HP Gets American Airlines Deal

Good news continues for Hewlett-Packard Co. (HPQ). After delivering modest third quarter results, the company won a deal with American Airlines parent AMR Corp. (AMR). According to the agreement, Hewlett-Packard will be developing a system for AMR, which will take care of pricing, reservations, flight information and check-in.
 
We believe this will improve the overall travel experience of American Airlines customers. This will specifically help the company in efficient baggage transfer, which will ultimately lead to lesser lost baggage, passengers getting updated information about cancelled or rescheduled flights and user-friendly check in process. The process may take around 4 to 5 years to set up. The pricing of the deal was not declared.
 
We believe that if Hewlett-Packard can execute this project efficiently, this experience will take the company a long way in winning similar projects from other major players in the airlines industry. Although the airlines industry is going through the doldrums as a result of the global economic downturn, every other carrier is looking to streamline their operations and we believe Hewlett-Packard can cater to that need.
 
In its recent quarterly result, the company provided a better-than-expected outlook for the fourth quarter. However, the company continues to see top line pressure driven by weakness in Europe and intense pricing pressure. We are still positive on the company’s performance going forward, given that demand is stabilizing and cyclical businesses (particularly consumer PC) are rebounding. However, we remain concerned about the long-term growth prospects for its printing unit, which may lead to profit erosion. This American Airlines deal is a bonus for the company, but the execution of the same remains to be seen.

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