Orbitz
Encyclopedia
Near West Side, Chicago
The Near West Side, one of the 77 defined community areas of Chicago, is located , adjacent to the downtown central business district . The rich history of the Near West Side of Chicago has its genesis in the Hull House phenomenon...
, Chicago
Chicago
Chicago is the largest city in the US state of Illinois. With nearly 2.7 million residents, it is the most populous city in the Midwestern United States and the third most populous in the US, after New York City and Los Angeles...
, Illinois
Illinois
Illinois is the fifth-most populous state of the United States of America, and is often noted for being a microcosm of the entire country. With Chicago in the northeast, small industrial cities and great agricultural productivity in central and northern Illinois, and natural resources like coal,...
. 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. Orbitz Worldwide is a publicly-traded company listed on the New York Stock Exchange
New York Stock Exchange
The New York Stock Exchange is a stock exchange located at 11 Wall Street in Lower Manhattan, New York City, USA. It is by far the world's largest stock exchange by market capitalization of its listed companies at 13.39 trillion as of Dec 2010...
following its initial public offering (IPO) in July 2007. Orbitz Worldwide’s largest investor is Travelport
Travelport
Travelport is a broad-based business services company and a leading provider of critical transaction processing solutions to companies operating in the global travel industry...
, one of the world’s largest networks of travel brands, content and service offerings.
Background
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
CheapTickets
CheapTickets is an online travel services company focusing on the leisure market, offering airline tickets, hotel and Vacation rentals, rental cars, customized vacation packages, and cruises...
, and the Away Network in the Americas; ebookers
Ebookers
Ebookers.com is an online travel company based out of the UK and is a wholly owned subsidiary of Travelport, the former travel arm of Cendant which was bought in October 2006 by an affiliate of Blackstone Partners. Travelport split out itself into three companies...
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
Expedia
Expedia is an Internet-based travel website based in the US with localised sites for 21 countries...
and Travelocity
Travelocity
Travelocity is an online travel agency and wholly owned subsidiary of Sabre Holdings Corporation, which was a publicly traded company until taken private by Silver Lake Partners and Texas Pacific Group in March 2007...
, as well as a solution to the continued increase in Global Distribution System
Computer reservations system
A computer reservations system is a computerized system used to store and retrieve information and conduct transactions related to air travel. Originally designed and operated by airlines, CRSes were later extended for the use of travel agencies...
(GDS) fees. Continental Airlines
Continental Airlines
Continental Airlines was a major American airline now merged with United Airlines. On May 3, 2010, Continental Airlines, Inc. and UAL, Inc. announced a merger via a stock swap, and on October 1, 2010, the merger closed and UAL changed its name to United Continental Holdings, Inc...
, Delta Air Lines
Delta Air Lines
Delta Air Lines, Inc. is a major airline based in the United States and headquartered in Atlanta, Georgia. The airline operates an extensive domestic and international network serving all continents except Antarctica. Delta and its subsidiaries operate over 4,000 flights every day...
, Northwest Airlines
Northwest Airlines
Northwest Airlines, Inc. was a major United States airline founded in 1926 and absorbed into Delta Air Lines by a merger approved on October 29, 2008, making Delta the largest airline in the world...
, and United Airlines
United Airlines
United Air Lines, Inc., is the world's largest airline with 86,852 employees United Air Lines, Inc., is the world's largest airline with 86,852 employees United Air Lines, Inc., is the world's largest airline with 86,852 employees (which includes the entire holding company United Continental...
, subsequently joined by American Airlines
American Airlines
American Airlines, Inc. is the world's fourth-largest airline in passenger miles transported and operating revenues. American Airlines is a subsidiary of the AMR Corporation and is headquartered in Fort Worth, Texas adjacent to its largest hub at Dallas/Fort Worth International Airport...
, 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. The company began Beta testing early the next year, and Orbitz.com officially launched in June 2001.
Anti-trust concerns
Even before the site began operating, the company faced intense antitrustAntitrust
The United States antitrust law is a body of laws that prohibits anti-competitive behavior and unfair business practices. Antitrust laws are intended to encourage competition in the marketplace. These competition laws make illegal certain practices deemed to hurt businesses or consumers or both,...
scrutiny – because five of the six oligopolist
Oligopoly
An oligopoly is a market form in which a market or industry is dominated by a small number of sellers . The word is derived, by analogy with "monopoly", from the Greek ὀλίγοι "few" + πόλειν "to sell". Because there are few sellers, each oligopolist is likely to be aware of the actions of the others...
