. Merchandising and personalisation Customer experience is one of the key differentiators for airlines. As much as 97% 4 of airlines are planning investments in personalisation technologies in the next three years. Amadeus solutions were developed to deliver a high-quality customer experience through personalisation. Amadeus services are contracted already by more than 100 airlines, enabling ancillary services, customer insights and personalised offers. In 2016, Amadeus launched Amadeus Anytime Merchandising with Avianca. This enabled airlines to take control; to create and push realtime, personalised offers for travellers, consistently across all channels. Our merchandising strategy supports any distribution strategy or channel mix. Merchandising continues to be a huge revenue opportunity for airlines in the coming years. Revenue optimisation Revenue optimisation is especially important in the current landscape, where there is increased complexity due to the rise in online shopping and mobile channels and the proliferation of multiple traveller touchpoints. Amadeus solutions help our airline customers optimise the revenue for the airline for each shopping request, execute dynamic pricing, reduce fraud and track all passenger sales and revenue performance in real time. Simulation results demonstrate a 5-7% revenue increase for airlines that migrate to Amadeus Revenue Management solution. In terms of new customers, we have signed a new agreement with Singapore Airlines for both Amadeus Revenue Management and Dynamic Pricing solutions. Amadeus Dynamic Pricing calculates the optimum price to be presented to each customer, taking into account real-time shopping and market information. 4 Source: Amadeus customer survey Source: T2RL airlines. See Amadeus research and thought leadership papers, p. 69. Shopping and retailing A digital strategy is critical to airlines in driving brand loyalty and revenues. This requires airlines to find a highly scalable and reliable platform enabling them to grow their direct business while supporting their promotional efforts. The main business opportunity for airlines comes with lower customer acquisition costs and higher conversion rates. Airlines can also offer high accuracy, making it easier for customers to find their preferred travel option. Cost optimisation Airlines face cost challenges in many areas, including sales and operations. For example, disrupted operations can have a significant impact on airline costs, which are estimated at 60 billion a year for all airlines. 5 Our research study Shaping the Future of Airline Disruption Management highlights solutions improvement options to better manage Airport Irregular Operations (IROPS) and was debated at the IATA Executive Leadership Summit in Amadeus helps airlines to proactively manage disruptions with passengers through their mobile devices. In the near future, we will also enable more efficient recovery from disruption, with automatic rebooking technology to empower passengers to choose relevant options using kiosks and mobile self-service solutions. Consulting services Airlines are evolving their strategies while facing competitor and regulatory challenges. To support the new business models and service technologies, Amadeus intends to increase the focus on this area and leverage partnerships with major IT service providers, particularly Accenture, with whom we have signed a strategic alliance. Our expanded services cover: business consulting, custom software development (to adapt to the specific needs of our airline customers), business process outsourcing and IT services (to propose fully operated solutions) and hosting services. Amadeus supports airlines with consulting services to help them with the execution of an optimal merchandising strategy and to boost their ancillary revenues. We estimate our total addressable market in this area at 1 billion in It could potentially be larger as we move in the future into the digital space.

17 4. Business lines and highlights 2016 > 4.3 Airline IT 43 Evolution of Passengers Boarded Amadeus Passengers Boarded grew 85% in the full-year period, fuelled by the addition of Passengers Boarded from Navitaire (consolidated since 26 January 2016) and a 12.2% increase in Amadeus Altéa Passengers Boarded. Altéa Passengers Boarded increased organically 4.4% in This organic increase combined with the impact from the 2015 and 2016 implementations (mainly All Nippon Airways and Thomas Cook Group Airlines, in 2015, and Swiss International Air Lines, Brussels Airlines and China Airlines, in 2016) drove our volumes up by 12.2% in the full year. Navitaire contributed million passengers to our 2016 Passengers Boarded (consolidated since 26 January 2016 and equivalent to million passengers for the full year). Passengers Boarded on the Navitaire New Skies platform performed well in the year, growing double-digit organically and also benefiting from implementations such as Viva Group. Additionally, Navitaire has supported the expansion of our international footprint. Asia-Pacific and North America gained relative weight in the year, representing 31.0% and 4.7% respectively. The shift towards these regions will continue as we implement the contracted migrations of Southwest Airlines (the domestic passengers business), Japan Airlines and Malaysia Airlines. Passengers Boarded by PSS (figures in millions) Change Altéa % New Skies n.m. Total , % Passengers Boarded by region (figures in millions) Change Western Europe % Asia-Pacific % Latin America % Middle East & Africa % Central, Eastern & Southern Europe % North America n.m. Total % Southwest Airlines

