Four major airlines announced last week they will combine forces to launch the first multiairline travel portal within the next six months to take on entrenched online travel providers Travelocity and Expedia.
United Airlines, Delta Air Lines, Continental Airlines and Northwest Airlines hope the site, which will offer deep discounts and Internet-only fares, will help them dominate the online travel space.
“Since the airlines own all of the Internet-only fares, consumers will want to go through this new Web site. This will make the airlines very powerful as they will use this potent partnership to shut out their competitors,” said Krista Pappas, senior analyst at Gomez Advisors, Lincoln, MA.
Like Travelocity and Expedia, the new portal will be a full-service travel site. It will offer access not only to the airlines, but to hotels, car rental companies and other travel services. Other airlines will be invited to participate.
Although the site’s business model is still in the works, it will probably operate much like Travelocity and Expedia, according to Kurt Ebenhoch, spokesman for United Airlines, Chicago. Both sites receive a 5 percent commission with a maximum of $10 for each booking, although this can vary.
The new site will operate independently from the airlines, which will still pay commissions for bookings. However, they will in effect pay themselves as they will split the site’s revenue.
“Some sort of mechanism will be put in place to generate revenue,” said Ebenhoch. “Since we will all be equity partner owners, we will share in the site’s profits.”
At least one competitor is skeptical of this venture. “It’s no surprise that they want to sell their tickets direct. They’ve tried variations of this in the past and it has had no impact historically,” said Suzi Levine, product manager for Expedia, Redmond, WA. “It will be interesting to see what comes to fruition.”
Aside from the prospect of additional revenue, the site will offer the airlines expanded customer profiling possibilities. By generating one massive database, the airlines will be better able to market directly to consumers.
In this respect, competitors have a jump on them. With its merger with Preview Travel, Travelocity claims it will have 20 million registered users by the end of 2000. “That’s a huge database of customers,” said Pappas. “[Travelocity] is doing a better job of profiling and customizing customer information than the airlines.”
While this partnership is not precedent setting, such an agreement among these fiercely competitive carriers is rare. It appears the Travelocity merger with Preview Travel may have forced them to act, according to Pappas. “The acquisition woke up the airlines,” she said. “They realized that if a particular agent had too much buying power that they could get pushed around. They realized that they needed to wake up and start shoving their weight around.”
As for Continental, the airline said the new site was about looking toward the future. “Internet bookings for the airlines are doubling every year,” said David Messing, spokesman for Continental Airlines, Houston. “We want to have a foothold in that section of our distribution base. Having a site that we can influence will give us more surety in capturing future growth.”
American Airlines is absent from this partnership because Travelocity is operated by Sabre Holdings Corp., which is owned by AMR, American’s parent company.
“While it may be tempting for American to get involved in the new site, they don’t have to because they are sitting pretty,” said Pappas. Travelocity had no comment.
