Orbitz

Type: Public Company
Address: 200 South Wacker Drive, Suite 1900, Chicago, Illinois 60606, U.S.A.
Telephone: (312) 894-5000
Toll Free: 888-656-4546
Fax: (312) 894-5010
Web: http://www.orbitz.com
Employees: 306
Sales: $175.5 million (2002)
Stock Exchanges: NASDAQ
Ticker Symbol: ORBZ
Incorporated: 2000 as DUNC, LLC
NAIC: 561510 Travel Agencies

Orbitz, Inc. operates a top three online travel agency. Orbitz.com has more than 19 million registered users, who can search among more than two billion fares on 455 airlines. This includes the largest selection of web-only airfares. Orbitz also offers deals on lodging (among 39,000 properties), rental cars (from 25 companies), vacation packages (30 providers), and cruises (18 lines). Airline ticket sales account for an estimated 70 percent of revenues. Other offerings include Orbitz for Business, aimed at corporate travelers, and Supplier Link Technology, an airline ticket distribution system. Orbitz was founded by United, American, Continental, Delta, and Northwest.

Five airlines--United Airlines Inc., Delta Air Lines Inc., Continental Airlines Inc., Northwest Airlines Corp., and, later, AMR Corp. (American Airlines)--teamed to create a new online travel service. (American became an equity partner in March 2000; total start-up funding was around $100 million.) Together, the five founding partners controlled 90 percent of seats on domestic commercial flights. Existing computer reservations systems such as SABRE did not present competing fares in an unbiased way, said company officials.

The venture was known to the media as "T2" when it was announced in November 1999. In fact, the partnership was incorporated as "DUNC, LLC" on February 24, 2000; "DUNC, Inc." was incorporated on May 4, 2000. These entities were officially named Orbitz, LLC and Orbitz, Inc. in July 2000. By this time, 30 affiliate airlines had signed up. Users could still buy tickets from 450 other airlines on the site.

Orbitz hired consumer advocate Cornish Hitchcock as an adviser at the time of its launch, when it had a total of 12 employees. By this time, six other airlines--Hawaiian, Midway, Midwest Express, Spirit, US Airways, and Vanguard--had agreed to sponsor the service. The total investment was $50 million.

The next month, Orbitz landed Jeffrey Katz, former CEO of Swissair AG, who left the airline to head the Internet start-up. Katz, an American native, would then commute from Los Angeles to Chicago in true airline exec fashion. Katz had once been an executive for the SABRE computer reservation system, owner of the Travelocity online ticket site.

Orbitz ended 2000 with 125 employees and no sales as it ramped up for a four-month beta test to begin the next February. The company's first hire was Chief Technology Officer Alex Zoghlin. Nara Schoenberg's profile of him in the Chicago Tribune painted him as an irrepressible, ponytail-wearing prankster and unlikely Navy vet with a strong entrepreneurial upbringing. He was also a computer whiz who had pioneered web browsers at the University of Illinois with Netscape cofounder Marc Andreessen (who would join the Orbitz board in 2003). Zoghlin left the firm in April 2003.

Traditional travel agents and competing travel sites protested Orbitz' cozy relationship with airlines, including its ability to sell cut-rate Internet specials not available through such traditional computer reservation systems as SABRE, Worldspan, and Galileo. Orbitz was also enabling the airlines to save on the fees they had been paying to have their flights listed on these databases by setting up its own "Supplier Link" distribution system.

However, Orbitz was able to successfully clear antitrust investigations, beginning with that of the Department of Transportation, in April 2001. (However, in June 2002, the Transportation Department reported it was conceivable that Orbitz might be able to undercut other web sites because of its close alliance with the airlines, reducing competition in the long run.) A Justice Department probe was finally completed in August 2003.

There were a number of rivals online. The oldest, Priceline, used a formula that required customers to essentially bid for tickets, rather than pick among listed fares themselves. Another group of airlines was launching a service called Hotwire that operated on a similar concept. There was also software designed to sort through fare offerings on individual airlines' web sites.

Orbitz.com officially opened for business in June 2001. It claimed to have more web-only bargain fares than any other site. Orbitz also boasted the ability to inform customers of flight cancellations and changes through their pagers and mobile phones. The site also made it easy to search nearby airports for better fares. Orbitz.com sold $3.3 million on its first full day; it signed up 5,000 new customers in a single Sunday.

