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Wednesday, February 9, 2000

Cheap Tickets
back in black as
bookings gain

The retailer earns $807,000
after a year-ago loss

By Russ Lynch


Discount travel retailer Cheap Tickets Inc. today reported a fourth-quarter profit of $807,000, or 3 cents a share, a turnaround from a loss of $409,000, or 2 cents a share, in the year-earlier quarter.

Info Box Although the results exceeded Wall Street expectations of 2 cents a share, the stock slipped today.

Cheap Tickets fell $1.56 to $16.12 today on the Nasdaq.

One analyst who follows the company doesn't think that's justified.

"Maybe it's 'buy on the rumor, sell on the news,' " Mitchell Bartlett, of Dain Rauscher Wessels in Minneapolis, said today. "I'm not sure that's the most appropriate strategy."

Cheap Tickets has "very strong numbers," operates in a dynamic industry, is big on the Internet and has a strong brand identification, Bartlett said. "Their Internet numbers are way up," he said.

Founded in 1986, Honolulu-based Cheap Tickets buys blocks of unsold airline tickets and sells them at discounted prices through its offices in Hawaii and on the mainland and increasingly through the Internet. It also generates revenue by providing traditional travel agency services.

Net revenues -- the combination of the retail value of tickets resold and the commissions it got from sales of travel services for others -- came to $66.4 million in the latest quarter, up 66 percent from $40.1 million in the year-earlier quarter.

The company said an airline fare war reduced the amount of its sales of "nonpublished" tickets, the seats it buys from the airlines. The result was that its income from commission-based travel sales was half its total operating income, compared with an annual average of 36 percent.

Income also was adversely affected by lower commissions paid by airlines, said Michael Hartley, chairman and chief executive officer. However, Cheap Tickets was affected less than some other travel businesses because a large part of its business is not based on commissions, he said.

The company's Internet sales through its Web site continued to soar. The company sold $150 million worth of airline tickets through the site in the latest quarter, up 260 percent from $41.5 million in the 1998 final quarter.

During the three months through Dec. 31, Cheap Tickets registered 811,527 new users on its Web site, bringing the total to more than 2.6 million by year-end. In January, that number grew to 3.1 million.

In November, to attract more customers to the Internet, the company dropped its requirement that Internet users provide credit card information before they can use the site. Total fourth-quarter gross bookings of $120.6 million were up 69.9 percent from $71 million in the year-earlier quarter.

For all of 1999, Cheap Tickets had a net profit of $7.6 million, up 590 percent from $1.1 million in 1998 and equal to 34 cents a share, compared with 6 a share a year earlier. Net revenues for 1999 were $339.6 million, up 98.5 percent from $171.1 million in 1998.

Cheap Tickets' stock went public last March. It has traded as high as $66.62 in July and as low as $11.87 in December, according to Bloomberg News.

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