Orbitz Takes Off

Industry consortium fills online travel sites' radar screens

In the bloodbath that electronic commerce has become, online travel has remained one of the few industries to not only survive the dot-com shake-out, but to thrive.

As Internet companies close by the dozens each week, consumers continue to swarm to Internet travel sites and airlines Web sites in record numbers, searching for bargain airfares, rental cars, hotel rooms and vacation packages.

Three of the top five e-commerce sites sell tra- vel: Travelocity.com, Expedia and Hotel Reservations Network, which operates the HotelDiscounts.com Web site. And a number of competing start-ups boast revenue and traffic that most Internet companies have only dreamed of.

But the landscape that has made the online travel industry a true New Economy gold rush is changing this week, with the entrance of a consortium of industry giants hoping to cash in on travel sites proven business models.

Whether that change will be good or bad for competition and consumers depends on who you are and whom you ask. But the controversy highlights the legal, business and technological issues that arise when dominant businesses in the brick-and-mortar world form partnerships to create massive Internet marketplaces to compete with independent Internet start-ups.

The challenger consortium is Orbitz, an independent, Internet travel start-up that launches this week in Chicago with more than $100 million in backing from five of the largest U.S. airline carriers — American Airlines, Continental Airlines, Delta Air Lines, Northwest Airlines and United Airlines.

Announced in 1999, the widely publicized and much-hyped new service immediately drew regulatory scrutiny for potential antitrust issues — the opportunity for big carriers to collude on prices and drive competitors out of business. Its a concern that regulators increasingly face as industries worldwide collaborate to offer improved consumer and business-to-business marketplaces.

After a 10-month investigation, the U.S. Department of Transportation in April cleared Orbitz for takeoff, saying its discounted fares and cutting-edge technology would allow customers to easily search massive amounts of flight information, which could enhance consumer choice.

"New competition in the online travel agency business is inherently desirable," the DOT said.

And thats a message that bears repeating across the economy, said Jonathan Zuck, president of the Association for Competitive Technology. "To compete, you must continue to improve your technology and services, instead of trying to delay or block new competitors from the markets," he said.