By Karen Jacobs and Andrea Shalal-Esa

(Reuters) – Defense contractors Lockheed Martin Corp and Raytheon Co topped estimates for fourth quarter profit, but said sales would be flat this year as they cope with cuts in defense spending.

The Pentagon, the world’s largest weapons buyer, is looking to cut defense expenditures by nearly $500 billion over the next decade. On Thursday, it disclosed a budget plan that would cut nearly 100,000 ground forces in 2013 in a bid to reach that goal.

Wayne Plucker, aerospace industry manager at Frost & Sullivan, a consulting firm, said large defense contractors have been downsizing operations for two years and will be able to weather cuts better than smaller companies.

“Many of the large players are in the right places, things like command, control, surveillance and reconnaissance, IT and many other things that fundamentally the military can’t live without,” Plucker said.

Lockheed, the world’s largest defense contractor, said the budget plan reflects a new security strategy that will ensure deficit reductions are met.

“The clear contours of the new strategy align exceedingly well with our portfolio and our experience,” Lockheed Chief Executive Robert Stevens said during an earnings conference call.

LOS ANGELES, Jan 25 (Reuters) – Best Western, the mid-scale hotel chain that operates in more than 100 countries, is planning to open an upscale hotel in Haiti to cater to business travelers.

The hotel, slated to open this summer in the Port-au-Prince suburb of Petion-Ville, will carry the Premier label, one of two new brands launched last year as Best Western courts higher-end customers and looks to remake its image.

The seven-story property in Haiti will include 105 rooms, a full-service restaurant, banquet space for up to 140 people and a spa. The company did not give details on its total investment for the property.

It will be one of the first new hotels to open in Haiti two years after a 7.0 magnitude quake toppled buildings and homes and killed roughly 300,000 people and left more than 1.5 million homeless.

“This is not typical of what everybody would think of Haiti,” Mark Williams, Best Western vice president for North American development, said this week at the Americas Lodging Investment Summit in Los Angeles.

He said despite Haiti’s poverty, the country had business customers from Europe and South America that would support a higher-end hotel.

“When you go into markets that a lot of people consider Third World, there’s a lot of business there and a lot of people who will pay for the quality of product,” Williams said.

By Karen Jacobs

(Reuters) – Southwest Airlines Co (LUV.N: Quote, Profile, Research, Stock Buzz) reported a quarterly profit that topped estimates as strong passenger revenue helped blunt higher fuel costs, sending its shares up about 2 percent in Thursday morning trading.

Service cuts, fare increases and the retirement of less fuel-efficient planes have aided airline profits even as high oil costs and economic uncertainty threaten demand for flying.

Dallas-based Southwest forecast strong passenger revenue for the current quarter.

“The industry has set itself up to continue to grow in 2012 but the wild card here is the general economy,” said Matthew Jacob, an airline analyst with ITG Investment Research. “We’re not seeing any indication that demand for air travel is slowing at this point.”

Southwest, the traditional low-fare leader among major U.S. airlines, acquired AirTran last year and gained entry to East Coast cities such as Atlanta, which it had not previously served. Southwest-branded flights will start in Atlanta next month.

The carrier is also upgrading its planes, having reached a deal late last year to buy 208 Boeing 737s, including 150 of the upcoming 737 MAX planes that will have new engines. Southwest announced this week that it will upgrade cabin interiors and add six seats to more than 350 existing planes.

By Karen Jacobs and Kyle Peterson

(Reuters) – Most U.S. airlines are poised to report profitable fourth quarters, a trend set to continue in 2012 as cost-cutting and fare hikes help the industry weather rising fuel costs and global economic uncertainty that could hamper travel demand.

Some experts are calling for 2012 margins to improve over last year as airlines focus on lowering non-fuel expenses, continue to retire less-efficient planes and keep a lid on the number of seats they sell.

“We think 2011 finished really well, and 2012 is starting really strongly,” said Helane Becker, an analyst with Dahlman Rose & Co.