The Orbitz site had been billed as being powered by the fastest search engine in the world, custom designed at MIT. However, users experienced a number of technical glitches, particularly relating to international flights. There were also compatibility problems with older web browsers and with AOL, and complaints of inadequate customer service. An Orbitz spokesperson accused competitors of a "smear campaign."

Southwest Airlines sued Orbitz, complaining that the site listed its fare and flight information in a misleading way. Orbitz did not actually sell Southwest tickets. Vanguard Airlines, one of Orbitz's own partners, also had a troublesome relationship with the company.

A number of factors affected the travel industry after Orbitz started business. These included a weak global economy and the 9/11 terrorist attacks on the United States. This resulted in a weak reception on the stock market for another couple of years.

Orbitz began charging a $5 per ticket fee in December 2001. The company reported $43.4 million in operating revenue for the year. Orbitz's estimated $2.5 billion in bookings in 2002 more than tripled the previous year's result. The company lost $17.9 million for the year on revenues of $175.5 million.

In July 2002, Orbitz launched Supplier Link, billed as the first new airline ticket distribution system in more than 30 years. Around the same time, the company unveiled a special service to help corporate users save money on business travel. Savings of up to 75 percent on transaction fees were touted, since it only charged a $5-$6 per ticket fee. Specialized cost reporting and itinerary management tools were part of the service. The business unit originally targeted smaller businesses with annual travel budgets between $1 million and $10 million; Orbitz landed its first account with a major corporation, McDonald's, in October 2003.

An initial public offering was scheduled for 2002, but postponed due to weakness in the stock market and other conditions. While the online travel market was competitive, Orbitz's prospectus suggested a successful future by leveraging the site's pull on seekers of airline tickets to pitch higher margin services. The company began reselling hotel rooms online in the spring of 2003. According to Business Week, Orbitz actually listed rooms available on Travelweb.com in exchange for commissions.

Orbitz gained by the postponement of its initial public offering (IPO). The IPO had originally been expected to take in $125 million when set for May 2002. In the next year and a half, the company's numbers grew and it was coming closer to profitability. Skeptics blasted Orbitz's lack of consistent profits, and noted that the commission rates the airlines paid were scheduled to drop to 37 percent of their value by 2006.

When the IPO was rescheduled in November 2003, the company said it expected to reap up to $303.6 million. Orbitz, Inc. began trading on December 16 at $26 a share, and the company raised $317 million in the IPO. The five founding airlines sold some stock but retained an ownership stake.

Orbitz increased its offerings of rooms at 100 independent hotels in March 2003. The company already had an association with TravelWeb, a consortium made up of Marriott International Inc., Hilton Hotels Corp., Hyatt Corp., and others. Orbitz sold 2.3 million room nights in 2002, one-fifth that of Expedia, Inc., owned by USA Interactive.

Principal Divisions

Booking Engine Services; Orbitz for Business; Supplier Link.

Principal Competitors

Hotels.com; Priceline.com; Sabre Holdings Corp. (Travelocity.com); USA Interactive (Expedia Inc.).

Further Reading

Bly, Laura, "Katz Orbits the Web World," USA Today, December 29, 2000, p. 1D.

Chandler, Susan, "Antitrust Ruling Clears Path for Orbitz Takeoff," Chicago Tribune, Bus. Sec., August 22, 2003, p. 1.

Chase, Tammy, "Orbitz Down About 4% in First Day of Trading," Chicago Sun-Times, Fin. Sec., December 18, 2003, p. 76.

------, "Orbitz Expects an IPO to Bring Up to $303.6 Mil.," Chicago Sun-Times, Fin. Sec., November 27, 2003, p. 71.

------, "Orbitz Not Hurting Airline Competition or Causing Fares to Rise, U.S. Says," Chicago Sun-Times, August 1, 2003, p. 61.

------, "Orbitz Raises $317 Million in IPO," Chicago Sun-Times, December 17, 2003, p. 93.

------, "Orbitz Working to Gain As Firms Look to Cut Travel Costs," Chicago Sun-Times, Fin. Sec., October 29, 2003, p. 69.

