Kurt Ekert: Victor, thank you for the question. I think there’s 2 things that get inflated in the industry. One is called Direct Connect, the other is NDC. Direct Connect is where typically larger OTAs have direct connected with airlines, and this started back 10 to 15 years ago. And they basically have done that without the use of GDSs. So that’s nothing new in the industry. And we think that, that has for a while, represented about 10% of global airline intermediary distribution. That will be with United, for example. And within that, I don’t know the construct of what is traditional versus NDC in terms of look us through those pipes. What I can tell you, though, is if you look outside of that 10% is we’re not seeing any change in the structure of the marketplace.
Corporate, as you know, has recovered to about 75% on a unit basis of what it was in 2019, albeit much higher on a dollar basis. We believe that substantially all of that business continues to flow through our sector and in all the other forms of leisure distribution we don’t think there’s been a change either. So I think that what you have is that within the direct net channel, again, which has been there for quite a long period of time preceding COVID, that there may be certain activity there that carriers are calling new technology. But within the true intermediary marketplace, we don’t see any change.
Michael Randolfi: Yes. One other thing I would highlight, Victor, is as you think about NDC and you think about and economics, generally, what we’re seeing is that the economics of NDC agreements look pretty similar to what you see today around most of the globe with the exception of Europe where Europe, as you know, has some of the highest booking fees around the globe. But for Sabre, that only represents 15% of our bookings and so the transition, we wouldn’t expect to have nearly a significant impact, maybe a little bit more in that region.
Victor Cheng: Got it. Very clear. And maybe if I can squeeze in one last one. I note that passengers [indiscernible] the Airline IT side also appears to be a tad lower quarter-on-quarter [indiscernible] 2019. if you can provide a bit of color as to kind of what’s trending in there?
Michael Randolfi: Yes. On Airline IT, I mean, the primary impact on a year-over-year basis is going to be the demigrations, the vast majority of which is attributable to Russia. That impact is about $33 million. If you adjust for that, you’d obviously have growth in Airline IT driven by higher passenger boarded.
Operator: [Operator Instructions]. The next question comes from the line of [indiscernible].
Unidentified Analyst: Just one for me. I wanted to deep dive into the air bookings again. It appears that the [indiscernible] recovery has always headlined this quarter. Could you comment on this from lines on whether potentially new [indiscernible] level has been reached? How do you see that going into Q4 also considering that you just commented on the recovery still going everywhere else?
Kurt Ekert: Yes, , thank you. When you look at the GDS marketplace, which is what we’re talking about here, Traditionally, that marketplace has been comprised of about 50% corporate or CMC bookings of about 50% leisure. As we’ve indicated, corporate has recovered to about 75% on a unit basis of 2019 levels. Now Air and Hotel yields are much higher. So the dollar recovery is actually much higher or much closer to historical norms. One of the things that [indiscernible] is a governor, we believe on corporate travel is corporate and procurement budgeting where they particularly are saying, you can only grow the corporation by so much year-on-year. The good news is, as you think about corporate travel historically, it was closer to $1.5 trillion sector before COVID and over the 20-year history, including the impact of 9/11 and the financial , had a 4% to 5% annual CAGR.
So certainly, we expect that part of the business to grow as it has grown traditionally. Has there been some impairment relative to the size of that sector? We don’t know at this point, but that is possible. And then when you look at leisure recovery. Leisure is the other sort of half of the GDS sector. It leaves much more toward complex, long-haul international travel, where more simple point-to-point domestic travel is headed to accrue to direct airline distribution, historically, we think that’s the case. And so what’s happened is capacity has not been put back substantially on long-haul national as it has been put back on short haul. We think that has disproportionately negatively impacted the GDS business. So you are right that the recovery has been slower than we had anticipated in the past 2 quarters.
We’re not going to comment prospectively other than — let me just say again what Mike said, which is we — in the build toward the $900 million EBITDA target for 2025, we had indicated back in May, the debt came with the assumption of a 1% to 2% or 1.5% quarterly sequential growth in market size. We’re assessing what we believe is going to be the trend over the next couple of years, and we’ll come back in February with updated guidance.
Michael Randolfi: Yes. And the only other thing I would add with regards to 2023 and our fourth quarter assumptions incorporated in that is we assumed what we’ve seen as current trends, which are closer to flat in the third quarter. And I would say, if you back into our Q4 expectations. You could see it’s amongst the best adjusted EBITDA performance in years. We would expect it to be the best free cash flow generative quarter in years. And so we’re really pleased with our performance, and we are really seeing on those actions, which we can control, we’re delivering.
Operator: The final question comes from the line of James Goodall from Redburn Atlantic.
James Goodall: Just one — just a follow-up in terms of sort of current bookings. And we’ve heard many U.S. and European airlines talking positively about a pickup in managed business travel spend into the winter period. So I’m just wondering if that’s sort of flat sequential booking that you saw Q2 to Q3 have scope to increase going into Q4?
Michael Randolfi: Yes. Thanks for the question, Josh. One — there are reasons to be optimistic. We’ve framed our guide really based on the trends we’ve seen coming out of 2023. So what I would say is, I mean, out of Q3. So in Q3, I mean, we obviously saw flatter booking trends than I would like but those are the assumptions that we took into our Q4 assumption.
Kurt Ekert: I should say we feel — given our footprint with TMCs that handle much of the net travel business, we feel very well positioned as that part of the market recovers to benefit from that.