18 44 4. Business lines and highlights 2016 > 4.3 Airline IT Key Airline IT highlights in 2016 Navitaire s acquisition Navitaire s acquisition was closed at the beginning of 2016 following regulatory approval. Navitaire, a technology and business solutions provider to the airline industry specialising in the low-cost segment, complements Amadeus Altéa offering and positively contributed to revenue growth in Complete suite of Amadeus Altéa solutions Watch video on Key Airline IT highlights in 2016 Kuwait Airways unveiled in November 2016 its Transformation Plan, designed to reassert its pioneering legacy in the region s aviation industry by To achieve this goal, Kuwait Airways has contracted for the complete suite of Altéa solutions, including Revenue Management, e-commerce, Loyalty Programmes, Inventory, Reservation, Departure Control and Payments, as well as Mobile and Travel Intelligence. Amadeus extensive portfolio will help the airline create more personalised travel experiences and adapt its offering to customer demand and preferences in real time.

19 175+ airlines contracted Amadeus PSSs Including Navitaire, more than 175 airlines had contracts for one of the Amadeus PSSs (Amadeus Altéa or Navitaire New Skies) at the end of Among the new additions were Malaysia Airlines and Air Tahiti Nui. More than 165 airlines had implemented an Amadeus solution. Swiss International Air Lines, Brussels Airlines (both part of the Lufthansa Group), Ukraine International Airlines and China Airlines were among the airlines that implemented the Amadeus Altéa solutions during Ryanair & Navitaire 25 years of collaboration At the beginning of 2017, Ryanair renewed its Passenger Service Systems agreement with Navitaire. Ryanair will continue using the firm s advanced ancillary and reservations solution including merchandising, distribution, digital and departure control platforms until 2025, representing 25 years of collaboration between Ryanair and Navitaire. & 4. Business lines and highlights 2016 > 4.3 Airline IT 45 In November 2016, Amadeus announced a partnership with Optym, a unique software player in the airline network planning and scheduling space. Together, Amadeus and Optym will offer a complete suite of products, known collectively as Amadeus SKY Suite by Optym, which will include SkyMAX (Schedule Optimizer) and SkySYM (Schedule Simulator), as well as SkyWORKS (Schedule Editor), SkyPLAN (Market Frequency Optimizer) and SKYCAST (Revenue Forecaster). Amadeus Altéa s growth Amadeus Altéa s growth was also supported by existing customers contracting additional solutions from the Airline IT portfolio. The network carriers of the Lufthansa Group opted in April for the full Amadeus Altéa Suite, adding Amadeus Altéa Departure Control Flight Management to their existing Altéa Reservation, Inventory and Departure Control Customer Management capabilities. The Amadeus Altéa Suite is now available to all of the group s network airlines. Amadeus received Level 3 NDC certification from IATA Optym In 2016, Amadeus was one of the first industry players to receive Level 3 NDC (New Distribution Capability) certification from IATA. This is the highest possible level of certification; few have attained it, and it reaffirms Amadeus leadership in innovation. Amadeus developed the Amadeus Altéa NDC solution, which will allow airlines to distribute their prices and fares, including ancillary and fare family content, using NDC Offers & Orders. This was shortly followed by Navitaire also receiving the highest level of NDC certification.

20 46 4. Business lines and highlights 2016 > 4.4 Diversification into new areas 4.4 Diversification into new areas Amadeus is uniquely positioned in the travel ecosystem. We provide technology at all stages of the traveller journey, and we have the capability to serve almost every player in the travel industry, beyond airlines and travel sellers. Back in 2012, we believed that diversification was a natural evolution. That has proven to be right: we have already achieved a relevant presence in new markets, extending our customer base to hotels, airports and railways, and expanding our scope of products and solutions in new areas like payments, mobile and travel intelligence. Airport IT Customer service plays a key part in the airport s strategy. Self-service is perhaps the biggest trend seen at airports. There has been a move towards automation in the passenger processing industry, with online check-in already the norm and self-bag drops becoming more widespread. There is also a growing determination by airports and airlines to address a common pain point for passengers: baggage processing. Improving operational efficiency and reducing operational costs is another key focus for airports. There is a need for better collaboration among airport stakeholders, and a rising demand for efficient resource use and faster aircraft turnaround. However, the integration of new systems and industry standards is difficult and costly. The challenge of managing information associated with legacy IT systems presents a major threat to airport expansion, mainly due to key information residing in unconnected systems. For efficient operational planning, airport operators need a centralised data source. Amadeus provides a platform for information sharing between these players. The Amadeus portfolio of products targets the facilitation of information exchange and collaboration between airport stakeholders, which ultimately benefits the passenger. The ground handling industry is predicted to grow at relatively high rates over the next 10 years as a result of forecast demand for air transport. The International Air Transport Association (IATA) estimates that airlines outsource more than 60% of ground handling, and this trend is increasing. This has a direct impact on ground handling companies in terms of expanding their service offerings to accommodate the additional passenger, baggage and cargo capacity. In 2016, Amadeus improved its modern technological platform and achieved deeper integration of the new solutions sourced in the acquisition of IT providers UFIS and AirIT. We have successfully commercialised our integrated product portfolio, and each of the components of our product suite is now used by customers, delivering tangible benefits.

