Here's a pure-play Internet business-to-consumer (B2C) company that will actually post a net profit for the recently ended quarter and that's showing real signs of growth.

Expedia (Nasdaq: EXPE), the publicly traded online travel agent that's 70 percent owned by Microsoft (Nasdaq: MSFT), announced this week it expects to post an operating profit of $4 million when it reports its fiscal third quarter later this month.

When acquisition costs, goodwill amortization, and other non-cash factors are considered, Expedia says it will post an overall loss of $18 million for the quarter.

TIME FOR A HOLIDAY Still, the rosy results of Expedia's latest quarter give the company specifically -- and the online travel industry generally -- good reason for optimism in this time of doom and gloom. Expedia will report revenues of about $110 million, an 88 percent increase over the same quarter last year. The company's announcement shattered analysts' expectations that Expedia would show a net loss for the quarter and sent its stock up to $20, near its 52-week high of $23.

"We're ecstatic," says Suzi LeVine, Expedia's marketing director. Ms. LeVine says the company's recent successes can be attributed partly to a new business strategy. Instead of merely serving as a traditional travel and booking agent, Expedia acts as a middleman wholesaler. It locks in discounted airline fares with carriers and cheaper-than-normal room rates with hotels. The company then sells the airline tickets and rooms at a markup.

"This bodes well for the industry," says Fiona Swerdlow, a Jupiter Media Metrix analyst. "[Expedia's] business model is a strong one."

According to Jupiter, which tracks Internet usage, travel-related Web sites attracted 30.1 million unique visitors in February, an increase of 23.5 percent over February 2000. Expedia attracted 6.8 million visitors in February, a nearly indistinguishable second to the most-popular online site, Travelocity.com (Nasdaq: TVLY), which garnered 6.9 million visitors. Perhaps most significantly, Travelocity.com was down 3 percent from February 2000, while Expedia shot up 10.2 percent for the same period. Beleaguered Priceline.com (Nasdaq: PCLN) was a distant third at 3 million, having lost 21.9 percent of its visitors, according to Jupiter.

FASTEN YOUR SEATBELTS Despite Ms. LeVine's optimism and these relatively sunny days for Expedia, the company and its pure-play competitors could face some serious turbulence in the weeks ahead. That's because the airlines themselves are starting to make bold moves online, grabbing an increasingly large market share.

According to Media Metrix, unique visitors to airlines' Web sites increased 26.1 percent to 10.4 million unique visitors in February over the same month in the previous year. Most major airlines now offer steeply discounted fares directly on their Web sites. Coupled with other special offerings like frequent-flier miles, the airlines are beginning to attract a significant number of customers. Southwest (NYSE: LUV) led all airlines with 2.9 million visitors in February, an increase of 19.8 percent over February 2000. United Airlines (NYSE: UAL) was a close second with 2.45 million visitors, an increase of 40.6 percent over the previous year. And looming large on the landscape is Orbitz, the online travel agency backed by United, Northwest (Nasdaq: NWAC), Continental (NYSE: CAL), and Delta (NYSE: DAL). Orbitz is expected to launch in June over the legal objections of Expedia, Travelocity, and a host of other travel agents. The agents complain that Orbitz will be an illegal monopoly, and they have enlisted two dozen states' attorneys general to their cause. The protestors are asking the federal government to ground Orbitz.

But earlier this month, the federal Department of Transportation in a letter to Orbitz concluded: "Orbitz may lead to substantial consumer benefits by establishing another major competitor in the comprehensive online travel agency marketplace."