Sabre (SABR Quick QuoteSABR - Free Report) and Delta Airlines (DAL Quick QuoteDAL - Free Report) recently announced the renewal of their multi-year distribution agreement. The contract will allow Sabre to offer DAL’s New Distribution Capability (NDC) content and Electronic Data Interchange for Administration, Commerce, and Transport (EDIFACT) content to travel agencies connected to SABR’s marketplace.

Travel agencies will be able to access a range of travel offers provided by Delta Airlines. By offering both the NDC and the EDIFACT contents, Delta Airlines will be able to balance between traditional and modern distribution systems. While EDIFACT is a legacy system that is widely adopted, NDC offers enhanced products like personalized offers and dynamic pricing. DAL will be able to reach a wide customer base and also be able to provide better services through the use of both systems.

Sabre will be able to uplift the travel choices of its agents, provide multiple price points and execute omnichannel servicing. So far this year, multiple airlines have collaborated with SABR to launch their travel content. The list includes WestJet, Hawaiian Airlines, Air Canada, Etihad Airways and Malaysia Airlines.

Despite continuous deal wins, Sabre's year-to-date (YTD) share price performance has been marked by significant volatility. The stock has plunged 32.3% YTD against the Zacks Internet – Software and Services industry’s growth of 3.9%.

The underperformance can be attributed to investors’ pessimism over its near-term prospects amid macroeconomic uncertainties.

Sabre Benefits From Growing NDC Adoption

At present, more than a dozen airlines all over the world, including United Airlines (UAL Quick QuoteUAL - Free Report) and American Airlines (AAL Quick QuoteAAL - Free Report) , have partnered with Sabre to offer its NDC content in the Sabre Global Distribution System (GDS).

United Airlines and American Airlines introduced their NDC offers on Sabre GDS to allow travel buyers to access their pricing content on multiple platforms like Sabre Red 360, Sabre APIs and GetThere.

SABR’s other airline solutions are also enabling it to expand its customer base. Sabre’s strong portfolio of airline solutions, such as the SabreSonic passenger service system, AirCenter and AirVision, as well as other products like Sabre Red Workspace, has witnessed strong growth.

The range of product offerings has helped the company boast a strong and diverse customer base, which adds to the top-line growth. In the recently reported results for second-quarter 2024, revenues increased 4% year over year.

Competitive Challenges

Sabre operates in a highly competitive travel distribution space that requires the company to continuously innovate and inject its offerings into other products to expand its market reach. SABR’s Travel Network segment is prone to pricing pressure from travel suppliers.

The stiff competition in the industry increases pricing pressure, given the availability of several alternative solution providers. To compete in this market, the company has to continuously roll out new products and invest heavily in innovation, which might impact profitability.

Additionally, the company has to comply with the new regulations of the industry as well, like the NDC standard introduced by The International Air Transport Association. These tend to increase costs.

Conclusion

Although Sabre has a consistent flow of customers signing up for its NDC, EDIFACT and global distribution system offerings, the company’s profitability might be hurt by continuous investment requirements for product innovations.

Moreover, the stiff competition in the industry increases pricing pressure, given the availability of several alternative solution providers.

Currently, SABR carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.