21 4. Business lines and highlights 2016 > 4.4 Diversification into new areas 47 The Amadeus product range for airports, which encompasses more than 20 solutions, covers all activities in the infrastructure, terminal, ramp and movement areas at the airport. All these products interact with each other, so they can benefit from the information generated by each module. Our offering is grouped into three main areas: passenger processing, ground handling and airport operations. Amadeus Airport IT in 2016 We have expanded our customer base to reach 240 clients. We currently have contracts in place with over 100 ground handlers, 30 airlines and 110 airport operators, managing over 1 billion passengers annually. Our Airport IT solutions are available today at more than 330 airport sites worldwide. With Amadeus portfolio of airport solutions, its community approach and the leveraging of its ecosystem of airline IT, payment services and travel agency knowledge and customers, Amadeus is well positioned to help airports and their partners achieve success in tomorrow s travel world. Below are some examples of our customer expansion in Copenhagen Airports, which owns and operates the airports of Kastrup and Roskilde, signed a 10-year IT partnership with Amadeus. The agreement includes nine different solutions that will improve the airport s operational performance and customer experience, with next-generation cloud-based technology. The airport has already implemented the Amadeus Airport Sequence Manager and Airport Collaborative Decision Making Portal solutions to provide the airport, its airline customers, ground handlers and air traffic controllers with accurate and synced information on aircraft departures. Quebec City s Jean Lesage International Airport also showed its confidence in Amadeus during In March, the airport announced that it will implement Amadeus Airport Common Use Service. In the North American region, Amadeus has enjoyed business development success with 12 new customers. In Asia-Pacific, Adelaide Airport will implement Amadeus fully cloud-based airport management solutions portfolio. Adelaide is embarking on a widespread infrastructure improvement initiative over the coming years, so optimal passenger and airport operations management is going to be a key factor in the thinking and planning of this process. Over the last three years, Amadeus has demonstrated its ability to become a strategic partner in supporting the growth of airports and ground handlers, and improve airport operational performance to ensure flexibility and scalability for all stakeholders. Hospitality 2016 represented one of the most profitable years ever for the hotel industry: the industry grew, with occupancy just under 66%, average rates climbing up 4.5% and a revenue-per-available-room increase of 5%. 6 The industry has a robust global development pipeline of approximately 1.3 million guestrooms 7 (526,777 rooms in the Americas; 234,509 rooms in EMEA and 581,627 rooms in Asia-Pacific), offering a promising industry outlook. Key industry challenges Hospitality technology is still very fragmented between traditional IT specialists, global technology providers and in-house developments. This imposes a set of challenges, such as: fragmentation of data and inventory complex synchronisation as a result of fragmented technologies limited functional evolution a consequence of higher total cost of ownership All this leads to lack of a central perspective and the associated difficulties with guest recognition and personalisation. Our vision is to bring these technologies together in a modular, component-based, cloud-native platform, enabling hoteliers to focus on brand differentiation and creating unforgettable brand and guest experiences. Amadeus offers these solutions as Software-as-a-Service (SaaS). Amadeus offers products for central reservations, sales and catering, property management and hospitality operations, all focused on a better end-to-end experience. We are advancing in the execution of our Hospitality IT strategy by integrating recently acquired companies Itesso and Hotel SystemsPro, and we are also progressing in the development of a next-generation Property Management System. At the end of 2016 Amadeus Hospitality had more than 24,000 properties using at least one of its solution modules, with more than 660,000 supported hospitality staff users across the globe, a strong indicator of how our market penetration continues to grow across our solutions portfolio. 6 Source: Lodging Econometrics and STR. 7 Source: Lodging Econometrics (2014).

22 48 4. Business lines and highlights 2016 > 4.4 Diversification into new areas Unified user experience Partnership with InterContinental Hotels Group for a next-generation Guest Reservation System In 2015 InterContinental Hotels Group (IHG) and Amadeus announced their partnership to develop a next-generation Guest Reservation System to revolutionise the technological foundations of the global hospitality industry. Since then, Amadeus has made significant strides towards delivering its new cloud-native platform. The system will be a first in the hospitality sector, with more than 5,000 IHG properties across 9 brands moving to the new solution. Migrations are expected to start in late This next-generation reservations system will enable customers to better categorise and display their inventory to support their digital strategies, such as one-on-one guest marketing. It will also enable advanced search capabilities beyond traditional closed-search criteria for better opportunities to cross-sell and upsell services and attributes and maximise yield. Helping hospitality organisations globally realise more profitable business Amadeus Group & Event Distribution solution (MeetingBroker) is our platform for group business distribution that helps venues increase their number of online leads, enabling meeting planners to use online distribution channels to submit enquiries and Requests for Proposals (RFPs) for their events and meetings to venues. The Amadeus Sales & Event Management advanced solution (Delphi.fdc), our cloud-based sales and catering solution that allows hospitality organisations to connect and collaborate with their customers to facilitate execution of events, continued to show significant growth, with some important wins with the world s leading names joining our customer community. Accor began the global roll-out of Amadeus Sales & Event Management, and will now offer its customers the ability

