BOSTON (06/15/2000) - A brick-and-mortar merger has put on hold U.S. Senate hearings that could determine the future of major electronic-business initiatives.
Facing the time-consuming task of reviewing Chicago-based United Air Lines Inc.'s proposed US$11.6 billion purchase of US Airways Group Inc., the Senate Commerce Committee has postponed the June 22 hearing on an online ticketing Web site being funded by the five largest airlines in the U.S.
No new date has been set, but Orbitz - known informally as T2 before announcing its new name last Monday - is the first joint online venture between Fortune 500 competitors to receive this type of scrutiny from Washington.
Fresh from its successful prosecution of Microsoft Corp., the U.S. Department of Justice (DOJ) is investigating whether the airlines would form an anticompetitive cartel if they gained control of the ticket distribution channel. The nation's leading automakers and meat packers are also being investigated for similar initiatives.
Pia Pialorsi, press secretary for the Senate Commerce Committee, said the Orbitz hearing remains a priority for committee Chairman Sen. John McCain, a Republican from Arizona.
The Chicago-based airline ticketing venture, which hopes to launch its Web site this summer, declined to comment on the delay of the hearing or on whether the Commerce Committee's move will have any impact on the planned launch.
But Orbitz officials held a press conference last week in which they insisted that the Web site will create, not stifle, open competition in the airline ticket marketplace.
As part of the press conference, the Orbitz executives said they already gave the government copies of all the contracts Orbitz signed with its participating airlines. But that hasn't derailed the Senate hearing or a separate DOJ investigation, which both came in response to complaints about Orbitz filed by two travel agent trade groups.
"The documents might say one thing, but how are they going to act in the real world?" asked Sam Whitehorn, senior Democratic counsel to the Commerce Committee. "The words on paper might not tell the whole story."
The Orbitz site is being funded by United, Delta Air Lines Inc., Continental Airlines Inc., Northwest Airlines Inc. and American Airlines Inc.
Whitehorn said it's incumbent upon the government to look into initiatives funded by large-scale competitors.
"If it turns out that there's nothing nefarious, then let them go out in the marketplace," he said. "We haven't looked into it enough to determine that yet."
The Orbitz name also was unveiled at the press conference. The company has yet to hire a full executive team or to name its board of directors.
The site has started with funding from airlines, but Chief Technology Officer Alex Zoghlin said Orbitz is looking for investors from all arenas.
When asked what the airlines gain if Orbitz functions as a truly independent entity, Zoghlin answered the motive is profit, not control.
"If this is wildly successful in the consumers' eyes, then there's money to be made out of it," he said.
One of Orbitz's consultants was also at the press conference - Washington attorney Cornish Hitchcock, who has been active in the Aviation Consumer Action Project.
Hitchcock argued that current computer reservations systems favor certain airlines, prevent travel agents from shopping the marketplace and charge exorbitant fees.
He called Orbitz "a 21st century solution to the computer reservations system problems consumers have seen over the last 20 years."