Sep. 25--Two months ago, travel Web sites were beginning to prove they could make money by selling airline tickets and hotel and car reservations over the Internet. 

But what a difference a couple of months makes. With the terrorist attacks on the World Trade Center and the Pentagon, the financial outlook for online travel sites is unclear, analysts say. 

Bookings for online sites were down as much as 65 percent below normal last week. And the sites, including Travelocity.com, Expedia and Priceline.com, spent most of the last week helping customers get refunds for their airline tickets or rescheduling trips. By the end of the week, Orbitz, a site launched this year and funded by several major airlines, announced it would cut 8 percent of its work force. 

Additionally, stock prices of travel sites dropped sharply this week as investors wondered if the companies could survive a long drought in travel bookings. 

Industry analysts said several travel Web sites can remain profitable through the travel downturn by cutting costs. 

Travelocity and Expedia, for example, each spend about $100 million for marketing each year, analysts said. Those sites can afford to reduce advertising, because their brands are well-established in consumers' minds, said Paul Keung, an analyst with CIBC World Markets. 

Travelocity Chief Executive Terry Jones said his company is looking for ways to cut spending. 

"We have to match our capabilities to demand," he said. "We will curtail advertising and any nonessential spending." 

What's helping the online sites is results from a robust summer. Several sites said bookings before September were higher than usual, enabling the companies to boost their cash on hand. 

"We saw record sales, and we were growing faster than ever imagined," said Amy Bohutinsky, spokeswoman for Hotwire, a discount site where customers buy cheap fares without first knowing what airline they're flying. 

Travelocity told investors this week that it will meet earnings expectations for the third quarter because it had stronger-than-expected profits for July and August. 

Launched in 1995, Travelocity, based in Fort Worth, was one of the first Internet travel sites. The company had hoped to become profitable by the end of 2001, but beat expectations by reporting a profitable first quarter, its first quarterly profit ever. 

Excluding one-time charges and gains, Travelocity reported a profit of $2.38 million for the year's first six months. 

Expedia, the second-largest travel Web site, said its bookings were off by 65 percent the week of the terrorist attacks. 

"It's too early to assess the near-term impact on our business, but long term, we believe our travel bookings will again increase at an attractive growth rate," said Gregory Stanger, Expedia's chief financial officer. 

USA Networks is in the process of buying 75 percent of Expedia, now majority-owned by Microsoft. USA plans to combine its stakes in Expedia and the Hotel Reservations Network with its purchase of National Leisure Group. 

The hotel network, based in Dallas, said its reservations had not been hurt as much by the air travel system's problems, saying five times as many people drive to a destination than those who fly. 

"We believe the impact overall is short term and that the long-term prospects are excellent as more and more people book their travel online," HRN President Bob Diener said. 

Currently, 15 percent of all travel is booked online and that number is expected to grow to 25 percent in the next few years, analysts said. 

But they said none of the travel sites will be immune to the decline in bookings. 

Keung said "opaque fares" -- fares sold by sites such as Priceline and Hotwire, and sold to a consumer without first revealing the carrier or flight schedule -- will be hit the hardest by the travel slowdown. 

He said consumers will more likely want to know what airline they're flying before purchasing tickets. And last-minute travel will not be as popular. 

Priceline said new bookings dropped 65 percent following the terrorist attacks, and the company was issuing refunds and canceling hotel reservations. 

Hotel and rental car reservations have led a recovery in bookings, but the company's airline ticket sales have been lagging. But at the same time, the company said it still has $165.7 million in cash and no debt. 

"All of our purchases are made after we receive a guaranteed customer purchase offer, which means we have no stockpiles of unsold inventory," Priceline CEO Richard Braddock said. 

In 2000, the name-your-own-price Web site was in financial trouble due to competition from other sites. 

But Priceline has rebounded this year after a restructuring and hiring of a new CEO. The company recorded its first profit for a quarter, posting second-quarter earnings of $2.8 million. 

Two travel sites that may not survive the downturn, according to analysts, are Hotwire and Orbitz. Both sites are private companies and received most or all of their initial funding from major airlines. 

With the airlines so strapped they asked the federal government for a financial bailout, it is unlikely those sites can ask their investors for more money, analysts say. 

Hotwire said it has a portion of its original funding of $75 million from Texas Pacific Group and its airline investors. 

"We actually have a good amount of that original funding left, so overall we're in a good position to weather this for a while," Bohutinsky said. 

She added that the company had solid revenues in July and August that should also support Hotwire's financial position. 

Analysts, however, see Hotwire as a possible acquisition target. 

"Hotwire's goal was to ultimately go public or be sold," said Dennis Telzrow, an analyst with Hoak Breedlove Wesneski. "This change in events could impact that plan." 

Unlike Hotwire, which has been operating and generating revenues since last October, Orbitz only recently launched in June. 

Orbitz, which received $200 million in start-up funding from six major airlines including American and United, will need to significantly cut its operating costs, analysts said. 

"I don't think the federal bailout dollars will go toward Orbitz," Keung said. 

The company declined to say how much cash reserves it has, other than to say its "cash position is solid." Orbitz spokeswoman Dawn Doty said the site is optimistic it will be stronger than ever when travel rebounds. 

However, on Friday, Orbitz announced it had laid off 8 percent of its 170 employees and is cutting costs because of a slowdown in bookings. 

As the travel industry recovers from the terrorist attacks, airlines will likely need the help of online sites, analysts said. 

Jones said Travelocity will work closely with its airline partners to offer targeted e-mail marketing and airfare sales to customers. 

"We talk about ourselves as a database that allows us to bring these wide travel offers and cross sell products such as hotel and cars," Jones said. 

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