23 4. Business lines and highlights 2016 > 4.4 Diversification into new areas 49 to directly book rooms and meeting space online. Omni Hotels & Resorts also began the roll-out of Amadeus Sales & Event Management across its entire portfolio. On the entertainment side, we secured the fourth largest gaming company in the world, and completed the roll-out of Amadeus Sales & Event Management, empowering its sales and events staff with cloud-based mobile sales and catering platform, with robust Customer Relationship Management (CRM) to build stronger connections with its customers. In addition, open communication platforms like Amadeus HotSOS help hoteliers providing a new level of personalisation of service to their guests. Finally, Amadeus has continued to invest in Amadeus Cloud Property Management System (PMS), a solution that can be deployed rapidly and that reduces the cost of ownership to hotel properties and brands. At the same time, Amadeus PMS is seamlessly scalable for single and multiple properties. As a cloud solution, Amadeus PMS permits access from multiple devices and from any location. 8 Source: Amadeus (2014). Hotels 2020: Beyond segmentation. 9 Source: American Express Travel (2015). Future Travel Trends.

24 50 4. Business lines and highlights 2016 > 4.4 Diversification into new areas Hotel distribution The international hotel booking industry is undergoing significant change. Connected consumers, consolidation, the rise of peer-to-peer businesses, metasearchers and new competition from non-traditional players have forced both hotel providers and booking agencies to adapt and evolve. To help our customers keep pace in this fast-growing industry, Amadeus keeps investing to provide both hotels and bookers with an efficient value proposition which enables end users to have greater choice and better information from multiple sources in one single platform for all parties to gain the highest value from the booking process. Amadeus connects the world s leading hotel chains, representation companies and aggregators, as well as thousands of independent hotels, to its global community of travel agencies. Through a single access point, agents can benefit from our wide content choice of over 2 million shopping options and more than 580,000 hotel properties via custom-built reservation applications that are efficient and tailored to how our business partners operate. For our over 300 hotel chain providers, Amadeus rolled out an action plan based on the results of the 2015 Customer Satisfaction Survey, continuously improving and enhancing the servicing offered through our dedicated Hotel Distribution Help Desk. Hotel chain partners recognise Amadeus as a relevant and valuable partner, and so special loyalty programme rates initially launched for the hotel chains direct channels only are also fully available in the Amadeus Global Distribution System (GDS). Hotelier partners can also benefit from our marketing and GDS optimisation solutions for more visibility and greater control over how their properties are marketed and sold. In 2016, the Amadeus LinkHotel customers portfolio has grown by 550 hotel properties, and Amadeus is bringing clear value to them by further widening their reach thanks to its partnership with DerbySoft, to enable all hoteliers to distribute their content to most metasearch engines and online travel agencies through their existing connection to the Amadeus GDS, and with no implementation costs. Driven by continued product deliveries such as the Hotel Parsing Engine to help improve descriptive content quality, Amadeus continues to show strong and continuous growth in the amount of global hotel bookings being processed via Web Services, especially among Travel Management Companies (TMCs), online travel agencies and third parties who want to expand by selling hotels globally and have found in Amadeus a partner who brings forward a good choice of attractive and profitable hotel content. As Amadeus works to enable travel professionals with more choice, industry partnerships with players such as HCorpo and Teldar Travel are indispensable. Amadeus is also pairing this world of content with training and campaigns to boost adoption in all core markets, so travel agencies can fully benefit from Amadeus Hotels Plus s important productivity benefits. Amadeus Value Hotels, our own net rate content provider, is now trading in France, Spain and Italy and has doubled the amount of exclusive hotel net rate content sourced by Amadeus so travel agencies can manage their own mark-ups and benefit from business-friendly contracting and payment models. Black Sand Beach in Tenerife by Christophe Gillain. First prize of Amadeus Summer Photo Contest.

