Posted on 06/22/2002 2:24:15 PM PDT by ATOMIC_PUNK
MINNEAPOLIS (AP) - Northwest Airlines has stopped selling discounted tickets on Priceline.com, the name-your-own-price Internet company. The airline has grown "increasingly concerned with the changes in Priceline's business model," Northwest spokeswoman Mary Beth Schubert said Friday. Schubert did not explain the concerns and said she didn't know if it might resume using the company in the future. On the Priceline.com site, Internet users can bid on leisure airline tickets, hotel rooms, rental cars, cruises and vacation packages. Nearly all the major airlines sell distressed seats - those that are not likely to be sold through traditional sales channels - through the site. The New York Times reported Friday that some airlines were angry when Priceline began selling fixed-priced fares on eBay. Bidders on eBay, using a "Buy It Now" option, can purchase tickets without bidding. Some of the major airlines, including Northwest, also founded Priceline competitors Orbitz and Hotwire. Brian Ek, a spokesman for Priceline, said the Northwest tickets made up a "very, very small number." He said he did not expect other airlines to follow Northwest's move. "We enjoy a great relationship with the airlines," he told The Times. Priceline.com was started in 1998. It reported a net loss for 2001 of $15.8 million on revenue of $1.17 billion, and a net loss in 2000 of $329.5 million on revenue of $1.23 billion.
By Reshma Kapadia
NEW YORK (Reuters) - Online travel company Priceline.com Inc. (NasdaqNM:PCLN - News) lowered its revenue forecast on Wednesday due to slower June sales, sending its stock sliding more than 25 percent.
The news came just weeks after the company, which lets people name-their-own price for airfares, hotel rooms and car rentals, reaffirmed its second-quarter outlook.
The Norwalk, Connecticut-based company said it expected second-quarter revenue to fall 5 percent below $320 million -- the low-end of what the company had previously anticipated -- and it expected to earn about $6 million, or 3 cents a share for the quarter, the low end of previous guidance.
On average, analysts had earnings of 4 cents a share for the second quarter, according to Thomson First Call.
Priceline shares closed down 25.5 percent, or 97 cents, at $2.83 after tumbling as low as $2.48, the lowest point since September and off 55 percent since the beginning of the year.
"That's my problem with guidance. You basically put out tidbits of information and the people that are short-term oriented grab onto it regardless of its importance," Chief Executive and Chairman Richard Braddock told Reuters.
"One company can come out and say they had a $4 billion accounting irregularity and another guy misses by a penny and you can't necessarily tell the difference in the reaction in the market," Braddock said in a phone interview, referring to the WorldCom (NasdaqNM:WCOM - News) accounting scandal.
A SLOWDOWN IN TRAVEL DEMAND
The previous guidance was based on steady monthly increases in airline ticket revenue, but such increases did not happen in June -- typically the company's strongest month, Braddock said.
"Is business worse? Clearly it is," said Thomas Weisel analyst Jake Fuller, who has a buy rating on the stock. "It's hard to spin the information to come out with a positive conclusion, but this is something we are seeing elsewhere in the travel industry."
The recovery in the travel industry slowed down over the last couple months and Priceline is more exposed because it has more exposure to the airline industry than some of its rivals like Hotels.com (NasdaqNM:ROOM - News) and Expedia Inc. (NasdaqNM:EXPE - News), he added.
Many travelers booked summer plans earlier in the year, taking advantage of fare sales and weakening demand, Braddock told Reuters. He declined to speculate about July and August but said the company's hotel business continues to be strong, citing the instability of the airline sector with its financial woes and difficulty raising prices.
Both UAL Corp.'s (NYSE:UAL - News) United Airlines and US Airways (NYSE:U - News) have asked the government for loan guarantees for $2 billion and about $1 billion, respectively.
NORTHWEST DECISION NOT LINKED TO LOWER GUIDANCE
"This was all about June. It had nothing to do with Northwest," Braddock said in the interview.
Late last week, Priceline was dealt a blow when Northwest Airlines Corp. (NasdaqNM:NWAC - News) said it would no longer sell the company discount air fares. A Northwest spokesman said the airline was "increasingly concerned" with changes in Priceline's business model.
Priceline's partnership to create a new travel site for online auctioneer eBay Inc. (NasdaqNM:EBAY - News) and sell fixed-priced fares has reportedly been one of the things that has raised the ire of Northwest.
"It's obviously not a positive, but I don't think everyone is going to pull out of Priceline," Fuller said. "Priceline, unlike some of the others, does truly create value and work with suppliers ... I don't view their model deteriorating or eroding because of it."
Braddock said Priceline is still in talks with Northwest about other elements of its relationship. To date, the airline has only decided not to give Priceline discounted Web fares.
He said the company had notified its suppliers about its deal with eBay, giving them the heads-up. Braddock added that Priceline was not in the same position with the other airlines as it is with Northwest over discounted Web fares.
"It is immaterial to our business," Braddock said of the Northwest decision. "I wouldn't say we have gotten anywhere near the type of reaction (from the other airlines) that we have from Northwest."
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