Travel Weekly - July 27, 2009

TRAVEL WEEKLY PORTFOLIO

SYMBOL COMPANY NAME

AC.PA

AFLYY.PK

AAI

ALK

AXP

ASCA

AMIE

AMR

CAR

BYD

BAY.L

CCL

CHH

CAL DAL DIS

DTG

EXPE

GET

HTZ

IHG

JBLU

LVS

MGM

MAR

OWW

PCLN

RLH

RJET

RCL

RYAAY

LUV

0678.HK

HOT

TZOO

TRXI

LCC

MTN

WYN

WYNN

Accor

Air France-KLM

Air Tran Holdings

Alaska Air Group

American Express Co.

Ameristar Casinos

Ambassadors International

AMR Corp.

Avis Budget Group

Boyd Gaming

British Airways

Carnival Corp.

Choice Hotels International

Continental Airlines Delta Air Lines The Walt Disney Co.

Dollar Thrifty

Expedia

Gaylord Entertainment Co.

Hawaiian Airlines

Hertz Global Holdings

InterContinental Hotels Group

JetBlue Airways Corp.

Las Vegas Sands Corp.

MGM Mirage

Marriott International

Orbitz Worldwide

Priceline.com

Red Lion Hotels

Republic Airways Holdings

Royal Caribbean

Ryanair Holdings

Southwest Airlines

Star Cruises

Starwood Hotels & Resorts

Travelzoo

TRX

US Airways Group

Vail Resorts

Wyndham Worldwide

Wynn Resorts

CUMULATIVE

VALUE 7/22/09

VALUE 7/22/08

%
CHANGE

$28.92

$12.58

$6.37

$20.74

$28.76

$19.23

$0.29

$4.25

$7.10

$8.89

$137.30

$27.81

$26.81

$9.22

$5.77

$25.38

$17.21

$17.70

$12.75

$6.67

$9.03

$10.51

$4.78

$10.25

$7.00

$20.11

$2.15

$120.85

$4.86

$4.87

$15.16

$29.79

$6.92

$1.13

$21.28

$13.01

$0.62

$2.05

$29.00

$11.79

$42.26

$37.51 - 22. 9

$25.40 -50.5

$2.41 164.3

$18.50 12. 1

$36.70 - 21. 6

$12.63 52.3

$3.83 -92.4

$9.25 -54.1

$6.36 11. 6

$10.28 - 13. 5

$246.25 -44.2

$39.30 - 29. 2

$27.05 -0.9

$13.26 - 30. 5

$7.71 - 25. 2

$29.96 - 15. 3

$3.48 394.5

$18.30 - 3. 3

$30.04 -57.6

$9.33 - 28. 5

$8.31 8. 7

$13.99 - 24. 9

$4.50 6. 2

$49.00 -79.1

$30.75 -77.2

$27.42 - 26. 7

$6.18 -65.2

$105.38 14. 7

$8.72 -44.3

$8.65 -43.7

$26.59 -43.0

$34.07 - 12. 6

$15.65 -55.8

$1.50 - 24. 7

$36.86 -42.3

$8.24 57.9

$1.25 -50.4

$4.27 -52.0

$40.01 - 27. 5

$17.54 - 32. 8

$97.81 -56.8

$791.17 $1,134.24 - 30. 2

CUMULATIVE (NOT INCLUDING AIRLINES) $539.86 $734.99 - 26. 5

RESEARCH Economic impact of travel in the U.S., 2008

Spending
Tax receipts
Employment
Payroll

T
E
P
$773 billion
$117 billion
7. 7 million
$194 billion

Source: U.S. Travel Association

MONEY

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 as well.

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

EARNINGS

Revenue

Net income

AIRTRAN Q2 ’09 Q2 ’08

$603M $693M

$78.4M ($14.8M)

change

( 12.9%)

N/A

Revenue

Net income

CONTINENTAL Q2 ’09 Q2 ’08

$3.1B $4B

($213M) ($5M)

change

( 22.5%)

N/A

Revenue

Net income

DELTA Q2 ’09 Q2 ’08

$7B $5.5B

($257M) ($1B)

change

27%

N/A

Revenue

SOUTHWEST Q2 ’09 Q2 ’08

$2.6B $2.9B

change

(10.3%)

Net income

$54M

$321M

(83.2%)

Revenue

Net income

UNITED Q2 ’09 Q2 ’08

$4.02B $5.37B

$28M ($2.7B)

change

( 25.2%)

N/A

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 million.

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%

Revenue

Net income

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.