June 17, 1998
Stocks for Dad Part I
To Dad From Tony
by Tony Miller (TMF 2Aruba)
800 Travel Systems, Inc
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4802 Gunn Hwy.
Tampa, FL 33624
http://www.lowairfare.com
$5 15/16 as of June 15, 1998
Hey, Pop!
This year I wanted to pick a stock for you that was different from the big cap companies like Coca-Cola, which I picked for Mom last month. I gave this a lot of thought and picked something that I think could have very good potential, yet is speculative enough for that sense of risk that you've always enjoyed. The name of the company I've chosen for you is 800 Travel Systems Inc., and it trades under the ticker IFLY.
Since becoming a retiree, you've acquired two new interests. You've been enjoying the ability to travel a great deal, and when home, become very intrigued with the Internet. So, I thought that a company that addressed both of these would be just the "ticket" for you.
Now let me tell you what this company is all about. IFLY became a public company only 5 months ago through its IPO. It currently sells discount domestic and international air travel via its easy to remember phone numbers: 800-Low-Air-Fare and 800-Fly-4-Less. But that's expected to change as the company is working on a website where customers can purchase tickets right from its computers. Imagine how nice it would be to be able get your tickets all squared away without having to take the time to go to a travel office or even pick up the phone? Now that's convenience!
I know what you're thinking, Dad. There are already companies that do this now. That's true, but IFLY is planning something different. Its website is expected to have real-time online chat with reservation agents who will be able to assist in the travel bookings and answer customers' questions on the spot. I think the key here is "interactive," and even those who are still skittish about making purchases online should feel comfortable with a site like this, don't you? No other company has this kind of interaction, and I would imagine that this could be a significant edge in this industry.
And speaking of the industry, the Travel Industry Association of America (TIA) expects Internet ticket bookings to grow from a current 1% of all tickets sold to 5% by the year 2000. Additionally, Jupiter Communications Digital Commerce Group, an Internet industry expert, has forecast that online travel revenues will grow to $11.7 billion by 2002. In fact, many in the field of Internet commerce predict that more money will be spent in the future on booking air travel through the Internet than on anything else online.
Okay, Dad, I'm sure you're wondering how it is doing so far. Well, as of its last earnings release on May 15th, the company reported revenues of $2,078,000 in the first quarter of 1998, which was an increase of 25% over the same quarter a year ago. This reflects an increase in reservations booked to $15.2 million from $12.2 million in the first quarter of 1997. And while the company posted a net loss, it was a 50% reduction from the net loss the previous year. That suggests to me that the company is moving in the right direction. Also, remember, Dad, that these numbers are all without any active website, which I think will make a huge difference.
Of course, IFLY still has a lot of work ahead of itself, as well as problems to overcome. It has several aggressive competitors -- even the airlines themselves are getting into the act. There are many areas where there's room for numerous players, and I think this emerging sector is one of them. The company is also in the process of hiring and training many new employees, as it currently gets many more calls than it can handle.
But with air travel at an all-time high and people always looking for bargains, I think a company like 800 Travel Systems with a creative plan can be a significant force to be reckoned with. It makes sense that as more people get online, more online commerce will follow.
So that's this year's pick for you, Dad. While it's a young company, I think it's worth taking a look. And if it doesn't work out� I can always go back to buying you a tie next year. Happy Father's Day!
Love,
Tony
* A Stock for dad represents the opinion of one Fool and in no way should be taken as the opinion of either the Motley Fool, Inc., the company in question or representative of anyone or anything else other than that specific Fool's thoughts.