As per reports, Accelya is the clear leader in terms of a 50% market share in NDC transactions (Source), and NDC is the future standard that is expected to be adopted by the airline software industry in the next 10 years because it dramatically saves operational costs and time (I don’t have growth numbers to validate this).
A parallel point to consider is that Accelya operates in an industry that has inertia built in its core, which means that its customers i.e. airline companies are loath to fix what’s not broken. Accelya has been operating in this industry for the last 20+ years and counts 200+ airlines as its customers (Source). Most likely, unless these 200+ airlines don’t significantly come across better software, they will most likely not switch to new players.
So in short, there are 2 ways to look at this:
- In the worst-case scenario, Accelya doesn’t grow its revenue but hums along with a 1-2% y-o-y growth rate because adoption of NDC is slower than expected and airlines are fine with ‘not changing what’s working’. In this case, Accelya won’t appreciate but is still a great source of dividends i.e. ~4% dividend yield.
In the best case, Accelya grows because of faster than expected adoption of NDC, increasing its revenue by 10%+ y-o-y. In this case, Accelya is not only a great dividend source, but also a potential source of capital appreciation.
Disclosure: Invested
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