WASHINGTON (07/21/2000) - Orbitz, an online travel agency being developed by the nation's top five airlines, ran into major turbulence at a U.S. Senate hearing this week. Consumer groups, travel agents, competitors - and one federal investigator - said the government should prevent Orbitz from gaining a monopoly on posting ultralow airline fares.
Orbitz claims that beginning this fall it will offer Web consumers the lowest airline fares available, using a Java-based search engine developed at MIT.
Orbitz was founded by United Air Lines Inc., Delta Air Lines Inc., Continental Airlines Inc., Northwest Airlines Inc. and American Airlines Inc.
The fact that the Chicago-based joint venture is owned by the major airlines - which can control who gets fare information - has led to antitrust investigations by the U.S. Department of Justice and the U.S. Department of Transportation. But neither probe is finished.
The big concern is that the airline owners might post their most deeply discounted fares only on the Orbitz site, cutting out travel agents and other Web sites.
There's "a deep-rooted suspicion that when the major air carriers get together, some mischief is afoot," testified Kenneth Mead, inspector general at the Transportation Department.
Mead said the agency should require airlines to provide the same fares to all travel entities.
Terry Jones, CEO of rival Travelocity.com Inc. in Fort Worth, Texas, said he agreed. "The issue is fair and open access to [fare] information," he testified.
But Orbitz CEO Jeffrey Katz said his rivals are just seeking government intervention to keep out a new competitor. Katz said his company is trying to use advanced software to break into a business that is dominated by the "online travel duopoly" of Travelocity.com and Redmond, Wash.-based Expedia Inc.
"Some have characterized us as Internet big boys backed by airline bad boys.
But we're an Internet start-up. We have huge obstacles to overcome to even become No. 3" in online travel bookings, Katz said.
Antitrust Concerns Raised
Mark Silbergeld, a Washington-based spokesman for Consumers Union in Yonkers, N.Y., and the Consumer Federation of America in Washington, said the problem is "Orbitz is operating in the realm of verbal assurances" that it will be unbiased. He called for extensive antitrust regulation of the joint venture before the Web site is launched to make sure that Orbitz is unbiased.
"I'm very, very skeptical about this Orbitz effort," said Sen. Ron Wyden (D-Ore.). "We need safeguards, or else consumers will get fleeced again."
The hearing was held by the Senate Commerce Committee, chaired by Sen. John McCain (R-Ariz.). No additional committee hearings on Orbitz have been announced.