What changed in this filing

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2023-02-17 compared with 2022-02-18 · 33 added, 23 removed, 53 unchanged (51% of the section changed)

8 unchanged sentences

Interest Rate Risk

As of December 31, 2021, our exposure to interest rates relates primarily to our senior secured credit facilities, as all of our interest rate swaps have matured.

Offsetting some of this exposure is interest income received from our money market funds.

The objectives of our investment in money market funds are (i) preservation of principal, (ii) liquidity and (iii) yield.

If future short-term interest rates averaged 10% lower than they were during the year ended December 31, 2021, the impact to our interest income from money market funds would not be material.

This amount was determined by applying the hypothetical interest rate change to our average money market funds invested.

In September 2017, we entered into forward starting interest rate swaps to hedge the interest payments associated with $750 million of the floating-rate Term Loan B.

The total notional outstanding of $750 million became effective December 31, 2019 and extended through the full year 2020.

In April 2018, we entered into forward starting interest rate swaps to hedge the interest payments associated with $600 million, $300 million and $450 million of the floating-rate Term Loan B related to years 2019, 2020 and 2021, respectively.

In December 2018, we entered into forward starting interest rate swaps to hedge the interest payments associated with $150 million of the floating-rate Term Loan B for the years 2020 and 2021.

As of December 31, 2022, our exposure to interest rates relates primarily to our interest rate swaps and our senior secured credit facilities.

Offsetting some of this exposure is interest income received from our time deposits and money market funds.

The objectives of our investment in time deposits and money market funds are (i) preservation of principal, (ii) liquidity and (iii) yield.

If future short-term interest rates averaged 10% lower than they were during the year ended December 31, 2022, the impact to our interest income from these investments would not be material.

This amount was determined by applying the hypothetical interest rate change to our average time deposits and money market funds invested.

In September 2017, we entered into forward starting interest rate swaps to hedge the interest payments associated with $750 million of the floating-rate Term Loan B for the year 2020.

In 2018, we entered into forward starting interest rate swaps to hedge the interest payments associated with $450 million and $600 million of the floating-rate Term Loan B related to the years 2020 and 2021, respectively.

In April 2022, we entered into an interest rate swap to hedge the interest payments associated with $200 million of the floating-rate 2022 Term Loan B-1 for the years 2022 and 2023.

In June 2022, we entered into an interest rate swap to hedge the interest payments associated with $150 million of the floating-rate 2022 Term Loan B-1 for the years 2022 and 2023.

We designated these swaps as cash flow hedges.

3 unchanged sentences

Designated as Hedging Instrument

$1,350 million 1 month LIBOR (1)

2.27% December 31, 2018 December 31, 2019

$200 million 1 month SOFR (1)

April 30, 2022 December 31, 2023

$150 million 1 month SOFR (1)

June 30, 2022 December 31, 2023

$600 million 1 month LIBOR (2)

3 unchanged sentences

(1) Subject to a 0.5% floor

Since outstanding balances under our senior secured credit facilities incur interest at rates based on LIBOR, subject to an applicable floor, increases in short-term interest rates would impact our interest expense.

(2) Subject to a 0% floor.

(3) Fixed fee of 1.71% effective April 30, 2022, and expiring December 30, 2022, and 3.09% effective December 31, 2022, and expiring December 31, 2023.

(4) Fixed fee of 2.79% effective June 30, 2022, and expiring December 30, 2022, and 3.98% effective December 31, 2022, and expiring December 31, 2023.

Since outstanding balances under our senior secured credit facilities incur interest at rates based on LIBOR and/or SOFR, subject to an applicable floor, increases in short-term interest rates would impact our interest expense.

If our mix of interest rate-sensitive assets and liabilities changes significantly, we may enter into additional derivative transactions to manage our net interest rate exposure.

We did not have any liabilities from interest rate swaps for the year ended December 31, 2021.

The fair value of these interest rate swaps was a liability of $16 million at December 31, 2020.

As of December 31, 2021, we had outstanding approximately $2.8 billion of variable debt that is indexed to LIBOR consisting of Term Loan B for $1.8 billion, Term Loan B-1 for $401 million and Term Loan B-2 for $635 million.

In July 2017, the Financial Conduct Authority announced its intention to phase out LIBOR by the end of 2021, and subsequently extended the phase-out date to June 30, 2023.

See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Senior Secured Credit Facilities" for the estimated impacts of this change.

We intend to seek an amendment with our lenders of Term Loan B prior to June 2023 to provide for a transition to SOFR or another alternative to LIBOR in anticipation of its discontinuation, but there can be no assurance that we will be able to reach an agreement with our lenders for any such amendment or that the incremental amount of any interest pursuant to such amendment would be significantly less than current requirements.