25 Our global content offer 4. Business lines and highlights 2016 > 4.4 Diversification into new areas 51

26 52 4. Business lines and highlights 2016 > 4.4 Diversification into new areas Payments Harnessing growth in a changing world Travel product sales amounted to USD 2.1 trillion in 2015 and are expected to reach USD 2.5 trillion by 2020, according to Euromonitor International. With customers and suppliers spread over many different countries, each with different payment methods, currencies and regulatory environments, accepting payment for those sales is not as straightforward as it should be. Thankfully, the payments field is changing. Worldwide non-cash transactions grow at approximately 10% each year. 10 This shift is driving the growth of cards and alternative payment methods. Worldpay, a payment company and Amadeus partner, expects bank transfers to grow by 33% between 2015 and 2019, compared with 5% for credit card payments. Over the same period, ewallet transactions are expected to grow by 60%. In this changing environment, travel companies still need to pay and get paid. Amadeus: at the centre of travel Amadeus aims to be the travel industry s payment partner; our central position in travel gives us a unique perspective into the industry s payment needs, processes, technical architecture and regulatory environment. We designed and built many of the systems that payment processors interface with, we enjoy long-standing relationships with key regulatory and trade bodies and we already have agreements with the third parties that travel companies work with. These factors give Amadeus an advantage when designing and implementing new payment processes. Indeed, we take generic payment assets and customise them to the specific needs of the travel industry to improve the customer experience and increase operational efficiencies. Amadeus helps its customers by providing them with a one-stop-shop for payment services that: Manage travel-specific processes. For example, the ability to pay for a flight part in currency and part in air miles, and to add the information about the credit card details to the Passenger Name Record to simplify booking payment processing and reconciliation. Remove complexity: with a single technical link, our customers and partners reduce payment, IT and maintenance costs. We offer our customers a vendor-neutral payment platform that allows them to take a best-of-breed approach to selecting a payment partner without the complex integration challenges associated with building such a platform in-house. Accept payments in more than 190 countries thanks to the number of different Payment Service Providers (PSPs) and banks connected (over 400 as of today) to the Amadeus Merchant Hub. We also help corporations and travel agencies pay their suppliers. For corporations, we integrate major corporate card issuers to generate virtual cards for payments to hotels and other suppliers. We help travel agencies pay airlines, hotels and other suppliers by providing them with a range of payment options based on virtual payment technology. By integrating these payment options directly into the booking environment, we help travel agencies reduce manual back-office work, eliminate risk and enable new revenue streams. We do this by integrating payment providers into a travel-specific payment hub that is global and multi-channel, covering the full range of generic and travel-specific payment methods. This means that, through a single connection, travel companies can manage all their payment needs. For our payment partners, Amadeus offers a single entry point into the global travel industry, reducing the technical and commercial complexity of working with this industry. Serve customers across all channels. With a single connection, travel merchants can manage payments across call centres, ticket offices, airports, e-commerce and mobile sites, and travel agencies. Manage the end-to-end payment process, from performing security checks to ensuring money is received in their bank account. 10

27 4. Business lines and highlights 2016 > 4.4 Diversification into new areas 53 Rail IT and distribution Amadeus Travel Payments in 2016 During 2016, Amadeus continued to develop innovative payment products. B2B Wallet Prepaid was launched in February This new virtual card, whose details are generated each time it is used in order to maximise security, was enhanced through two key partnerships with market leaders. We received a very positive response from the market with the launch of our B2B Wallet Prepaid solution. Of all of the travel agencies we have had initial discussions with, more than 90% have responded positively. Just 4 months after the launch, we have confirmed customers in 10 countries. Amadeus announced a partnership with MasterCard to offer travel agencies payment acceptance and security worldwide, as well as further protection against supplier default in B2B Wallet. We also entered into a partnership with Ixaris, which will allow travel agencies to easily create and add funds to their virtual payment cards. During 2016 we have also been working to expand our footprint throughout the travel industry and are currently working on the rail, airport and hotel segments, as well as on our core segments of airlines and retail travel agencies. Rail forms part of our vision to shape the future of travel In an ever-changing environment, rail is clearly becoming an integral part of the travel chain. Having access to multiple modes of transport to fulfil a journey is becoming important both for travel sellers and for travellers, who are increasingly looking for a door-to-door experience. The evolution of high-speed railways creates competition and collaboration with airlines, and with over 35,000 kilometres of high-speed tracks already in operation throughout the world and another 15,000 kilometres under construction, the future looks bright for the industry. 11 These are early days, but a growing focus on the customer means railways are increasingly cooperating with airlines, bus or carsharing companies to improve the travel experience. As no two countries or railways are the same, we have developed Amadeus RAILyourWAY, which empowers rail operators to take a modular approach to technology, combining Amadeus solutions with their existing systems so that they can: Respond in real time to market developments and traveller requirements Quickly adapt to their competitive environment Implement new strategies Our solutions help railways operate their business efficiently and connect to the travel ecosystem. Having a multi-channel distribution strategy is essential in this digital age, and with products such as Amadeus Rail Display, Web Services, Online Booking Tools and Air-Rail Display, railways can leverage third-party sales with Amadeus global network of leisure, business, online travel agencies and corporations. Our full suite of management solutions include inventory and seating, offer and pricing, reservation and ticketing. With 90 railway companies distributed worldwide and over 200 dedicated rail experts, Amadeus Rail forms part of our vision of being at the centre of the travel industry. Amadeus employees working at our offices in Nice. See Travel industry overview and global trends, p UIC High Speed Department (updated 1 November 2016). High Speed Lines in the World.