“We’re cautiously optimistic,” she said. “But I don’t think we’re pounding the table on the group.”

Southwest Airlines Co (LUV.N: Quote, Profile, Research, Stock Buzz) will kick off the fourth-quarter earnings season for U.S. carriers on Thursday. Other major carriers, United Continental Holdings Inc (UAL.N: Quote, Profile, Research, Stock Buzz) and Delta Air Lines Inc (DAL.N: Quote, Profile, Research, Stock Buzz), are scheduled to report earnings in the next week.

For two years now, airlines have been recovering from a decade-long downturn that saw several airline bankruptcies and mergers. A series of capacity cuts starting in 2008 paved the way for higher fares to help offset spikes in the price of jet fuel.

By Karen Jacobs

(Reuters) – Defense contractors ITT Exelis Inc (XLS.N: Quote, Profile, Research, Stock Buzz), Harris Corp (HRS.N: Quote, Profile, Research, Stock Buzz) and Lockheed Martin Corp (LMT.N: Quote, Profile, Research, Stock Buzz) are vying for a contract expected to be awarded in June to build a data communications system for the Federal Aviation Administration’s NextGen program.

The system to be built and operated under the contract is meant to replace voice with digital data for many of the communications that take place between pilots and air traffic controllers.

The contract is the second major step in building NextGen, the FAA project to transition from an air traffic control system based on World War II-era radar technology to one based on satellite technology.

“If we’re going to be able to safely and efficiently move traffic on into the 21st Century, we’ve got to get away from the speed of voice and analog communications,” said Dan Elwell, vice president of civil aviation for the Aerospace Industries Association trade group.

He added he was concerned the Next Generation air transportation program as a whole could be set back after a bipartisan congressional committee failed last year to agree on $1.2 trillion in deficit-cutting measures. That failure triggered a process called sequestration that mandates $600 billion in across-the-board cuts at the Defense Department to kick in starting next year.

NextGen has “been funded so far adequately to stay on track, but if sequestration goes forward … we’re very concerned that NextGen will suffer dramatically,” Elwell added.

By Tim Hepher and Karen Jacobs

(Reuters) – Boeing Co lost the 2011 order race by a wide margin and lagged its archrival Airbus on deliveries for the ninth year in a row, figures showed on Thursday, but it pledged to fight back in 2012 with big sales of a revamped narrowbody.

At Boeing, a 3 percent rise in total deliveries from 2010 showed the resilience of overall aircraft production, in contrast with many other sectors of the economy, but also confirmed difficulties in getting up to speed on the latest aircraft models, including the revolutionary carbon-composite 787 Dreamliner.

Boeing said on Thursday it delivered 477 commercial planes last year, up from 426 in 2010 and nearly in line with a company forecast of about 480 aircraft. The U.S. jet maker booked net orders for 805 planes, buoyed by the best-selling 737 narrowbody and its widebody 777, which set an annual order record for the company.

After taking longer to decide on a strategy for meeting demand for more fuel-efficient smaller jets, Boeing sank to the worst market share in the 40-year history of its rivalry with Airbus in 2011 but is expected to push the pendulum the other way with its competing 737 MAX in 2012. On average, the two aircraft manufacturers have a roughly equal share of the $100 billion annual passenger jet market.

In terms of gross orders, which are not adjusted for cancellations, Boeing had a 38 percent market share in 2011 with 921 compared with Airbus’s end-November total of 1,521 orders (See graphic on orders, link.reuters.com/pak85s).

Industry sources say the European firm is set to end the year with orders well above 1,600 once its final figures are released on January 17. [ID:nL6E7NM009]

By Karen Jacobs

(Reuters) – Hotel deals will approach $30 billion worldwide this year, about on par with 2011, as uncertain economic conditions and fragile debt markets make buyers cautious and selective, hotel investment services firm Jones Lang LaSalle Hotels.