The fair value of these interest rate swaps was an asset of $5 million as of December 31, 2022.

We did not have any assets or liabilities from interest rate swaps for the year ended December 31, 2021.

As of December 31, 2022, we had outstanding approximately $1.0 billion of variable debt that is indexed to the London Interbank Offered Rate ("LIBOR") consisting of 2021 Term Loan B-1 for $397 million and 2021 Term Loan B-2 for $630 million.

These term loans included hard-wired fallback language, as published by the Alternative Reference Rates Committee, that will replace LIBOR with Term SOFR plus specified credit spread adjustments when LIBOR ceases to be published in June 2023 or such sooner date on which we may opt in.

See " Management's Discussion and Analysis of Financial Condition and Results of Operations —Liquidity and Capital Resources—Senior Secured Credit Facilities" for the estimated impacts of this change, which we do not expect to be material.

Foreign Currency Risk

3 unchanged sentences

During the year ended December 31, 2021, foreign currency operations included $158 million of revenue and $446 million of operating expenses, representing approximately 9% and 19% of our total revenue and operating expenses, respectively.

During the year ended December 31, 2020, foreign currency operations included $98 million of revenue and $373 million of operating expenses, representing approximately 7% and 16% of our total revenue and operating expenses, respectively.

The principal foreign currencies involved include the Euro, the Indian Rupee, the British Pound Sterling, the Australian Dollar, the Polish Zloty, and the Singapore Dollar.

Our most significant foreign currency denominated operating expenses is in the Euro, which comprised approximately 5% and 4% of our operating expenses for the years ended December 31, 2021 and 2020, respectively.

Our most significant foreign currency denominated operating expenses is in the Euro, which comprised approximately 5% of our operating expenses for each of the years ended December 31, 2022 and 2021.

In recent years, exchange rates between foreign currencies and the U.S.

16 unchanged sentences

We generally do not require security or collateral from our customers as a condition of sale.

See “ Risk Factors —Our travel supplier customers may

experience financial instability or consolidation, pursue cost reductions, change their distribution model or undergo other changes.”

See “ Risk Factors —Our travel supplier customers may experience financial instability or consolidation, pursue cost reductions, change their distribution model or undergo other changes.”

We regularly monitor the financial condition of the air transportation industry.

We believe the credit risk related to the air carriers’ difficulties is significantly mitigated by the fact that we collect a significant portion of the receivables from these carriers through clearing houses, such as the Airline Clearing House (“ACH”).

As of December 31, 2021, 2020 and 2019, approximately 53%, 52%, and 59%, respectively, of our air customers make payments through the ACH which accounts for approximately 82%, 63% and 89%, respectively, of our air billings.

As of December 31, 2022, 2021 and 2020, approximately 48%, 53%, and 52%, respectively, of our air customers make payments through the ACH which accounts for approximately 82%, 82% and 63%, respectively, of transaction revenue related to air customers.

ACH requires participants to deposit certain balances into their demand deposit accounts by certain deadlines, which facilitates a timely settlement process.

4 unchanged sentences

There can be no assurance, however, that our operating results will not be affected by inflation in the future.

The global capital markets experienced periods of volatility throughout 2022, partially due to increases in the rate of inflation.

During 2022, we refinanced portions of our debt which resulted in interest rates higher than prior years, increasing current and future interest expense.

We expect to further refinance portions of our debt in 2023 and 2024 which, at current interest rates, would negatively impact our interest expense.

These events could lead to further market disruption and potential increases to our funding costs.

Currently approximately 29% of our debt, net of cash and hedging impacts from interest rates swaps, is variable and impacted by changes in interest rates.

See “Risk Factors—We are exposed to interest rate fluctuations.

An overall labor shortage, lack of skilled labor, increased turnover or labor inflation, caused by COVID-19 or as a result of general macroeconomic factors, could have a material adverse impact on our operations, results of operations, liquidity or cash flows.

See Item 7 , “ Management’s Discussion and Analysis of Financial Condition and Results of Operations —Factors Affecting our Results—Technology transformation and change in mix of technology spend” and “Risk Factors—Our business could be harmed by adverse global and regional economic and political conditions."

See Item 7 , “ Management’s Discussion and Analysis of Financial Condition and Results of Operations —Factors Affecting our Results—Technology transformation and investments in modernizing our architecture” and “Risk Factors—Our business could be harmed by adverse global and regional economic and political conditions."

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk