Orbitz regains half of business lost from American
Orbitz Worldwide Inc. said it's recaptured almost half the volume of airline bookings lost when American Airlines stopped selling tickets through the online travel agency in December.
At the same time, the lack of American's business will contribute to first-quarter sales below what analysts were expecting, Orbitz said today on a conference call. Tickets sold for American and related hotel reservations, car rentals and travel insurance accounted for 5 percent of Orbitz's total revenue in 2010, Chief Executive Officer Barney Harford said.
Chicago-based Orbitz, the second-biggest U.S. online travel agency after Expedia Inc., is among agencies involved in a dispute with AMR Corp.'s American over distribution of its fare and flight data. American, the third-biggest U.S. carrier, stopped displaying and selling tickets on Orbitz in December.
“While we have been able to recapture much of American Airlines' volume, nearly half, by shifting it to other airlines, we are still feeling some impact,” Harford said. “We do not believe the current situation is positive for consumers, and we don't believe it makes sense for either party going forward.”
The Fort Worth, Texas-based airline wants to provide fare and flight data directly to online travel agents like Orbitz instead of paying fees to go through global distribution systems such as Sabre Holdings Corp. and Travelport Ltd. American spent more than $300 million on such fees in 2010.
No Other Airlines
Orbitz has not been approached by other airlines seeking to make changes similar to those proposed by American, Harford said in an interview.
Sales this quarter will be in the range of $177 million to $184 million, Orbitz Chief Financial Officer Russ Hammer said. That's below the $192.1 million average of seven analyst estimates compiled by Bloomberg.
“The loss of American is weighing on the first-quarter potential, given that it will be the first full quarter of not booking tickets for American,” Frederick Moran, an analyst at New York-based Benchmark Co., said in an interview. “It's really not the macro trends, which look very strong for overall travel and specifically for online travel agents.”
Harford declined to comment on the status of talks aimed at settling the dispute, which he said is “proving very costly” for American and is leading the carrier to offer “unprecedented” fare discounts.
Advance Bookings
On a Jan. 19 conference call, American said this quarter's advance booked load factor, or the average percentage of seats booked per plane, was in line with the same period of 2010. The carrier declined to comment further today.
American offered price discounts to “a relatively small percentage of customers” who previously booked tickets on Orbitz, said Ryan Mikolasik, an outside spokesman for the carrier.
Expedia, based in Bellevue, Washington, removed American fares from its website on Jan. 1, saying the airline's Direct Connect data distribution system may raise costs and make it harder for passengers to compare prices.
“We want to have as much product on the shelves as we can to make it available to our customers, but it's got to be on the right terms,” Expedia Chief Executive Dara Khosrowshahi said today at a Goldman Sachs Group Inc. conference in San Francisco. “Right now, we're not in a good place with American and, hopefully, we can get there.”
Too Expensive
Switching to systems like American's Direct Connect with all of its airline partners would be “prohibitively expensive,” particularly when companies like Sabre, Amadeus IT Holding SA and Travelport already aggregate and distribute fare and flight data, he said.
Orbitz's fourth-quarter loss widened to $78 million, or 76 cents a share, from $18 million, or 21 cents, a year earlier, the company said. The 2010 fourth-quarter included $79.5 million to reflect the impairment of various assets. Sales rose 4 percent to $182.4 million.
Orbitz fell 16 cents, or 3.8 percent, to $4 at 4:15 p.m. in New York Stock Exchange composite trading after earlier touching $3.78. The shares have declined 28 percent this year. AMR rose 19 cents to $7.55 and have fallen 3.1 percent this year.