Orbitz launch poses challenge to other online low-fare ticket finders

Airline Industry Information, June 4, 2001

AIRLINE INDUSTRY INFORMATION-(C)1997-2001 M2 COMMUNICATIONS LTD

Chicago-based online airfare portal Orbitz launched on Monday (4 June).

The much-publicised site, which is backed by five major US airlines, is not according to industry observers the first of its kind; analysts point out that Santa Clara-based SideStep Inc has been gathering low cost airfare information since November 2000.

Orbitz has negotiated deals with 25 airlines that requires them to list all published fares at www.orbitz.com, including specially discounted prices that the airlines usually reserve for their own web sites. Orbitz receives a commission for each transaction. SideStep Inc meanwhile uses 'scraping' technology to search the web sites of over 20 airlines and provide a list of the best fares for a given itinerary. Customers are then directed to the airlines' web sites and transactions are conducted there, with SideStep receiving a referral fee, according to The Associated Press. Airlines with whom SideStep doesn't have an agreement are charged USD12-15 per ticket by the computerised reservation company used by SideStep - which can be more expensive than the fees paid by airlines to companies such as Worldspan and Sabre.

SideStep was expecting to be profitable in 1Q'2002, but analysts have suggested that going into direct competition with Orbitz could slow the company's progress.

Orbitz also lists vacation packages, hotel rooms and rental cars and has come under intense scrutiny, with employees required to attend a four-hour seminar on anti-trust law.

Critics of the concept say that Orbitz will reduce and maybe even eliminate competition, resulting in higher prices. The US Department of Transportation has already investigated the company and found no evidence of monopolistic behaviour, but has also indicated that it will continue to monitor the site.

Orbitz is owned by American Airlines, Continental Airlines, Delta Air Lines, Northwest Airlines and United Airlines. Orbitz has suggested that it could reduce airlines' spending on CRS services, such as those provided by Galileo, Sabre and Worldspan, by about 60% and save them about 30% per transaction compared to travel agents or web sites.

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