28 54 4. Business lines and highlights 2016 > 4.4 Diversification into new areas Travel intelligence Amadeus Rail in 2016 Among the key milestones in 2016 was the extension of the partnership between Amadeus and AccesRail, an IATA travel partner and content aggregator specialising in international travel. Travel agents are now able to book 18 rail and bus operators across 26 countries on the same screen as air travel, thanks to Amadeus Air-Rail Display. RENFE, the Spanish rail operator, agreed in April to distribute its rail content to Amadeus subscribers globally. Search, booking, ticketing, payment and settlement flow for the travel agency are all handled by Amadeus now. Rail Display, our flagship product for travel agency rail sales, is being rolled out in the French and Swedish markets. Our new merchant business model with DB (Deutsche Bahn, Germany), SNCF (France), Renfe (Spain) and Trenitalia (Italy) is now available in Central Eastern European countries. This new business model facilitates international rail sales for travel agencies. Amadeus acts as a merchant for rail operators to simplify contractual agreements, financial flows and invoicing with travel agencies. As the travel industry grows and deals with data of increasing volume and complexity, the opportunity to make sense of this data grows with it, but this is also the challenge. Amadeus offers a response to this challenge with travel intelligence. Using its deep knowledge of the industry and technical excellence, Amadeus Travel Intelligence provides advanced data analytics solutions designed for the travel industry. It offers the travel sector a combination of big data assets, technologies and expert data scientists. Our solutions transform raw travel data into meaningful insights for customers, resulting in smarter strategic decisions as well as tactical and operational actions. New technologies that analyse the abundance of digital data offer exciting opportunities for those who want to take either an incremental or an innovative approach to travel intelligence. By leveraging the data from numerous sources across the entire travel ecosystem, Amadeus enables travel providers to gain actionable insights, monitor market performance and better understand traveller behaviour. Travel intelligence can help customers capitalise on insight into traveller demands and more astutely personalise their services, inform market-relevant strategies and strengthen their operational efficiency. Amadeus Travel Intelligence value proposition

29 4. Business lines and highlights 2016 > 4.4 Diversification into new areas 55 Amadeus Travel Intelligence in 2016 In 2016, Amadeus launched two travel intelligence solutions: Amadeus Performance Insight and Amadeus Booking Analytics. The first one allows airlines of all sizes to better understand their performance using data to inform and improve their decision making. Avianca Brasil, Air Vanuatu, ECAir and Kuwait Airways are some of the clients that have contracted this solution. Amadeus Booking Analytics offers airlines such as Hainan Airlines, China s largest private carrier, the possibility of monitoring bookings per route, per booking class and per airline, among other criteria. This helps the airline for example to identify new growth opportunities and fine-tune their market strategy. On the other hand, since implementing Amadeus Schedule Recovery, a solution that provides optimised flight rescheduling in case of disruption, Qantas removed, on average, 300 minutes of flight delays per day, reducing the number of flights delayed by 60%. Amadeus has also continued the development of Amadeus Agency Insight, a product suite that helps travel agencies act upon the data they collect and improve their competitiveness. Watch our video on Amadeus Schedule Recovery: A winning solution for Qantas Amadeus Regional development centre for Latin America, in Bogotá (Colombia).

