Global aviation technology: aviation supply is under close attention. Maintain the outperform rating on Amadeus and the market performance rating on Sabre.

Global Air Tech: Airline supply under the microscope. MaintainOutperform on Amadeus and Market-Perform on Sabre AI was dethroned as the hottest topic at air tech earnings, as investor focus shifted to near-term volume trends, and pressure on these following the outbreak of war in the Middle Eastand the rise in fuel prices. Q1 results were solid, despite cancellations weighing on bothbookings and passengers boarded, with a more pronounced impact at Amadeus than Sabregiven the regional footprints. However, the former was able to offset this through its broadIT product portfolio, with upselling, Nevio revenues, professional services and rebooking allcontributing. Looking ahead, airlines are adjusting capacity dynamically, and we see particular Alex Irving, CFA+44 20 7676 7044alex.irving@bernsteinsg.comAntoine Madre+33 1 58 98 74 52antoine.madre@bernsteinsg.com Specialist Sales Kiran Shah, CFA+44 20 3547 1533kiran.shah@bernsteinsg.com A robust Q1.Amadeus’ results were strong, as upselling and other solutions mitigatedthe impact of geopolitical headwinds to volume. Somewhat surprisingly, full-year guidancewas maintained despite the geopolitical impact on air travel: we still see downside risk tothis year’s volume targets as airlines decide on winter capacity. Sabre, which has lowerdirect exposure to the conflict, reported its strongest air booking growth in over two years Airlines are reducing schedules …The world’s airlines have reduced capacity since theconflict, with the Middle East most impacted by restrictions, and other carriers trimmingschedules to better absorb the c.70% increase in jet fuel prices versus pre-conflict levels.Global schedules are now flat YoY in Q2 and +3.9% in Q3. This represents a mid-single-digit decline in Q2 vs pre-conflict expectations and a low-single-digit shortfall in Q3. … with downside risks ahead.Air Tech stocks generate profit from volume, while airlinesrely on both volumes and fares, leading to a divergence in interests. The risk of capacitycuts remains, as despite a robust fare environment, and in our view if jet fuel prices remainelevated, the small reductions announced so far will not be enough. We see winter as moreexposed to potential cuts, given seasonally lower contribution margins. We also see shorterstagelength routes as more likely to be cut, given their higher share of variable costs (i.e. Remain Outperform on Amadeus, Market-Perform on Sabre.In the current volatileenvironment, our medium-term thesis remains unchanged. We continue to view Amadeusas well positioned as the leader in Air IT, with Air Distribution, in our view, more of an ex-growth cash cow. We have slightly reduced our 2027 forecasts for Amadeus to reflect risksto capacity, while incorporating IDEMIA into our forecasts. We revise Sabre numbers higherfollowing the strong quarter, but still expect its leverage to remain above 5x net debt/ Perform on Sabre. BERNSTEIN TICKER TABLE PRICE TARGET CHANGE / ESTIMATE CHANGE IN BOLD INVESTMENT IMPLICATIONS Amadeus (Outperform, €75.00)is the largest player in Air distribution and Air IT. It is skewed to better businesses, with >60%of EBITDA contribution (and rising) coming from Air IT and Hospitality, leaving 40% - and falling - coming from the ex-growthGDS business. Amadeus continues to take share among GDSs in distribution, and keeps picking up new contracts in Air IT. Thebalance sheet is healthy, and the group is returning cash. We see a c. 18% annual TSR in 2027-30 at a constant multiple: 10%annual growth in net income (boosted also by the acquisition of IDEMIA), with a 4% dividend yield and 4% buyback (which keepsleverage constant, but we do not rule out the possibility of further accretive M&A). The products are well-invested and well- Our price target of €75.00 is set at 20.1x our 2027 EPS estimate of €3.7. We remain convinced of Amadeus’s ability tocompound returns in the high-teens, and see the group as a highly appealing medium-term holding. A moderation of (in our viewoverdone) fears around AI disruption would be the clearest path to a re-rating. Sabre (Market-Perform, $1.75)is far more skewed to the ex-growth GDS market, at c. 80% of revenues. Its smaller ITSolutions business depends on a few large customers (chiefly American at c. 35% of volumes). In both segments it is overweightNorth America and more levered to booking and passenger trends in this region. Leverage remains stubbornly high: whilethere is no meaningful near-term refinancing risk, with debt maturities minimal until 2029, we see only very slow organicdeleveraging. On our assessment that the GDS industry is essentially ex-growth, we have net debt / EBITDA remaining above5x until the end the decade. Investors should bear in mind that the airline industry is cyclical, and a future downturn will come. We value Sabre at 7.0x FY+1 EV/EBITDA, down from 7.4x, which on our 2027 EBITDA estimate provides our target price of$1.75, and we rate the company Market-Perform. RELATED RE