Wifaq blog

Orbitz hurt by airline dispute, wants deal

BANGALORE (Reuters) – Online travel agency Orbitz Worldwide, reeling from its spat with American Airlines over a distribution method, reported a wider quarterly loss and forecast first-quarter revenue below analysts' expectations, sending its shares down as much as 8 percent.

Orbitz said its U.S. leisure business is being hurt by the absence of American Airlines from Orbitz.com and Orbitzforbusiness.com sites, and reduced transaction share from travel site Kayak.com.

The dispute between American Airlines and Orbitz Worldwide arose when Orbitz refused to use American's direct connect link and the airline stopped selling its tickets on Orbitz sites in December.

"While we have been able to recapture much of the American Airlines ticket volume, nearly half, by shifting business to other airlines, we are still feeling some impact," Orbitz Chief Executive Barney Harford said on a conference call with analysts.

Orbitz recognizes the importance of coming to a deal with American Airlines "that works for both parties," Harford said.

Net revenue associated with American Airlines tickets booked on Orbitz.com and Orbitzforbusiness.com, including revenue from associated hotel, car rental and destination services bookings, represented about 5 percent of the company's 2010 total revenue.

"It is important to have American Airlines in the platform. Of course, you want all the major airlines on your platform ... especially when the industry is recovering," ThinkEquity analyst Aaron Kessler, who has a "hold" rating on Orbitz stock, said.

Orbitz shares have shed 35 percent of their value since American stopped selling its tickets on Orbitz.

Expedia Inc, the largest online travel agency, is also in a dispute with American Airlines over the airline's insistence that third-party carriers use its new "direct connect" technology for selling its flights.

American Airlines in January said it reached a deal with Priceline.com -- rival of Expedia and Orbitz -- to use American's direct connect technology to access fares.

The travel industry has suffered from the economic downturn and online travel companies responded by slashing fees and offering promotions to bolster bookings.

Orbitz, which also operates Cheaptickets.com, reported a fourth-quarter net loss of $78 million compared with a net loss of $18.1 million a year earlier.

Revenue rose 4 percent to $182.4 million, helped by a rise in hotel volume and average daily rates for hotel rooms.

Shares of Orbitz, which fell as much as 8 percent to $3.78 in early trade, pared some of their losses and were trading down 5 percent at $3.97 in afternoon trade on Wednesday on the New York Stock Exchange.

(Reporting by Jennifer Robin Raj and Bijoy Koyitty in Bangalore, Editing by Jarshad Kakkrakandy and Maju Samuel)