30 56 4. Business lines and highlights 2016 > 4.4 Diversification into new areas Mobile Shifting to a mobile world 80% of the world s population picks up a smartphone every time they are looking for an answer. Furthermore, over a quarter of them live in a mobile-only world, turning to smartphones and other wearable devices as the sole source of information, and soon their go-to channel for, travel booking. 12 Modern travellers expect to have everything at their fingertips, and travel providers need to make sure that their mobile solutions are up to the task, as mobile is much more than just about apps nowadays. Amadeus Mobile Mobile is re-shaping the travel landscape. From universal itinerary management and context-aware apps to travel agent chatbot services, travel suppliers, travel agents and corporations must deliver an intuitive mobile experience that empowers travellers to enjoy a smoother, better trip. We created our Amadeus Mobile portfolio around a succinct and simple strategy empower our customers to establish a mobile presence on their terms that can rapidly scale and win their travellers loyalty. This could be within mobile web or in a mobile app. Our portfolio includes the following solutions: CheckMyTrip allows travellers to keep all their trip details neatly organised in a single app, be informed with timely flight and check-in notifications and take full advantage of what their destination has to offer, via taxi, restaurant and activity recommendations. The app plays a central role in our mobile innovation journey. CheckMyTrip with Dynamic Branding is designed for travel agencies who are just entering the mobile arena and want to go mobile with next to no effort. Our platform enables them to add their logo and contact details to specified Passenger Name Records associated with their office ID. Amadeus Mobile White Label solution is intended for travel agencies and corporations who want to leverage Amadeus expertise and technology to build an app that will put them in control of their travellers mobile experience. The platform enables full brand customisation and built-in monetisation capabilities, including search & book for air and hotel. Amadeus Mobile Web Services offers travel brands and third-party developers who have the knowledge and resources to build their own app an opportunity to enhance it with value-added features and content via our collection of Amadeus Application Programming Interfaces (APIs). Laying a new foundation 2016 was a pivotal year, when our CheckMyTrip app reached over 1 million downloads, steadily growing each month and garnering a proud 4.7 (out of 5.0) star rating in the ios store. Travel providers are turning to Amadeus for guidance and expertise on how to build the perfect itinerary management app. Our white label solution is powering Boston Consulting Group s entire workforce worldwide with the right information at their fingertips when and where they need it the most. Amadeus mobile journey is unfolding as we take the next big leap to bring together all of the critical enablers from advertising, payments and intelligence to help our customers businesses achieve new heights. 12 Think with Google (September 2016 edition). How People Use Their Devices.

31 4. Business lines and highlights 2016 > 4.4 Diversification into new areas Financial performance Distribution Distribution delivered 6.8% revenue growth in 2016, supported by higher volumes coupled with average pricing expansion. Amadeus volumes once again outperformed the travel agency air booking industry, improving our competitive position by 0.8 percentage points. In this context, however, the Distribution contribution grew at a slower pace (3.9% in the year). As a percentage of revenue, the Distribution contribution, which was impacted by competitive pressure and a negative country mix, declined by 1.2 percentage points, to 41.8%. Revenue and contribution (figures in million) Change Booking revenue 2, , % Non-booking revenue % Revenue 2, , % Contribution 1, , % Revenue Revenue in the Distribution segment increased by 8.4% in the fourth quarter of 2016, supported by higher bookings and expansive average pricing. For the full year, Distribution revenue increased by 6.8%, as a result of higher booking and nonbooking revenue. The booking revenue growth of 7.7% resulted from a 5.1% increase in bookings coupled with a 2.4% expansion in the average fee per booking. This increase in the unitary fee was driven by the positive effects from customer renegotiations and the booking mix (both from a higher weight of global bookings, and a decrease in the weight of rail bookings, with a lower average fee than air bookings). Non-booking revenue increased 1.3% in 2016 versus the prior year, impacted by a number of factors including the negative effect from the cancellation provision. 13 The underlying non-booking revenue growth was driven by (i) search solutions provided to metasearch engines and online travel agencies, (ii) enhanced functionalities provided to travel agencies (online and offline) and travel management companies and (iii) tools for corporations, including i:fao. Data, advertising and payments solutions have also grown their revenue contribution. Contribution The contribution of our Distribution segment is calculated after deducting from our revenue those operating costs that can be directly allocated to the segment (variable costs, mainly related to distribution fees and incentives, and product development, marketing and commercial costs). In 2016, Distribution contribution amounted to 1,223 million, 3.9% higher than in The increase in contribution was supported by higher revenue partially offset by growth in costs. As a percentage of revenue, in 2016 contribution represented 41.8%. Contribution was impacted by non-recurring effects linked to certain personnelrelated payments, local tax provisions and bad debt provisions, among others, included in the segment s net operating costs. Excluding these non-recurring effects, net operating costs growth was due to: Growth in incentives and distribution fees, driven by a 5.9% increase in travel agency air bookings and a unitary distribution cost expansion, as a consequence of competitive pressure and an increase in weight of countries that have a higher unit distribution cost, for example India. Higher fixed costs, which resulted from: Annual salary and variable remuneration reviews. A limited increase in our core Distribution commercial resources. The expansion of our R&D and commercial teams dedicated to corporate IT (i:fao), advertising (Travel Audience) and travel intelligence, as well as the consolidation impact of Pyton. A reduction in the overall capitalisation ratio of the segment, impacted by the mix of projects undertaken and the acceleration in activities within certain businesses with lower capitalisation ratios. A positive foreign exchange impact. 13 The cancellation provision corresponds to the estimated amount of booking fees which will be refunded to the airlines due to booking cancellations, and is included as a negative amount within non-booking revenue.

