Orbitz Profit Aided By Hotel, Packages

February 13, 2014

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Orbitz reported a higher-than-expected quarterly profit on Thursday and said it was making investments to improve its airline-ticket business.

The online travel agency said 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 top line 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 favour and has been heavily shorted," Kurnos said.

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 last week.

Priceline 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 holiday packages rose 18 percent and 16 percent, respectively. Total quarterly revenue grew 4 percent to USD$197.4 million.

Earnings were USD$5.3 million in the fourth quarter, compared with a loss of USD$314.6 million a year earlier.

Orbitz forecast revenue between USD$202 million and USD$207 million for the current first quarter. For the full year, it said revenue would grow in the low- to mid-single-digit percentage range.