Banks looking to rebuild their balance sheets will be a key driver forcing sales of hotel assets this year, and mega-deals of $1 billion or more are likely to be few.

But there will be good buying opportunities in core markets such as the United States, Japan, Britain and Southern Europe, as distressed properties will be available at well below their peak values, according to the company’s global hotel investment outlook for 2012.

“We are expecting the economic environment to be pretty difficult so in a certain regard that’s going to be a damper on the deal volumes,” Arthur de Haast, chairman of Jones Lang LaSalle Hotels, said in an interview.

“But at the same time there are a lot of other factors that are pushing activity, particularly relating to restructuring and the need for banks to deleverage their balance sheets.”

He said hotel deals would likely top $30 billion for 2011, which would mark a second straight year of increase. “We’re not going to see a lot of growth in the market this year compared to 2011, but we don’t see it falling off too significantly,” de Haast added.

By Karen Jacobs

(Reuters) – Flying to Europe is about to get more expensive.

The continent’s highest court upheld a European Union law on Wednesday that will charge airlines for carbon emissions on flights to and from Europe, beginning January 1. .

Carriers are certain to want to pass that cost on to consumers and some industry watchers forecast airfares between the United States and Europe could rise $50 to $90.

Mike Miller, vice president of the American Aviation Institute, a commercial aviation think tank, said trans-Atlantic ticket prices could rise $70 to $90, based on current oil prices, as a result of the EU carbon law.

“The bottom line is that this is a tax on passengers. It will dampen demand as prices rise and will slow airline investment into the single biggest method of lowering emissions – buying more efficient aircraft,” Miller said. “The higher prices and resulting drop in demand may push upwards of 10 million travellers not to travel, according to IATA.”

Many U.S. airlines declined to comment on how the EU law would affect pricing plans, but a representative for Virgin Atlantic Airways said: “It will invariably be necessary for us to pass at least some of the cost of the scheme on.”

By Karen Jacobs

(Reuters) – Flying between Europe and America is about to get more expensive.

The continent’s highest court upheld a European Union law on Wednesday that will charge airlines for carbon emissions on flights to and from Europe, beginning January 1.

Carriers are certain to want to pass that cost on to consumers and some industry watchers forecast airfares between the United States and Europe could rise $50 (32 pounds) to $90.

Mike Miller, vice president of the American Aviation Institute, a commercial aviation think tank, said trans-Atlantic ticket prices could rise $70 to $90, based on current oil prices, as a result of the EU carbon law.

“The bottom line is that this is a tax on passengers. It will dampen demand as prices rise and will slow airline investment into the single biggest method of lowering emissions – buying more efficient aircraft,” Miller said. “The higher prices and resulting drop in demand may push upwards of 10 million travelers not to travel, according to IATA.”

Many U.S. airlines declined to comment on how the EU law would affect pricing plans, but a representative for Virgin Atlantic Airways said: “It will invariably be necessary for us to pass at least some of the cost of the scheme on.”

By Karen Jacobs

(Reuters) – Flying to Europe is about to get more expensive.

The continent’s highest court upheld a European Union law on Wednesday that will charge airlines for carbon emissions on flights to and from Europe, beginning January 1.

Carriers are certain to want to pass that cost on to consumers and some industry watchers forecast airfares between the United States and Europe could rise $50 to $90.

Mike Miller, vice president of the American Aviation Institute, a commercial aviation think tank, said trans-Atlantic ticket prices could rise $70 to $90, based on current oil prices, as a result of the EU carbon law.

“The bottom line is that this is a tax on passengers. It will dampen demand as prices rise and will slow airline investment into the single biggest method of lowering emissions – buying more efficient aircraft,” Miller said. “The higher prices and resulting drop in demand may push upwards of 10 million travelers not to travel, according to IATA.”

Many U.S. airlines declined to comment on how the EU law would affect pricing plans, but a representative for Virgin Atlantic Airways said: “It will invariably be necessary for us to pass at least some of the cost of the scheme on.”