32 58 4. Business lines and highlights 2016 > 4.5 Financial performance IT Solutions IT Solutions includes our Airline IT business, which addresses airlines key operational requirements in the areas of PSSs (including reservation, ticketing, inventory management, departure control and disruption management), shopping and retailing (including e-commerce solutions), merchandising, personalisation and revenue optimisation solutions (including revenue management and financial solutions, such as Revenue Integrity or Revenue Accounting). Amadeus also supports airline customers through business consulting and process optimisation. Additionally, our Hospitality IT, Airport IT and Rail IT businesses, as well as part of our Payments offering (the Merchant Hub, through which we help travel merchants get paid), also form part of the IT Solutions segment. Revenue and contribution (figures in million) Change IT transactional revenue , % Direct distribution revenue % Transactional revenue , % Non-transactional revenue % Revenue 1, , % Contribution , % Revenue IT Solutions delivered underlying double-digit growth in 2016, which, together with the consolidation of Navitaire and our 2015 acquisitions, resulted in a 31.7% revenue increase. This positive evolution was supported by higher transactional revenue, in turn fuelled by volume growth in Passengers Boarded and upselling activity, as well as an increase in non-transactional revenue. Transactional revenue IT transactional revenue In this category, we include revenues from: (i) our PSS offering for airlines, (ii) our e-commerce solutions, which provide online shopping and booking engines for airline websites, along with related functionalities, (iii) our range of standalone IT solutions (in the areas of merchandising, personalisation or revenue optimisation), which are complementary to, and fully compatible with, our Altéa solutions and (iv) other revenue from our Airport IT, Retail IT and Payments (the Merchant Hub) offering. IT transactional revenue amounted to 1,142.1 million in 2016, expanding 41.1% versus 2015, driven by: The consolidation impact from our acquisitions, most notably Navitaire. A strong double-digit underlying growth in our Airline IT business, fuelled by a 12.2% increase in Altéa Passengers Boarded and expansive average pricing, reflecting our successful upselling activity, primarily through implementations of Altéa Departure Control Systems, e-commerce and standalone solutions. The growing contribution from our Airport IT solutions, in particular in the passenger processing area, and from our Payments Merchant Hub, through which we help travel merchants get paid. Direct distribution transactional revenue Direct distribution revenue includes: (i) fees charged for bookings made through the direct sales channel of an airline using our Altéa Reservation solution and for certain types of air bookings made through the direct sales channel of Altéa customers for which we charge a booking fee, not a Passengers Boarded fee, and (ii) fees charged to airlines using our Altéa Reservation solution for complementary functionalities that are closely related to the booking process. Revenue from Direct Distribution increased by 5.7% in 2016, supported by organic growth in bookings. Non-transactional revenue Non-transactional revenue comprises, among others, (i) the recognition of deferred customisation and implementation fees of our solutions, (ii) the provision of bespoke services, application hosting and other customer support services and (iii) revenues related to our Hospitality IT solutions. Non-transactional revenue increased by 13.5% in 2016 versus the prior year, as a combination of: Organic growth delivered by Hospitality IT, mainly in the Sales & Catering business (despite the negative impact from the divestment of a non-core Meeting Intelligence business in July 2016), and by Airline IT, mostly from the recognition

33 4. Business lines and highlights 2016 > 4.5 Financial performance 59 of previously deferred revenue (which starts to be recognised after a customer implementation takes place) as well as from e-commerce-related services. The contribution of our 2015 acquisitions and Navitaire. Contribution The contribution of IT Solutions is calculated after deducting from our revenue those operating costs which can be directly allocated to this segment (variable costs, including certain distribution fees and product development, marketing and commercial costs). In 2016, the contribution of IT Solutions reached 1,040.7 million, 36.8% higher than the prior year. As a percentage of revenue, the segment contribution expanded to 67.2%, 2.5 percentage points higher than in The increase in contribution was driven by revenue growth of 31.7%, partly offset by an increase in net operating costs of 22.5% (resulting from a 16.0% growth in gross operating costs and a 2.5% increase in capitalisations). All captions were highly impacted by the consolidation of Navitaire and the 2015 acquisitions. Excluding acquisitions, the IT Solutions segment contribution grew at a strong double-digit rate. The underlying growth in net operating costs was mainly due to: Annual salary and variable remuneration reviews. A reinforcement of our commercial teams to better support the expansion of our product offering and customer base. Higher R&D expenditure dedicated to (i) our Airline IT portfolio evolution and expansion, in particular in the areas of merchandising, shopping and personalisation, as well as services, and (ii) our new businesses, mainly related to the development and implementation of our next-generation Guest Reservation System under our agreement with InterContinental Hotels Group. A decline in the IT Solutions capitalisation ratio impacted by the mix of projects undertaken, as well as by a higher weight of activities which are not capitalised, such as bespoke developments or e-commerce-related services. A positive foreign exchange impact. Copenhagen Airport plans to increase passenger numbers from million, and chose Amadeus as their long-term IT partner.