Not an Orbitz-uary, But ...

The company's premise -- an independent operation dedicated to offering the lowest published fares from 30 airline companies -- seemed like an ideal business proposition to many of us.

So far, Orbitz has had a difficult time living up to its original hype, and in response to a recent series of questionable business moves, many of us may choose to remain loyal to the two "founding fathers" of online travel -- Travelocity (Nasdaq: TVLY) and Expedia (Nasdaq: EXPE).

Competitors Cry Foul

The company's most recent high-profile problem became more pronounced last month when the Interactive Travel Service Association asked the U.S. Department of Transportation (DOT) to investigate Orbitz for possibly stifling competition among online travel sites.

ITSA specifically objects to Orbitz' requirement that associated airlines must offer their lowest published fares directly to the site.

This is not a new controversy. Similar complaints were lodged prior to the Orbitz launch in the spring, but the DOT chose not to block the company's launch, and took a wait-and-see approach instead.

Now the ITSA wants the DOT to step in once again. A government investigation would not be surprising, in view of an extreme sensitivity to online antitrust violations.

What Consumers See

Meanwhile, other moves that directly affect consumers appear to indicate uncertainty within Orbitz.

First, just after the terrorist attacks in September, Orbitz immediately cut its staff in anticipation of what it believed would be a prolonged decrease in consumer travel. This highly public move proved somewhat premature, because Nielsen//NetRatings soon reported that Orbitz's share of traffic to online travel sites rose from 11.3 in September to 17.2 in October.

In fairness, this does not necessarily mean business was booming, because increased traffic does not always equal a sharp increase in sales. Orbitz is not required to reveal its number of tickets sold.

Still, by the middle of last month, Orbitz announced "that both site traffic and sales transactions have set new records, demonstrating the site's continued growth despite the overall slowdown in travel buying post-September 11."

New Fees

Then, late last week, Orbitz reportedly announced a newly instituted US$5 service fee on all of its tickets. In an oddly vague explanation of this latest move, Orbitz said the fee is necessary to let the company remain independent from the airlines and other travel companies with which it is associated.

It would appear Orbitz is banking on consumer willingness to shell out a measly five bucks, an amount that will not make or break most people.

However, when the economy is in recession, unemployment unreasonably high and near-term prospects somewhat bleak, any fee hikes with doubtful justification are probably not wise.

The obvious question: Why was the $5 fee not necessary in the first six months of the company's operation?

More Missteps?

One more Orbitz move could cause people to think twice about the company. This week, reportedly, Orbitz will unveil a new partnership with Comet Systems, intended to lure travelers away from Expedia and Travelocity. Comet Systems transforms traditional cursors into animated figures that function as comparison shoppers.

When a user checks fares at Expedia or Travelocity, Comet's technology will supposedly display the Orbitz fares next to its competitors' fares.

From a business standpoint, the move appears a bit unsavory. As a consumer, it seems intrusive and overly aggressive.

Consumer Loyalty

Despite its much-delayed launch, Orbitz claims it will be profitable by mid-2002, ahead of its original schedule. However, critics say it will achieve profitability through unfair business practices and questionable sales techniques.

In the long run, whether Orbitz prospers will largely depend on consumer loyalty. At this point, Travelocity and Expedia are the clear frontrunners in what has developed into one of the most competitive and profitable online business sectors.

If nothing else, Orbitz should probably have entered the race a bit earlier and not allowed its two competitors to have such a major head start.

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