Claburn, Thomas, "Turbulence at Takeoff," Ziff Davis Smart Business for the New Economy, November 1, 2000, p. 38.

Clark, Jayne, "In New TV Commercial, Orbitz Has Gay Travelers in Its Sights," USA Today, August 1, 2003, p. D1.

Compart, Andrew, "Orbitz-Vanguard Skirmish Gets Ugly," Travel Weekly, July 30, 2001, p. 1.

------, "Vanguard Steers Away from Orbitz," Travel Weekly, July 26, 2001, p. 1.

Costello, Jane, "Technical Glitches Still Plague Online Travel Service Orbitz," Wall Street Journal, August 27, 2001, p. B4.

DiSabatino, Jennifer, "Southwest Airlines Pulls Flight Information to Hinder Orbitz," Computerworld, July 16, 2001, p. 15.

Foss, Brad, "Orbitz Latest to Start Booking Tool Aimed at Corporate Fliers," Chicago Sun-Times, July 16, 2002, p. 54.

Garfield, Bob, "Creepiness Dwarfs the Upside in Orbitz's Marionette Show," Advertising Age, April 14, 2003, p. 49.

Grimes, Paul, "Orbitz Entry Gives Some Help in an Already Confusing Web World," Chicago Tribune, Travel Sec., July 29, 2001, p. 17.

Hamilton, Anita, "The Orbitz Blitz; Consumers Are Curious--and Rivals, Furious--About the Website Created by the Major Airlines," Time, July 30, 2001, p. Y15.

"Katz in Orbitz," Air Transport World, August 2000, p. 11.

Kopytoff, Verne, "Rivals Air Reservations About Orbitz Practices," Chicago Sun-Times, August 5, 2002, p. 49.

Maddox, Kate, "Internet Travel Firm Flies into Biz Orbit," Crain's Chicago Business, September 30, 2002, p. 8.

Maroney, Tyler, "An Air Battle Comes to the Web," Fortune, June 26, 2000, pp. 315+.

Mullaney, Timothy J., "Orbitz' Heavy Baggage; Why It's Unprofitable--And Why the IPO May Have to Wait," Business Week, July 8, 2002, p. 64.

------, "Sky-High Pay for Orbitz' Chief," Business Week, November 10, 2003, p. 13.

------, "This IPO Doesn't Deserve to Fly," Business Week, September 29, 2003, p. 110.

Mullins, Robert, "Travel Site Orbitz.com Feeling Scorn from Competition," Silicon Valley/San Jose Business Journal, June 22, 2001, p. 18.

Nairn, Geoffrey, "Turning Lookers into Bookers," Financial Times (London), May 2, 2001.

O'Donnell, Jayne, "Big Airlines Officially Open Online Outlet; Critics Fear Orbitz Fare Site Will Be Unfair," USA Today, June 4, 2001, p. B1.

Power, Stephen, and Melanie Trottman, "U.S. Report Gives Mixed Review on Effect of Orbitz on Competitors," Wall Street Journal, June 28, 2002, p. B2.

Rich, Motoko, "Orbitz, Expanding Inn Offerings, to List More Independent Hotels," Wall Street Journal, March 13, 2003, p. D3.

Rose, Barbara, "Orbitz Sets $125 Million Stock Offering," Chicago Tribune, May 21, 2002, p. 1.

------, "Tech Visionary Sights Maturity in Orbitz Orbit," Chicago Tribune, Bus. Sec., June 7, 2001, p. 1.

Schmeltzer, John, "Airlines' New On-Line Travel Service Hires In-House Critic," Chicago Tribune, Bus. Sec., June 16, 2000, p. 3.

Schoenberg, Nara, "The Bad Boy of Travel," Chicago Tribune, November 10, 2002, p. Q1.

Shapiro, Michael, "Orbitz's Rude Awakening; A First-Week Report on the Airlines' New Site," Washington Post, June 10, 2001, p. E1.

Stewart, Janet, "Swissair's Katz Takes Flight into New Orbitz," Chicago Tribune, Bus. Sec., July 6, 2000, p. 1.

Stroud, Toni, "Much Ado About Orbitz," Chicago Tribune, Travel Sec., April 22, 2001, p. 21.

