SAN FRANCISCO (09/11/2000) - Orbitz, the Web site that plans to deliver discount fares from virtually every major American airline, announced Friday that it is postponing its official launch for a second time.
The Chicago-based company now plans to launch its site with a $100 million marketing campaign in June, more than a year later than its original plan. After coming on board in July, Chief Executive Jeffrey Katz decided to phase the site's debut and instead launch a "monster beta test" to iron out snags and prepare for heavy demand.
Orbitz will roll out the test in October with 100,000 registered participants who will have free access to Orbitz's fare search engine. It won't be until February, however, that consumers participating in the beta test will be able to book flights online. In April, the beta will be expanded to include car rental, hotel, cruise and vacation packages, and the site's official launch will come two months later.
"The lion's share of the work is done," Katz said in a telephone press conference. "Now we're working on the scale problem and the reliability problem."
Founded by American, Continental (CAL) , Delta, Northwest and United airlines, Orbitz is proposing to offer an "unbiased" menu of flight choices, giving users access to its proprietary technology to search through a massive database of airline schedules and fares. Orbitz says it will be able to offer lower fares because its technology will bypass the expensive 25-year-old mainframe airline technology used by Expedia (EXPE) and Travelocity, saving space and labor costs. And while Expedia and Travelocity may highlight one or more airlines for a particular itinerary, Orbitz says it will be able to give consumers as many as 100 options.
Even though Orbitz has yet to go live, its powerful backers already have attracted scrutiny from regulators, who fear the venture may lead to collusion among the airlines. Orbitz did not mention regulatory issues as a factor in the company's phasing schedule, but David Schehr, a research director at the Gartner Group (IT) who specializes in online travel consumer behavior, says phasing will give Orbitz a chance to prove itself to regulators without incurring massive costs.
"That enables them to start getting the technology ready, start testing functionality, but not incurring the costs required for full launch only to find out that they've got this regulatory sword hanging over their head," he said.
Schehr also suggests that consumers don't necessarily want to see every flight option online. After they see the first low-fare options, he says, they've seen enough. Still, he acknowledges that offering "unbiased" information could be valuable. "It's important that the consumer perceives they're not paying more," he adds, noting that the competition will always be just a mouse-click away.