Travelocity Cuts Jobs, Closes Call Centers

Travelocity.com (Nasdaq: TVLY) said Friday that it would cut 10 percent of its non-customer-service workforce and institute a hiring freeze, as well as reduce its discretionary expenditures.

“Reductions in staff are difficult in any situation, and particularly difficult in this one because our entire team has rallied to support our customers during the recent tragic event,” said Travelocity president and chief executive officer Terrell B. Jones.

“We constantly scrutinize our operations to ensure we are running our business efficiently.”

In addition to the layoffs, the Internet travel site also said it plans to realign its customer service organization. Travelocity said it will close its Sacramento, California call center and reroute calls to its San Antonio, Texas, Virginia and Pennsylvania call centers.

Travel Woes

“As of last week, airline ticket volumes were at 70 percent of expected levels and have been rising, but it is too early to gauge where overall bookings will stabilize,” Jones said on Friday.

Travel bookings, both online and offline, have been hard-hit since the September 11th terrorist hijackings. In the days immediately following the September 11th terrorist attacks on U.S. soil, Expedia (Nasdaq: EXPE) and Travelocity both reported that travelers were booking at only 30 to 40 percent of previous levels.

Travelocity had been enjoying a sales surge before the tragedies.

Amazonian Heat

In addition to the travel shortfall affecting the entire sector, Travelocity is facing competition from the new alliance forged between rival travel site Expedia and e-tail giant Amazon.com (Nasdaq: AMZN).

Amazon opened a travel store on its Web site at the end of September that features booking services and travel status information from Expedia and discount travel Web site Hotwire.

Taking Stock

Travelocity’s shares fell 49 cents to $17.40 in late trading Friday. The job cuts and closures crossed the wires at 2:00 p.m. ET.

The shares were already hurting, however. In late September, research firm Robertson Stephens downgraded Travelocity’s stock from market perform to buy and reduced earnings estimates for the company.

The downgrade was reportedly based on “limited visibility” with respect to near-term prospects for the online travel industry and for Travelocity. According to reports, Robertson Stephens believes Travelocity is exposed to substantial risk, including a lengthy recovery period and the possibility of another disruption of the travel industry.

Travelocity will review its third-quarter results and provide fourth quarter guidance in a conference call scheduled for October 17th.

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