SYMBOL COMPANY NAME
Air Tran Holdings
Alaska Air Group
American Express Co.
Avis Budget Group
Choice Hotels International
Delta Air Lines
The Walt Disney Co.
Gaylord Entertainment Co.
Hertz Global Holdings
InterContinental Hotels Group
JetBlue Airways Corp.
Las Vegas Sands Corp.
Red Lion Hotels
Republic Airways Holdings
Starwood Hotels & Resorts
US Airways Group
$37.51 - 22. 9
$18.50 12. 1
$36.70 - 21. 6
$6.36 11. 6
$10.28 - 13. 5
$39.30 - 29. 2
$13.26 - 30. 5
$7.71 - 25. 2
$29.96 - 15. 3
$18.30 - 3. 3
$9.33 - 28. 5
$8.31 8. 7
$13.99 - 24. 9
$4.50 6. 2
$27.42 - 26. 7
$105.38 14. 7
$34.07 - 12. 6
$1.50 - 24. 7
$40.01 - 27. 5
$17.54 - 32. 8
$791.17 $1,134.24 - 30. 2
CUMULATIVE (NOT INCLUDING AIRLINES) $539.86 $734.99 - 26. 5
Economic impact of travel in the U.S., 2008
7. 7 million
Source: U.S. Travel Association
LOSSES CONTINUE FOR LEGACY CARRIERS
AirTran, Southwest report profits for Q2
By Michael Fabey
For months, executives of low-cost airlines have boasted
that their business models are tailored to thrive in the
current tough economic environment, in which cheaper
fares can generate higher profits.
As the airlines’ Q2 financial results started coming
in last week, those executives were mostly being proved
right, with AirTran posting a quarterly profit of $78.4
million and Southwest reporting net income of $54 million.
Meanwhile, the bigger legacy airlines didn’t fare nearly
Delta reported a net loss of $257 million, while Continental lost $213 million in the quarter.
United recorded a slim $28 million profit, but that was
mostly due to noncash fuel hedge gains and certain accounting charges. Minus those exceptions, the airline’s
quarterly release noted,
United lost about $323
million in the quarter.
Bob Fornaro, Air Tran’s
chairman, president and
CEO, said that the secret to the low-cost carriers’ success
during the recession lay in keeping ticket prices down
while remaining flexible with aircraft scheduling.
“We’ve got the lowest cost structure of any large carrier
in the industry, and we can make money at these prices,”
Fornaro told Wall Street analysts last week during the carrier’s quarterly earnings call.
“We’ve got a lot more flexibility right now due to our
cost structure,” he said. “Although I’d like to see fares a little
higher, we can operate in a weak revenue environment, and
over the years, we’ve had some of our best performances
when the revenue environment has not been strong. As
long as customers react to fare sales or moderate pricing,
that’s not a bad environment for us to operate in.”
Gary Kelly, Southwest’s chairman, president and CEO,
said that cheap fares, a known brand and large passenger
volume can make all the difference right now.
“It’s just imperative that we keep our costs low so that
we can support the low-fare brand,” he told analysts during Southwest’s quarterly earnings call. “We have one of
the strongest brands in the world, and we carry more customers than any other airline in the United States. We are
Q2 ’09 Q2 ’08
Q2 ’09 Q2 ’08
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mindful of that and are trying to make choices here, even
in the depths of this recession, that will take advantage of
those very positive attributes.”
Still, even the low-cost carriers are feeling the pinch
of the recession. All airlines lost more business travelers
in the second quarter, cut more capacity and had to deal
with distractions such as the H1N1 swine flu and seesawing fuel prices.
While airline executives acknowledged there was little
chance for recovery this year, they told analysts that advance
See AIRLINES on Page 12
Starwood posts $134M profit thanks to tax gain
By Jeri Clausing
Starwood Hotels and Resorts reported a 28% increase in
Q2 profits, thanks to a $90 million tax benefit.
But the company, whose brands include St. Regis, W and
Sheraton, reported a 23% drop in revenue on what CEO
Frits van Paasschen described as “the most challenging RevPAR environment the industry has ever faced.”
Worldwide revenue per available room was down 28%,
he said. In North America, RevPAR was down 25%.
In the luxury sector, van Paasschen said RevPAR was
down 30%, five basis points worse than after 9/11.
Van Paasschen said that while occupancy has stabilized,
rates continue to fall.
Starwood was the second major hotel company to report
its second-quarter results. Marriott reported similar drops
in RevPAR a week earlier.
Hotels also took a hit last quarter from the H1N1 swine
flu. Van Paasschen estimated the impact on Starwood at $10
Starwood reported $134 million in profits, up from $105
million for the same period last year. Revenue was $1.21 billion, compared with $1.57 billion last year.
During the quarter, van Paasschen said, the company continued its cost-cutting initiatives and improved its liquidity
STARWOOD HOTELS & RESORTS
Q2 ’09 Q2 ’08 change
$1.21B $1.57B (23%)
$134M $105M 28%
by $1 billion through debt restructuring, a bond initiative
and the sale of the W San Francisco for $90 million.
The company predicted $10 million in profits for the
third quarter, with RevPAR declines in the 20% range. Still,
van Paasschen said there remained “a lot of uncertainty
about how the economic recovery will continue to unfold.”
In its vacation ownership business, Starwood said revenues decreased 35.4%, to $124 million.
Sales of vacation ownership intervals decreased 47.2%,
and the average price per vacation ownership unit sold decreased 24.3%, to approximately $16,000.
But van Paasschen said the free fall in that sector appears
to be over, and the company is seeing signs of stabilization
in markets like Hawaii.
The company said it was also starting to see signs of a
return of group business at its hotels, saying cancellations
have declined and group meetings were stronger last month
than in any other month this year.