* Profit of 5 cents a share vs break-even estimate
* Company expects air business to improve
By Karen Jacobs
Feb 13 Orbitz Worldwide Inc reported a
higher-than-expected quarterly profit on Thursday and said it
was making investments to improve its airline-ticket business,
sending its heavily shorted shares up 28 percent for their
biggest gain since August.
The online travel agency said on a conference call with
analysts Thursday that recent agreements with Amadeus, Sabre and
Travelport to provide technology and travel-management services
would help boost traffic to Orbitz's sites. A current agreement
with Travelport that limits Orbitz's ability to work with
similar systems expires at the end of 2014.
Chief executive Barney Harford said the agreements would
help the company boost airline ticket sales in the second half
of 2014 and more robustly next year. He added that airfare sales
can help Orbitz gain potential hotel patrons.
"Net-net what ends up happening is you get accelerating air
growth, which had really been a hindrance to topline expansion,
starting in the back half of 2014," said Daniel Kurnos, an
analyst with Benchmark Company.
"All of that, combined with some of the technological
developments they have on the hotel side and the continued
strength Orbitz has had there, gave investors a much better
feeling about the outlook for the company, which has been
continuously out of favor and has been heavily shorted," Kurnos
Online travel agencies are reaping benefits from healthy
demand for travel and investments they have made to make it
easier for consumers to book from mobile devices.
The upbeat outlook from Orbitz followed
stronger-than-expected results from rival Expedia Inc
Priceline.com is due to report earnings next week.
Orbitz, which operates its namesake and CheapTickets brands
in the United States and ebookers in Europe, has in recent years
boosted revenue from hotel sales, which tend to be more
profitable than airline tickets.
In the fourth quarter, revenue from airline tickets fell 11
percent while revenue from hotels and vacation packages rose 18
percent and 16 percent, respectively. Total quarterly revenue
grew 4 percent to $197.4 million, compared with about $191
million expected by analysts.
Earnings were $5.3 million, or 5 cents a share, in the
fourth quarter, compared with a loss of $314.6 million, or $2.96
a share, a year earlier.
Analysts had expected profit to break even, according to
Thomson Reuters I/B/E/S.
Orbitz forecast revenue between $202 million and $207
million for the current first quarter, compared with $207.3
million expected by analysts. For the full year, it said revenue
would grow in the low- to mid-single-digit percentage range.
Shares of Orbitz were up 28 percent, or $1.95, to $8.86 in
trading on Thursday. Expedia rose 2.8 percent to $77.95 and
Priceline gained 1.8 percent to $1,269.67.
About 3.8 percent of Orbitz shares outstanding had been sold
short as of the latest reporting date of Jan. 31, more than
twice the U.S. average of 1.7 percent, according to data from
Thomson Reuters StarMine. Short covering occurs when traders are
forced to buy an asset they had agreed to sell at a future date
in the expectation its price would fall.