Twenty-seven airline companies, led by American Airlines, United Airlines, Northwest Airlines, Continental Airlines, and Delta Airlines, have banded together to form a travel Web site that will offer online discounted fares and ticketing.
The as yet unnamed site is seen by some observers to be an effort to control the end-to-end travel process, which includes providing information, booking tickets, assigning seats, recording frequent flier miles and conducting the flights. The site will also include bookings for hotel rooms, car rentals, cruises and vacation packages.
According to Forrester Research, about $12.8 billion in business and leisure trips were booked online in 1999. By 2004, Forrester predicts that about $64 billion in travel will be booked on the Internet, including 30 percent of all leisure trips.
By developing their own Web site, airline companies can conceivably stop paying the $5 to $10 commission fees that they generally pay to online brokers. Other fees that can be eliminated are those paid to online database companies that link travel agencies, airlines and other travel companies.
Boston Consulting Group is temporarily acting as launch coordinator for the venture. It expects the site to be fully functional by the second quarter of this year.
To head off any possible concerns about antitrust issues, the consulting firm said it will form a management team that will operate the site independently from the big five U.S. carriers involved.
American and United have operated their own industry-wide reservation networks for years under close observation by the U.S. Department of Justice, which has long been concerned about potential antitrust violations.
While a move by the airlines to operate their own Web site will almost certainly attract additional scrutiny, there is no indication that the move will cause the federal government to take any direct actions.
Other Airlines Involved
In addition to the Big Five, other domestic airlines on board are U.S. Air, Midwest Express Airlines, American Trans Air, and Hawaiian Airlines.
Foreign carriers will include KLM Royal Dutch Airlines, Singapore Airlines, Air Canada, Air New Zealand, Alitalia, Varig, and Singapore Airlines.
More airlines, hotels, car rental companies and other ancillary travel services are expected to be included in the site, which will attempt to appeal to consumers who have demanded the elimination of the middleman in routine purchases.
United Plans Own Measures
In addition to the Web site consortium, United Airlines separately announced plans to set up a subsidiary to develop e-commerce initiatives, including its own Web site.
United said that the division will include nearly 70 employees from the company’s marketing and technical operations, many of whom have already been working on Internet projects in some capacity. The company said the new division will emphasize their focus on finding new online opportunities.
United named Vice President of Revenue Management Scott Praven as head of the new division, which will become an official subsidiary in the second quarter.