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Orbitz reports disappointing losses on increased bookings

by Tara Lachapelle
Feb 23, 2010


OWW4Q

Tara Lachapelle/MEDILL

Orbitz Worldwide Inc., the Chicago-based owner of online travel booking sites like Orbitz.com and CheapTickets.com, swung to a loss of $18 million in the fourth quarter of 2009 from a profit of $8 million in 2008. Full-year losses widened to $337 million from $299 million.

Chicago-based Orbitz Worldwide Inc., owner of several online travel booking sites, reported millions in losses for both the fourth quarter and full year 2009, performing worse than Wall Street’s predictions despite posting better-than-expected revenue. The stock was down nearly 16 percent Tuesday, closing at $6.05.

For the fourth quarter ended Dec. 31, Orbitz swung to a loss of $18 million, or 21 cents per diluted share, down from a profit of $8 million, or 10 cents per diluted share, in the year-ago quarter. Wall Street was expecting smaller losses of 3 cents per diluted share.

Fourth-quarter sales were down 3 percent to $175 million from $180 million year over year.

“In 2009, we delivered strong performance in a very tough economic and competitive environment,” Orbitz CEO Barney Harford said in Tuesday’s conference call.

The company’s full-year net loss widened to $337 million, or $4.01 per diluted share, compared with a net loss of $299 million, or $3.58 per diluted share, in 2008.  The loss was bigger than the $3.83 per diluted share Wall Street was expecting.

For the full-year, sales were down 15 percent to $738 million from $870 million in 2008.

Benchmark Co. LLC estimated fourth-quarter sales would be down 17 percent to $150 million, but Orbitz handily beat these predictions. However, revenue did decrease with the removal of most domestic air booking fees.

Harford said that eliminating the hotel change and cancellation fees improved the quality of the company’s revenue, but that overall fee reductions will decrease revenue by about $27 million in the first quarter of 2010.

While analysts at Benchmark estimated gross bookings would be flat at around $2.2 billion, Orbitz increased its global gross bookings by 17 percent to $2.5 billion. The company attributes the growth to higher transaction volume partially offset by lower airfares and lower hotel room rates.

According to the company, air gross bookings increased 19 percent, and non-air gross bookings increased 12 percent, year over year.

Orbitz said it expects a revenue decline of about 2 percent to 6 percent year over year.

“We had hoped for faster revenue and margin recovery,” Benchmark analyst Frederick Moran said.

Chief Financial Officer Marsha Williams said management was “pleased with our results and believe we are well-positioned to compete in the global hotel business in 2010 and beyond.”, She acknowledged the challenges Orbitz’s HotelClub.com site is facing in the European market from larger competitors.

However, Harford noted that the company’s ebookers.com site is growing in the Europe and Asia-Pacific markets. He added the company has an “aggressive plan” to further engage in those markets, but wouldn’t discuss details until the next quarter.

Looking forward to the first quarter, CFO Williams said the story will continue to be about “loss of revenue.” On the positive side,  she also said that Orbitz reduced its debt in 2009 by $50 million.

“Refinancing and liquidity risk remains a concern given Orbitz’s below investment grade debt rating and its negative $160 million in working capital,” Benchmark’s Moran said.