In an attempt to fend off mounting criticism of what promises to be the Internet’s largest travel Web site, executives for the so-called “Travelocity Terminator” came forward Thursday to defend their plan to combine the forces of five of the largest U.S. airlines.
“We are hoping to interject competition,” said chief technology officer Alex Zoghlin, downplaying the powerful mix of Delta, United, American, Northwest and Continental as “an eight person startup.”
However, just weeks ago, the U.S. Department of Justice announced that it launched an investigation into possible antitrust issues associated with the venture.
Also known as “T2,” the site has already secured commitments from 30 airline companies that will offer airline ticketing, hotel reservations, car rentals and cruises. T2 will present users with the lowest fares available among all of the participating airline companies, unlike the two existing major online travel sites, Travelocity and Expedia, which review the fares of far fewer carriers.
Zoghlin said those sites currently account for 80 percent of all online bookings. “Our contract with the carriers is unbiased and unfiltered,” said Zoghlin. He also accused Travelocity, one of T2’s chief critics, along with Expedia, of preventing consumers from ever seeing the lowest air fares. Those sites are able to shift business to particular airlines through special contracts, he claimed.
Senate Hearings Upcoming
The Justice Department launched its antitrust probe after the American Society of Travel Agents (ASTA) formally requested that the site be blocked from selling airline tickets. ASTA contends that T2 would violate antitrust laws and lead to price fixing.
The U.S. Senate Commerce Committee is set to open hearings June 22nd to determine whether price fixing is a realistic threat from the site, and if T2 might successfully shut out competition, causing airfares to gradually and steadily increase.
With antitrust talk in the air, T2’s woes may be just beginning. On Thursday, the Wall Street Journal reported that American and Delta, the nation’s second and third largest airlines, held preliminary discussions earlier this week about a possible merger. Spokesmen for both Delta and American refused to comment on the report, but some e-commerce industry observers believe the rumored offline merger could further complicate T2’s prospects.
Survival of Agents at Risk
Rarely in the brief history of online commerce has a proposed Web site stirred as much controversy. “The issue is fair access to fare information,” said Bruce Charendoff, senior vice-president of government affairs for Travelocity. “There have been recurring rumors that carriers [with T2] are going to be required to jointly boycott other travel Web sites and use T2 exclusively for a certain portion of their fares.”
For ASTA, the major trade organization for U.S. travel agents, the issue is the survival of its members’ businesses. “The airlines have a long and checkered history of antitrust behavior,” said Paul Ruden, head counsel for ASTA. Ruden called T2’s plans “unfair and illegal.”
Nevertheless, Forrester Research believes that T2 is poised for success. In a report about the site, Forrester stated, “It’s designed to cut out Travelocity.com and Expedia, which, if left unchecked, could grow large enough to negotiate better fares and commissions with large suppliers of their own.”