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Orbitz Worldwide, Inc. (NYSEOWW) is an Internet travel company headquartered in Chicago, Illinois. Through its primary web site Orbitz.com, Orbitz Worldwide enables travelers to research, plan and book a broad range of travel products, facilitating 1.5 million flight searches and one million hotel searches every day.[1] Orbitz Worldwide is a publicly-traded company listed on the New York Stock Exchange following its initial public offering (IPO) in July 2007. Orbitz Worldwide’s largest investor is Travelport, one of the world’s largest networks of travel brands, content and service offerings.

BackgroundEdit

Originally established through a partnership of major airlines, and subsequently owned by various entities, Orbitz.com – the flagship brand of Orbitz Worldwide – has been in operation since 2001.

Other Orbitz Worldwide online travel companies include: CheapTickets, and the Away Network in the Americas; ebookers in Europe; and HotelClub and RatestoGo, based in Asia Pacific with operations globally. Orbitz Worldwide also owns and operates a corporate travel company. Orbitz was the airline industry's response to the rise of online travel agencies such as Expedia and Travelocity, as well as a solution to the continued increase in Global Distribution System (GDS) fees. 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 brand name Orbitz when it commenced corporate operations as DUNC, LLC (the initials of its first four founding airlines) in February 2000.[2] The company began Beta testing early the next year, and Orbitz.com officially launched in June 2001.[citation needed]

Anti-trust concernsEdit

Even before the site began operating, the company faced intense antitrust scrutiny – because five of the six oligopolist "major" airlines were collaborating on the project. Collectively, they controlled 80 percent of the US air travel market. Several consumer organizations, as well as Orbitz's primary competitors at the time (Expedia, Sabre, Travelocity, Galileo) spent significant amounts 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 due to the complaints of local competitors. 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 impeded 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.

IPO, sale, and future prospectsEdit

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.[3] In November, Orbitz filed paperwork to sell shares at between $22 and $24 each.[4] The company went public on December 18, 2003 at a price per share of $26.[5][6] After the IPO, the airlines held 70% of the outstanding stock and over 90% of the voting power.[7] Because Orbitz had such a strong brand and consumer acceptance, most shareholders saw the carrier ownership as very positive for its long term sustainability.[citation needed]

On September 29, 2004, Orbitz was acquired for $1.25 billion by New York City-based Cendant Corporation. Cendant paid $27.50 per share.[8]

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 being migrated to the new platform first, followed by CheapTickets.

In June 2006, The Blackstone Group, 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. At the time, Travelport included 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.

Travelport announced in May 2007 that it had filed a registration statement with the U.S. Securities and Exchange Commission to sell a portion of Orbitz Worldwide in an initial public offering (IPO). Travelport said it planned to use a portion of the proceeds to pay down its debt. Trading began on July 20, 2007, and the IPO transaction closed on July 25, 2007. Travelport continues to own approximately 48 percent of Orbitz Worldwide following the IPO. As a result, Orbitz Worldwide remains an affiliate of Travelport. Orbitz Worldwide is publicly traded on the New York Stock Exchange (NYSE) under the ticker symbol OWW. The Orbitz IPO has been regarded by some as one of the worst of 2007.[9]

Technologies Edit

Orbitz runs on a Red Hat Linux[10], Sun Solaris based platform and was an early adopter of Sun's Jini[11] platform in a clustered Java environment. Both JBoss and Oracle WebLogic Server are used as application servers within their environment along with various other proprietary and open source software. [12] Orbitz licenses ITA Software's Lisp-powered QPX software to power their site. Orbitz and ebookers are developing a common technology platform, which would enable the same platform to service multiple travel brands in multiple languages in different markets and currencies as well.

