WASHINGTON -- The recovery that is slowly reinvigorating the travel
industry is a remarkably uneven affair. People take airline trips
and stay in hotels; the hotels make money, but the airlines lose
money.
They drive to cruise ports and the cruise lines make money, but
the airlines get nothing. Airlines that charge lower prices are
making more money than those that charge higher prices.
Business travel is slumping and the number of GDS transactions
is down, but the nation's only two publicly traded traditional
travel agencies stayed profitable despite slumping sales.
These are just some of the little dramas hiding behind the
charts and columns of numbers accompanying the industry's
second-quarter earnings reports, which are reviewed below.
Unless otherwise indicated, all data is for the quarter ended
June 30, and all percentage comparisons refer to the same period of
2002.
Airlines
On the airline side, the bright spots continue to be Southwest,
JetBlue and other low-fare specialists and niche players. The major
network carriers still are digging themselves out of a hole.
All the airlines got a boost, however, from federal government
rebates of previously incurred security costs.
In the case of Southwest, the federal payment more than doubled
the carrier's $103 million profit, producing net income of $246
million, more than any other U.S. airline.
JetBlue gets the trophy for best growth spurt, as revenue grew
64%, to $244.7 million. Net income hit $37.9 million, aided by a
$22.8 million federal payment.
For most of the major network carriers, the federal payment
pushed the bottom line out of the red and into the black, but the
nation's largest carrier, American, was still $75 million in the
red, even after a $358 million payment.
Delta made $184 million, thanks to after-tax gains of $251
million from the government and $176 million from the sale of its
share of Worldspan.
Its former Worldspan partner, Northwest, reported a $227 million
profit, thanks to $209 million from the feds and $199 million from
the Worldspan sale.
Continental posted a $79 million profit and reported its federal
payment as an after-tax gain of $111 million.
US Airways Group ended up $13 million in the black, reflecting
the effects of its bankruptcy reorganization and a $214 million
federal security rebate.
Airline projections for the normally rich third quarter are long
on caution this year and short on optimism.
Lodging
Many of the big names in the hotel industry reported lackluster
results, but the numbers -- and company projections -- are far more
encouraging than what the airlines produced.
Hilton's earnings fell 29%, to $54 million; revenue was off 5%,
or $52 million, to $983 million, owing to soft pricing and
declining occupancy rates.
The company called the results "disappointing" and projected
only "moderate" improvement in the second half.
At Marriott International, net income from continuing operations
was essentially flat, at $126 million, for the quarter ended June
20; revenue was also flat, at $2 billion.
Flat revenue, at $1.2 billion, also was the story at Starwood
Hotels and Resorts. The bottom line, however, was affected by
numerous other events, as the company has closed on the sale of
nearly $1 billion in hotel assets so far this year as part of a
campaign to reduce its debt.
Income from continuing operations rose 14%, to $87 million.
Aside from the big three, the lodging reports offered several
pockets of good news.
Choice, for example, managed to boost revenue and increase its
margins. The company's net income jumped 11.8%, to $17.1 million,
as revenue rose 3%, to $103.5 million.
Fairmont, which manages a portfolio of 80 luxury properties,
reported net income increased 38%, to $40.1 million, as revenue
grew 16%, to $174.4 million.
Lodging and timeshare revenue for Cendant, meanwhile, increased
12%, to $635 million.
But the bigger numbers at Cendant these days are from the
vehicle division, which reported a 42% increase in revenue, to
nearly $1.5 billion, largely on the strength of the Budget
acquisition last year.
Overall, despite weakness in travel distribution and technology,
Cendant earnings increased from $7 million to $382 million, as
revenue rose 20%, to nearly $4.6 billion.
Distribution
American Express Travel Related Services, which includes the
company's travel and credit card businesses, reported net income
rose 12%, to a record $634 million, as revenue rose 6%, to over
$4.7 billion.
And while travel sales fell 8.7%, to $3.9 billion, American
Express managed to boost its commission and fee revenue from travel
sales from 8.7% to 9.6% of sales, generating $373 million in
revenue.
Harder hit by the business travel slump was Navigant, where a
10% drop in transaction levels for the quarter ended June 29
triggered a 12% decline in revenue. Even worse was the impact on
the bottom line, as Navigant's net income fell 47%, to $3.8
million.
Sabre's revenue was off 5.5%, at $507 million, but $41 million
in one-time charges took a bigger bite out of profits, as net
income fell 90%, to $6.8 million.
Travelocity's contribution to revenue rose 19.5%, to $91
million, fueled by a 74% increase in cruise, tour and last-minute
travel bookings.
Revenue from Sabre's corporate channel, GetThere, fell 6.3%, to
$12 million.
Cruise
The publicly traded U.S.-based cruise companies, Carnival Corp.
and Royal Caribbean, had similar stories to tell: New tonnage
generated revenue growth, but soft pricing and occupancy levels are
cutting into yields and profits.
Carnival's revenue soared 34%, to $1.33 billion, for the quarter
ended May 31 because of internal growth and the April merger with
P&O Princess, but net income took a 34% dive in the opposite
direction, to $127.8 million.
Carnival Corp.'s lower berth occupancy, normally 100% or better,
slipped to 98.5%.
At RCCL, revenue rose 10%, to $905 million, on a 15.5% increase
in capacity, but net income fell 16.5%, to $55.7 million.
Occupancy slipped to 101.8% from 104.4%.
To contact reporter Bill Poling, send e-mail to [email protected].