Orbitz WorldWide beats loss expectations, posts profit

Online travel agency Orbitz WorldWide posted a second-quarter profit on Wednesday, helped by increased booking transactions and cost-cutting that offset declines in recession-battered travel demand.

Online travel agency Orbitz WorldWide posted a second-quarter profit on Wednesday, helped by increased booking transactions and cost-cutting that offset declines in recession-battered travel demand.

The results easily beat expectations for a loss, and shares rallied were up 23.86 percent at $4.62 on the New York Stock Exchange.

In an interview, Chief Executive Barney Harford echoed statements from other travel industry executives who believe the worst declines in demand are in the past.

“What we’re seeing is a stabilization in terms of demand,” Harford said. “We’re seeing a stabilization in terms of average daily rates on hotels. But I don’t think we’re seeing any major signs of any kind of uptick.”

Orbitz said its net profit was $10 million, or 12 cents per share, compared with a year-earlier loss of $5 million, or 6 cents per share.

Excluding special items, Orbitz earned 10 cents per share, compared with the average Wall Street forecast of a 6-cent loss, according to Reuters Estimates.

Orbitz, which owns major travel sites Orbitz.com and Cheaptickets.com, said the total value of its bookings fell 12 percent on lower air fares and lower average hotel rates.

Domestic bookings values decreased 9 percent, while international bookings values fell 27 percent.

Revenue dropped 19 percent to $188 million due to the removal of most air booking fees and a decline in average hotel room rates globally, Orbitz said.

The company said operating expenses declined to $166 million from $216 million.

Online travel agencies like Orbitz, Priceline.com and Expedia Inc. have been working to spur bookings with fee waivers and sales as the recession crimps demand for business and leisure trips.

“Orbitz, like many other companies, is reporting increasing profits despite declining revenues as a result of their cost-cutting efforts,” said Morningstar analyst Warren Miller.

“While these measures were necessary to maintain profitability, it is likely that Orbitz has cut costs more than competitors like Expedia, which continually claims to be investing in growth despite the downturn in travel,” Miller said.

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Linda Hohnholz

Editor in chief for eTurboNews based in the eTN HQ.

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