Orbitz has released parts of its Complex Event Processing infrastructure as Open Source.[13]

ControversiesEdit

Southwest AirlinesEdit

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.[citation needed]

In June 2008, however, Orbitz For Business became one of the first Online Travel Agents to offer Southwest flights on the Orbitz For Business website.[14]

WebLoyaltyEdit

In July 2009 CNET revealed that Orbitz, along with other popular consumer websites Buy.com and Fandango, have been routinely giving post-transaction marketers access to their customers' credit cards. The Senate Commerce Committee investigating these companies has described their services as a "scam".[15] The scam works by charging a monthly fee (many users report a $12 charge from Reservation Rewards or Webloyalty showing up on their credit card statements) that is piggybacked with the Orbitz sale (as it stands, Orbitz Terms of Service agreement currently allows them to share customers' credit card information with third parties for their own uses). In spite of countless complaints and an ongoing U.S. Senate Investigation, Orbitz still maintains an affiliation with the controversial marketer.[15] [16] [17]

Alleged fraudEdit

In 2009, the state of New Jersey filed a lawsuit against the company alleging violation of their Consumer Fraud Act surrounding events with a Bruce Springsteen concert, where tickets were offered for sale on their website which did not actually exist. The court in Milgram v. Orbitz granted summary judgment for Orbitz, finding that Section 230 of the Communications Decency Act preempted the state law consumer fraud claims.[18]

American Airlines Pulls Fares from OrbitzEdit

In December 2010, American Airlines ceased offering fares through Orbitz following pressure from American to convince Orbitz to use its AA Direct Connect electronic transaction system. [19] AA tries to establish Direct Connect's to have the full control over the distribution of its products and to reduce GDS segment fees. Furthermore, Direct Connects enable AA to sell ancillary services to its customers.[20] American was later ordered by an Illinois Court to resume offering fares and flight schedules.[21] The court order came only days after American released a video jabbing Orbitz on YouTube.[22]

Insurance ScamEdit

Orbitz has been known to subtly slip "travel insurance" fees onto the very last "final confirmation" page of the purchase flow.[23] Inattentive users who don't notice the newly-added item before pressing the "purchase now" button end up purchasing insurance they may not want. Web searches for "Orbitz travel scam" yield a long history of complaints by people who feel this subtle opt-out purchase is an unethical business practice.[original research?]

NotesEdit

  1. "Orbitz developer presentation". Orbitz Worldwide. 15 July 2010. http://www.slideshare.net/jseidman/windy-citydb-final-4635799. Retrieved 15 October 2010. 
  2. Edgar Online
  3. Business Week
  4. Forbes
  5. Atlanta Business Journal
  6. http://www.alwayson-network.com/comments.php?id=P2103_0_6_0_C
  7. Motley Fool
  8. Orbitz Press Release
  9. Blogging Buyouts
  10. http://www.redhat.com/about/presscenter/2004/press_lw_keynote.html
  11. http://www.computerworld.com/action/article.do?command=viewArticleBasic&articleId=95663
  12. http://www.infoworld.com/article/06/04/03/76521_14FEosscaseorbitz_1.html
  13. http://news.cnet.com/8301-13505_3-9979041-16.html?part=rss&subj=news&tag=2547-1_3-0-5
  14. Center for Asia Pacific Aviation
  15. 15.0 15.1 Greg Sandoval (November 23, 2009). "E-tailers snagged in marketing 'scam' blame customers". Cnet.com. http://news.cnet.com/8301-1009_3-10403286-83.html. Retrieved 2009-08-22. 
  16. Buy.com, Orbitz linked to controversial marketers
  17. Laura Northrup (July 24, 2009). "Buy.com and Webloyalty Reservation Rewards - Say It Isn't So!". Consumerist.com. http://consumerist.com/2009/07/buycom-and-webloyalty-reservation-rewards---say-it-isnt-so.html. 
  18. "N.J. judge dismisses lawsuit over concert-ticket sales", David Porter, A.P. Philadelphia Inquirer. Wednesday, September 1, 2001. Accessed Wednesday, September 8, 2010.
  19. "American Airlines pulls fare data from Orbitz site", Chicago Tribune, December 22, 2010.
  20. Strauss, Michael (2010): Value Creation in Travel Distribution, http://www.amazon.com/Creation-Travel-Distribution-Michael-Strauss/dp/0557612462/ref=sr_1_1?ie=UTF8&s=books&qid=1291050497&sr=8-1
  21. "American Airlines Court Ordered Back Upon Orbitz Websites", CBS Local, June 1, 2011.
  22. "American Airlines jabs Orbitz on YouTube", Tnooz, May 31, 2011.
  23. "Surprise! You just bought trip insurance" Chicago Tribune web site, May 4, 2010

ReferencesEdit

External linksEdit


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