Sweeny, Phil, "Cambridge Company Helps Get Orbitz Web Site Airborne," Boston Business Journal, June 15, 2001, p. 29.

Tedeschi, Bob, "Orbitz Takes Off, in the Spotlight," New York Times, June 17, 2001.

Trottman, Melanie, "Dropping the Corporate Travel Office; McDonald's Makes Employees Book Trips Through Orbitz," Wall Street Journal, October 28, 2003, p. D1.

Tsuruoka, Doug, "Orbitz Is Flying High, But Regulators Still Have Questions," Investor's Business Daily, April 4, 2002, p. A8.

Van, Jon, "Orbitz Tech Guru Takes Leave of Online Travel Firm," Chicago Tribune, Bus. Sec., January 29, 2003, p. 1.

Williamson, Tammy, "Giant Airlines' Internet Travel Site Launched--And the Boss Is Confident," Chicago Sun-Times, June 5, 2001, p. 47.

— Frederick C. Ingram

This article is written like an advertisement. Please help rewrite this article from a neutral point of view. For blatant advertising that would require a fundamental rewrite to become encyclopedic, use {{db-spam}} to mark for speedy deletion. (November 2008)

This article is about the online travel agency. For the soft drink, see Orbitz (soft drink).

Orbitz Worldwide, Inc.

Type	Public
Founded	2001
Headquarters	Chicago, Illinois, USA
Key people	Jeff Clarke, Chairman Barney Harford, President, CEO Marsha C. Williams, CFO Mike Nelson, COO
Industry	Travel services
Revenue	US$859 million (2007) [1]
Employees	1,590 (2007) [1]
Website	www.orbitz.com

Orbitz Worldwide, Inc. (NYSE: OWW) 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. 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.

Contents 1 Background 2 Anti-trust concerns 3 IPO, sale, and future prospects 4 Technologies 5 Controversies 5.1 Southwest Airlines 6 Footnotes 7 References 8 External links

Background

Orbitz for Business logo.

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 for Business.

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 concerns

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. Orbitz continued its success in the market based upon its unique technology platform.

IPO, sale, and future prospects

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-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 60 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

Orbitz runs on a Red Hat Linux[3], Sun Solaris[4] based platform and was an early adopter of Sun's Jini[5] 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. [6] 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.

Controversies

Southwest Airlines

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.^[10]

Footnotes

1. ^ ^{a b} "Orbitz Worldwide, Inc. Overview". Hoover's, Inc. 2009. http://www.hoovers.com/orbitz-worldwide/--ID__101230--/free-co-factsheet.xhtml. Retrieved on 2009-03-19. 
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 [1]
10. ^ Center for Asia Pacific Aviation, [2]

References

• "ORBZ Securities Registration Statement (S-1/A)". 2002-07-03. http://sec.edgar-online.com/2002/07/03/0000912057-02-026478/Section12.asp. Retrieved on 2006-11-09. 
• "Commentary: Orbitz' IPO Doesn't Deserve to Fly". 2003-11-29. http://www.businessweek.com/magazine/content/03_39/b3851118_mz020.htm. 
• "Will Orbitz's IPO Fly?". 2003-11-26. http://www.forbes.com/2003/11/26/cx_aw_1126orbitz.html. 
• "Orbitz IPO Soars". 2003-12-18. http://www.bizjournals.com/atlanta/stories/2003/12/15/daily27.html. 
• "Orbitz Stock Price at $26 for IPO". 2003-12-16. http://www.alwayson-network.com/comments.php?id=P2103_0_6_0_C. 
• "Orbitz Loses Altitude". 2003-12-18. http://www.fool.com/news/commentary/2003/commentary031218tt.htm. 
• "Cendant Corporation Completes Acquisition of Orbitz". 2004-11-12. http://pressroom.orbitz.com/ReleaseDetail.cfm?ReleaseID=148156. 
• "Carl de Marcken: Inside Orbitz". 2001-01-12. http://www.paulgraham.com/carl.html. 

External links

• Orbitz official website
• Orbitz Worldwide, Inc. corporate website
• Open Cuba: Connecting Americans and Cubans through the Freedom to Travel supported by Orbitz

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