orbitz

This article is about the online travel agency. For the soft drink, see Orbitz (soft drink).

Orbitz, Inc. is an Internet travel company headquartered in Chicago. Orbitz, along with all other Cendant travel businesses, were sold to a subsidiary of the Blackstone group, for a deal worth over $4.6 billion to form a new company called Travelport.

Beginnings

Orbitz constituted the airline industry's response to the rise of online travel agencies such as Expedia and Travelocity, as well as the continued increase in GDS fees, and trailed its major competitors by several years. Continental Airlines, Delta Air Lines, Northwest Airlines, and United Airlines, subsequently joined by American Airlines, invested a combined $145 million to start the project in November 1999. It was code-named T2 – some claimed, meaning "Travelocity Terminator" – but adopted the name Orbitz when it commenced corporate operations in February 2000. The first executive of the company was a technologist named Alex Zoghlin. The company begain Beta testing early the next year, and Orbitz.com officially launched in June 2001.

Anti-trust concerns

Even before the site began operating, the company faced intense antitrust scrutiny – after all, five of the six oligopolist "major" airlines, controlling 80 percent of the US air travel market, were collaborating. Several consumer organizations, as well as Orbitz primary competitors at the time (Expedia, Sabre, Travelocity, Galileo) spent a significant amount of money lobbying the United States Department of Transportation to block the project from the outset, and some 23 state attorneys general also voiced concerns thanks to local competitors complaining. When the DOT permitted the company to move ahead in April 2001, the competitive lobbying effort was switched to the Antitrust Division of the Department of Justice and the U.S. House Committee on Energy and Commerce.

Among the concerns raised were these:

• above all, the so-called Most Favored Nation provision, by which the airlines agreed not to cut deals with competing sites under more favorable terms than with Orbitz
• the airlines' agreement to release certain discount fares only to Orbitz or other entities at Orbitz low distribution cost, at the expense of its online and offline competitors
• that Computer Reservation System fee discounts extended to partner airlines would undermine competitors and damage the fledgling online travel industry
• that the airlines would coordinate efforts secretly to reduce discounts
• Orbitz was breaking out the service fee from the ticket price, not making the total price clear

The Interactive Travel Services Association (ITSA), an organization of Internet travel agencies and GDSes - all Orbitz competitors - issued a report in December 2001 arguing that Orbitz was stifling its members.

Partly in response to consumer advocate complaints, Orbitz announced in May 2002 it would make its fares available to customers via its call center for those consumers that did not have computer or internet access.

In July 2003, the Department of Justice ruled that Orbitz was not a cartel and did not pose a threat to competition. Orbitz's rapid growth had not impedid its online competitors' businesses which had continued to grow apace, and no evidence was found of price fixing. Additionally, changes in the marketplace had eroded both the advantages of the Most Favored Nation clause and the webfares that Orbitz had due to its low supplier cost. Orbitz continued it's success in in the market based upon it's unique technology platform

IPO, sale, and future prospects

In August 2003, Orbitz filed to do an initial public offering (IPO). Businessweek, commenting on the proposed IPO, noted that Orbitz lost $5.3 million in the first half of 2003 on revenue of $107 million; that airlines would control the board of directors of Orbitz even after the IPO; and that much of Orbitz's business model was structured to benefit the airlines at the cost of (future) shareholders. [1] In November, Orbitz filed paperwork to sell shares at between $22 and $24 each. [2]. The company went public on December 18, 2003, [3], at a price per share of $26. [4] After the IPO, the airlines held 70% of the outstanding stock and over 90% of the voting power. [5]Because Orbitz had such a strong brand and consumer acceptance, most shareholders saw the carrier ownership as very positive for its long term sustainability.

On September 29, 2004, Orbitz was acquired for $1.25 billion by New York-based Cendant Corporation. Cendant paid $27.50 per share. [6]

Given Cendant's spate of acquisitions in Europe, there has been some speculation about Orbitz being exported to Europe as a brand or the continued use of acquired Cendant brands like ebookers and Octopus Travel. Currently, there is a large project underway to migrate all Cendant brands onto a common technology platform, with ebookers.com being migrated to the new platform first, followed by CheapTickets.

In June 2006, The Blackstone Group, a private equity firm, entered into a definitive agreement with Cendant Corp to acquire Travelport, its travel distribution services business for about $4.3B in cash, a significant reduction in value to the original acquisition prices of the individual companies. Travelport includes the Orbitz travel reservation website used by consumers, the Galileo computer reservations system used by airlines and thousands of travel agents, Gulliver’s Travels and Associates wholesale travel business, and numerous other travel related software brands and solutions.

Controversies

Southwest Airlines

Southwest Airlines filed a lawsuit against Orbitz for trademark infringement and false advertising in May 2001. Southwest, which had opposed the project from the outset, claimed Orbitz misrepresented its prices and used its trademarks without permission. In July, it withdrew its fares from Airline Tariff Publishing Company, the entity that distributes fare information to Orbitz and others, and dropped its case against Orbitz. Southwest went on to remove themselves from every other online outlet except their own, southwest.com

Maddox incident

In March, 2005, Orbitz.com received email complaints numbering in the thousands from readers of a website called The Best Page in the Universe.^[1] The author, George Ouzounian, who writes under the name Maddox, recounted a less than satisfactory experience with Orbitz in which he was given an impossible itinerary. This story was read by over a hundred thousand people within less than a week, and instigated a boycott against the company by many of these readers.

Orbitz responded to the many thousands of emails that Maddox readers sent to them with an explanation of Maddox's itinerary – a blatant breach of their Privacy Policy. As a result, many of Maddox's readers and others now feel unsafe using Orbitz.

Trivia

Orbitzgames.com was launched in September 2005 as a showcase of all the promotional orbitz games produced to date.

Wink Martindale is the host of the mini-game show "Take on Orbitz" (as featured in the commercials).

Orbitz was the first major travel site to launch a microsite featuring gay and lesbian travel deals. Orbitz was also the first site to air television ads which include gay and lesbian characters on national cable networks. "Hotel Matrix", an example of one of Orbitz' gay-tailored TV ads, was the recipient of the GLAAD Media Award in 2004.

References

External links

• Official Orbitz website
• Orbitz game portal
• Orbitz gay and lesbian travel microsite
• Yahoo! - Orbitz, Inc. Company Profile
• Airline Tariff Publishing Company