Sabre Corporation announced today that it is taking significant measures to strengthen its financial position in response to the current industry conditions. The travel industry continues to be adversely affected by the global health crisis caused by the outbreak of COVID-19, as well as by government directives that have been enacted to slow the spread of the virus.
“This is an unprecedented time. The global travel industry is facing challenges beyond what has been experienced before. We believe Sabre is well positioned to navigate this challenging environment. We are fortunate that significant aspects of our cost structure are variable and are taking steps to help align our other costs with the current demand environment,” said Sean Menke, President and CEO. “We have identified and are in the process of removing over $200 million in cash costs from the business in 2020. Given the magnitude of travel decline and the unknown duration of the COVID-19 impact, we will continue to monitor travel activity and take additional steps should we determine they are necessary.”
As part of these cost reductions, Sabre has begun implementing several immediate actions with regard to its workforce and other costs during this difficult business climate. These actions include: a temporary reduction in base compensation pay for its US-based salaried workforce, including a 25 per cent reduction for its CEO, and Sabre will work with international employees on a country-by-country basis, Also, a reduction in the cash retainer for members of its Board of Directors. Moreover, Sabre’s 401(k) match program will be temporarily suspended for US-based employees who contribute to its 401(k) program. On a global basis, Sabre is offering voluntary unpaid time off, voluntary severance and a voluntary early retirement program, and Sabre is reducing third-party contracting, vendor costs and other discretionary spending.
On March 16, Sabre’s Board of Directors voted to suspend the payment of quarterly cash dividends on Sabre’s common stock, effective with respect to the dividends occurring after the March 30, 2020 payment, and Sabre announced the suspension of its share repurchase program.
“As it relates to our liquidity, we drew down our revolver in the amount $375 million, which adds to our existing cash balance of $436 million as of 2019 year-end. Additionally, our credit agreement permits us to suspend the financial covenant related to the maintenance of our leverage ratio if a “Material Travel Event Disruption” has occurred. We believe that recent capacity reductions by domestic airlines will lead in the coming months to a finding that a Material Travel Event Disruption has occurred,” said Doug Barnett, CFO. “We also note that about two-thirds of our cost structure is adjustable in the near-term. We will continue to assess the travel environment and whether additional cost actions beyond the $200 million announced today are necessary.”