Tech Problems To Affect Cheap Tickets Results

Cheap Tickets, Inc. announced that it expects to report revenue and earnings per share for the second quarter, ending 30th June, 2001, below current expectations due to a variety of factors which have adversely affected the company`s estimated operating results.
Cheap Tickets expects total gross bookings for the second quarter will be in the range of $235 million to $240 million, which is approximately 25% higher than the second quarter of 2000. The company currently expects revenue in the second quarter 2001 will be between $27.5 million and $29 million, and net income for the quarter will be between $1.1 million and $1.3 million, or $.04 to $.05 per share, compared to consensus estimates of between $0.21 and $0.22. Although quarterly gross bookings increased in line with projections, total revenue did not grow at the same rate due primarily to a lower-than-expected percentage of non-published ticket sales, which typically contribute more to the bottom line than published fares, due primarily to technology-related problems and competitive published-fare sales during the quarter. Operating expenses for the second quarter of 2001 are expected to be in line with expectations, between $25 million and $26 million. The company attributes a significant portion of the shortfall in estimated results to technology-related problems, which were responsible for excessive booking-engine errors and also prevented a significant number of competitive non-published fares from being displayed to customers, contributing to the reduction in non-published fare bookings during the quarter. The company believes these technical problems, the effects of which became apparent late in the quarter, reduced the number of completed online transactions despite a substantial increase in Web site traffic. The company believes these problems were caused by technical interface failures between its current booking engine and reservation system, both of which are owned and managed by an outside vendor. Cheap Tickets management is actively working with its third-party booking vendor to correct the problem. Cheap Tickets also attributes part of its second quarter shortfall to the delayed launch of its upgraded Web site, which was expected to improve sales conversion during the quarter with the introduction of e-ticketing, enhanced price-finding capabilities and improved customer-usability features. The company now expects the new site will launch in the third quarter of this year.
Cheap Tickets also experienced increased customer call volume to its 24/7 call centres during the quarter, which exceeded its capacity due primarily to higher-than-expected staff attrition in May, affecting call-handling ability through June. Although call-centre gross bookings increased over the year-ago quarter, the capacity constraints resulted in a higher level of abandoned calls, which resulted in missed sales opportunities. To help accommodate the increased call volume, the company has added staff at its four existing call centres, and expects the July opening of its newest call centre in Tampa to immediately improve its call-handling and booking abilities.