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Analyst Interview Excerpt
A Future for Legacy Carriers - Kevin Crissey - UBS Investment Research


Full article published: 11/23/2009


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TWST: Let's start with the big picture and your outlook for travel-related companies - you cover both airlines and some of the online travel sites. What is your outlook? Is the worst behind us?
Mr. Crissey: I sure hope so, and the data seems to suggest that that's the case. It's clearly still a discounters' market, which is playing well for the online travel guys, where basically you have been able to lower your prices and stimulate leisure traffic. Not so much on the business side, which is typical of the demand elasticities, the differences between those two types of passengers. The planes are pretty full right now, and so what we expect going forward is that you are going to see it be more about pricing than about volume. And we think that travel demand is getting better. I'm not sure how fast it's going to get better, that's a function of the economy. But we're hopeful that it gets better, and we think it'll get meaningfully better starting in January from the corporate side, as new travel budgets are set with hopefully a brighter outlook. When that happens, you may be replacing a backpacker with a briefcase guy or gal. And so that would be good for the pricing of the airlines, and I think a similar read-through for what it would mean for hotels. The online travel agencies probably have seen or are seeing the peak of their volume growth. And now the question becomes: Are they better off in a trade where they get a higher price point and a little bit less volume? Because I think the hotels and airlines are about as desperate as they're going to be in terms of the interest in selling through online travel agencies right now. So we're optimistic on the outlook for things improving; the question is how fast is that improvement.

 

Tickers included in this excerpt: AAI, ALGT, ALK, AMR, EXPE, LUV, OWW, PCLN, UAUA

 

For more information call (212) 952 7433. The Wall Street Transcript does not endorse any of the comments made by interviewees, and does not make stock recommendations.