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UPDATE 2-Orbitz profit aided by hotel, vacation packages; shares jump

Karen Jacobs
Thursday, 13 Feb 2014 | 1:54 PM ET

* Profit of 5 cents a share vs break-even estimate

* Company expects air business to improve

Feb 13 (Reuters) - Orbitz Worldwide Inc reported a higher-than-expected quarterly profit on Thursday and said it was making investments to improve its airline-ticket business, sending its heavily shorted shares up 28 percent for their biggest gain since August.

The online travel agency said on a conference call with analysts Thursday 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 topline 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 favor 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 Inc last week.

Priceline.com 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 vacation packages rose 18 percent and 16 percent, respectively. Total quarterly revenue grew 4 percent to $197.4 million, compared with about $191 million expected by analysts.

Earnings were $5.3 million, or 5 cents a share, in the fourth quarter, compared with a loss of $314.6 million, or $2.96 a share, a year earlier.

Analysts had expected profit to break even, according to Thomson Reuters I/B/E/S.

Orbitz forecast revenue between $202 million and $207 million for the current first quarter, compared with $207.3 million expected by analysts. For the full year, it said revenue would grow in the low- to mid-single-digit percentage range.

Shares of Orbitz were up 28 percent, or $1.95, to $8.86 in trading on Thursday. Expedia rose 2.8 percent to $77.95 and Priceline gained 1.8 percent to $1,269.67.

About 3.8 percent of Orbitz shares outstanding had been sold short as of the latest reporting date of Jan. 31, more than twice the U.S. average of 1.7 percent, according to data from Thomson Reuters StarMine. Short covering occurs when traders are forced to buy an asset they had agreed to sell at a future date in the expectation its price would fall.

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