Airlines Stick E-Commerce in Coach

My first story about Orbitz, the multi-airline mega-site that promised to revolutionize the way Internet users make travel reservations, appeared almost two years ago — before the site even had a name. T2 (aka Travelocity Terminator) was the working title.

Now it has a name, but no functionality. Go figure.

Early on, it sounded as though T2 would smoothly take e-commerce to the next level of respectability and into mainstream America. After all, 24 airline companies (which later grew to 30) were to use state-of-the-art technology to enable users to find lowest possible fares and quickly book their own reservations.

Now? Well, let’s just say this. Watching Orbitz prepare for arrival has made for one turbulent ride.

Is Bigger Better?

Because we so want e-commerce to grow up, just the idea of heavyweights like Continental, United, Northwest, American and Delta uniting to co-create Orbitz made our collective head swim.

Now, a number of key players in government and industry have started to circle around Orbitz, questioning the legality, ethics and potential of its plan.

Frankly, it was unrealistic to believe that American industry and the U.S. government would come to agreement about such a large group of powerhouse competitors joining forces. It is the possible monopolization of the travel industry that has the handwringers working overtime.

Unfriendly Skies

To thicken the controversy, some of the biggest airline companies, and future participants in the Orbitz site, announced their desire to merge last month. Suddenly, TWA and American would become one, as would US Airways and United.

As a result, consumers, legislators and industry leaders are left with the ultimate issue: How big is too big?

As usual, the answer depends on who is being asked.

The American Society of Travel Agents believes that Orbitz will stifle competition, discourage traditional travel retailers and wreak havoc in an industry that never asked to be redefined. Attorneys general in 20 states, fearing antitrust is in the air, have written to the U.S. Department of Transportation to voice their concerns.

Conversely, the U.S. Department of Justice, newly helmed by ultra-conservative John Ashcroft and perhaps fatigued by its protracted antitrust action against Microsoft, might not be so inclined to stand in Orbitz’s way.

Still Earthbound

At a minimum, there is uncertainty, so one might think that Orbitz would make some type of concession or conciliatory move to prove its viability in the marketplace.

Instead, Orbitz almost seems to be daring its critics to try to stop it. Consider: Instead of trying to prove it would not operate as a monopoly or squash its less powerful competition, Orbitz is flaunting its economic and industrial muscle.

Specifically, it is requiring participating airline companies to publish their lowest fares, while essentially paying them to do so by offering a generous discount on booking fees. That might be a strategic and canny move, were it not for the consortium of critics looking for means to delay or cancel an Orbitz takeoff.

Orbitz’s stubbornness could backfire. While legal wrangling goes on month after month, many of us who already book our travel reservations online are becoming increasingly familiar and comfortable with the main competition, Travelocity and Expedia. In short, there may not be a reason for us to consider using Orbitz even if and when it debuts.

Out With The Old?

If Orbitz manages to go live, offer the lowest possible fares among most major airline companies, cut processing costs and booking fees, and woo middle America with its new business model, who wins and who loses?

Ostensibly, Orbitz wins — at least until someone else comes up with a more revolutionary system.

And seemingly, brick-and-mortar travel agents and less influential online travel sites lose, as they are systematically pushed offstage.

In reality, however, if Orbitz becomes an example of e-commerce innovating in a way that crushes competition, everyone might lose.

Broader Vision?

Orbitz would contribute more to the free enterprise system by operating as a worthy opponent. Respectable opponents are out to win, not destroy the opposition.

If players in the New Economy want to move national and international commerce forward, they must leave room for traditional players. No one ever intended for online transactions to eliminate the need or potential for brick-and-mortar powerhouses or even mom-and-pop operations.

What do you think? Let’s talk about it.