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Orbitz, an online travel agency owned by the nation’s five largest airlines, has taken flight amid criticism that it’s a cartel in the making. But whether it will help travelers find the lowest air fare remains to be seen.By STEVE HUETTEL © St. Petersburg Times, published June 25, 2001
This is no boiler room start-up run by geeks who haven't noticed that the dot-com bubble has burst. Orbitz is a slick online travel agency owned by the nation's five largest airlines, determined to grab a bigger share of the business of selling their product to consumers. At first blush, Orbitz seems to stack up well against the giants of the online travel business, Sabre's Travelocity and Microsoft's Expedia. Customers who register for its Traveler Care service get an update about flight delays or cancellations three hours before departure. You can get the message via telephone, e-mail, pager or fax. A command center staff that includes a former air traffic controller and a onetime ramp manager for American Airlines at Chicago's O'Hare International advise travelers in real time on storms and congestion at airports. As far as the bottom-line question -- Will Orbitz find the lowest ticket price? -- the jury is still out. Don't expect a verdict any time soon. A quick check of fares on four round trips from Tampa in mid-July produced one tie and one win each for Orbitz, Travelocity and Expedia. (Expedia's winning price, though, was an "opaque fare." That means it was like those on Priceline.com, which must be purchased without knowing the airline, flight times or number of stops en route). Perhaps the better question is whether Orbitz can deliver on its goal of becoming the only place consumers need to shop for bargain tickets. Not yet, say experts on the business. "Orbitz set an impossibly high bar for itself," says Kate Rice of PhoCusWright, an online travel research company in Sherman, Conn. "You absolutely have to be an aggressive shopper. It's more realistic to say it's one of four or five major sites you need to check."
What sets Orbitz apart is that participating airlines have pledged to give the new company their best fares, including those previously offered only on their Web sites. That includes fares from the five owners -- United, American, Delta, Continental and Northwest -- and 30 other participating airlines. Unlike some of its competitors, Orbitz pledges not to spin the information by promoting a "featured carrier" or leaving out fares from start-up airlines or carriers flying to nearby alternate airports. "There's been a misunderstanding that we say we will give the lowest price all the time," Orbitz spokeswoman Stacey Spencer says. "We have the most low fares. We guarantee we will show you every fare and not alter the results." It sounds like a promising new option for consumers. But online competitors, travel agents and consumer advocates argue that Orbitz is an anti-consumer cartel waiting to happen. Letting the five largest U.S. airlines get together to sell tickets is a recipe for price-fixing and other anti-competitive misdeeds, they say. "If OPEC owned Exxon, how would Shell feel?" Expedia marketing director Suzi LeVine asks. "It's why there are antitrust laws in this country." The U.S. Justice Department continues investigating antitrust issues concerning Orbitz. The U.S. Department of Transportation ruled the company wasn't a threat to competition in the airline or ticket distribution businesses. But the agency will require Orbitz to report on its first six months of operations. Besides the array of fares airlines offer directly to the public, they cut all kinds of deals with corporations, ticket consolidators and travel agencies, including online agencies such as Travelocity and Expedia. Under their membership agreement, airlines must offer Orbitz the same fares they negotiate with the site's competitors. That gives Orbitz a huge advantage that could doom some traditional and online travel agents, says Mike Stacy, Travelocity's senior vice president of consumer marketing. "If the distribution outlets shrink, it puts more power in the hands of the carriers," he says. "What's going to be the effect on prices consumers can be charged?" All member airlines must contribute to marketing expenses for Orbitz. That can include cash or in-kind contributions, such as advertising on cocktail napkins or bags of in-flight snacks. But the contract with carriers includes another option that worries competitors: offering special fares exclusively to Orbitz. None of the member airlines has chosen that option yet, says Spencer, the Orbitz spokeswoman. Southwest Airlines refused to join Orbitz and share its Web-only fares. The leading low-fare, no-frills airline sued the company in federal district court in California last month, demanding that Orbitz stop carrying its published fares and flight schedules. Orbitz continues to list Southwest flights but refers customers to the airline if they want to buy a ticket. Southwest offers non-stop flights between Albany, N.Y., and Baltimore, but Orbitz displayed a route that included a stop in Orlando, the airline says. An Orbitz route from Islip, N.Y., to Louisville, Ky., sold by Southwest with a single stop in Chicago or Baltimore, had stops in Tampa and St. Louis. The result, Southwest contends, makes it seem an uninviting alternative to the big airlines that own Orbitz. Southwest chairman Herb Kelleher told an aviation conference this month that the site "simply invents fares." He scoffed at assurances that Orbitz will operate independently from its owners. "I've never seen management be independent of the people who own the enterprise," he said. Orbitz removed the Southwest logo from its site. But the company contends it is legally listing the fares and routes Southwest provides clearinghouses that sell the information to travel retailers, including Orbitz. Thanks largely to advance news coverage, Orbitz was overwhelmed in its first days of service. A severed fiber optic cable in Chicago on the launch day, June 2, slowed response time by three hours. Two South Florida call centers were too understaffed to handle the volume of people who tried to book flights through a live person. Orbitz says gross bookings hit $3.3-million on June 6, the first glitch-free day. The company won't release more recent financial numbers but says it is handling an average of 10,000 transactions a day. By comparison, Travelocity reported a average of more than 33,000 transactions daily for the last quarter of 2000. Expedia averaged 20,000 a day for the quarter ending March 31. Besides their size and experience, Travelocity and Expedia have another big edge: marketing deals with giant Internet portals such as Yahoo and AOL. All three competitors say the real test won't be who offers the lowest price most often. It's about which site gives the best package of customer service and the best fares people want to buy. Expedia, for example, e-mails customers with travel alerts before their trip but also sends a guide one week ahead with deals on hotels and rental cars. Travelocity has Dream Maps, a feature that lets consumers who don't care where they're going say how much they want to spend and returns with a list of trips within their budget. For those who don't care when they travel, the site's Best Fare Finder locates the lowest price to a specific place over the next three months. "It's not about the lowest fare," says Stacy of Travelocity. "It's about the best fare for time constraints and other travel parameters we all have." - Steve Huettel can be reached at huettel@sptimes.com or (813) 226-3384.
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