"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
United States Department of Transportation
The United States Department of Transportation is a federal Cabinet department of the United States government concerned with transportation. It was established by an act of Congress on October 15, 1966, and began operation on April 1, 1967...
to block the project from the outset, and some 23 state attorneys general
Attorney General
In most common law jurisdictions, the attorney general, or attorney-general, is the main legal advisor to the government, and in some jurisdictions he or she may also have executive responsibility for law enforcement or responsibility for public prosecutions.The term is used to refer to any person...
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
United States Department of Justice
The United States Department of Justice , is the United States federal executive department responsible for the enforcement of the law and administration of justice, equivalent to the justice or interior ministries of other countries.The Department is led by the Attorney General, who is nominated...
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
Cartel
A cartel is a formal agreement among competing firms. It is a formal organization of producers and manufacturers that agree to fix prices, marketing, and production. Cartels usually occur in an oligopolistic industry, where there is a small number of sellers and usually involve homogeneous products...
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 prospects
In August 2003, Orbitz filed to do an initial public offeringInitial public offering
An initial public offering or stock market launch, is the first sale of stock by a private company to the public. It can be used by either small or large companies to raise expansion capital and become publicly traded enterprises...
(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. In November, Orbitz filed paperwork to sell shares at between $22 and $24 each. The company went public on December 18, 2003 at a price per share of $26. After the IPO, the airlines held 70% of the outstanding stock and over 90% of the voting power. Because Orbitz had such a strong brand and consumer acceptance, most shareholders saw the carrier ownership as very positive for its long term sustainability.
On September 29, 2004, Orbitz was acquired for $1.25 billion by New York City
New York City
New York is the most populous city in the United States and the center of the New York Metropolitan Area, one of the most populous metropolitan areas in the world. New York exerts a significant impact upon global commerce, finance, media, art, fashion, research, technology, education, and...
-based Cendant
Cendant
Cendant Corporation was a New York-based provider of business and consumer services, primarily within the real estate and travel industries. In 2005 and 2006, Cendant broke up and spun off or sold its constituent businesses...
Corporation. Cendant paid $27.50 per share.
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
Ebookers
Ebookers.com is an online travel company based out of the UK and is a wholly owned subsidiary of Travelport, the former travel arm of Cendant which was bought in October 2006 by an affiliate of Blackstone Partners. Travelport split out itself into three companies...
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
CheapTickets
CheapTickets is an online travel services company focusing on the leisure market, offering airline tickets, hotel and Vacation rentals, rental cars, customized vacation packages, and cruises...
.
In June 2006, The Blackstone Group, entered into a definitive agreement with Cendant Corp to acquire Travelport
Travelport
Travelport is a broad-based business services company and a leading provider of critical transaction processing solutions to companies operating in the global travel industry...
, 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
Travelport
Travelport is a broad-based business services company and a leading provider of critical transaction processing solutions to companies operating in the global travel industry...
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
Travelport
Travelport is a broad-based business services company and a leading provider of critical transaction processing solutions to companies operating in the global travel industry...
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
Travelport
Travelport is a broad-based business services company and a leading provider of critical transaction processing solutions to companies operating in the global travel industry...
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
Travelport
Travelport is a broad-based business services company and a leading provider of critical transaction processing solutions to companies operating in the global travel industry...
continues to own approximately 48 percent of Orbitz Worldwide following the IPO. As a result, Orbitz Worldwide remains an affiliate of Travelport
Travelport
Travelport is a broad-based business services company and a leading provider of critical transaction processing solutions to companies operating in the global travel industry...
. 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.
Technologies
Orbitz runs on a Red Hat LinuxRed Hat Linux
Red Hat Linux, assembled by the company Red Hat, was a popular Linux based operating system until its discontinuation in 2004.Red Hat Linux 1.0 was released on November 3, 1994...
, Sun Solaris based platform and was an early adopter of Sun's
Sun Microsystems
Sun Microsystems, Inc. was a company that sold :computers, computer components, :computer software, and :information technology services. Sun was founded on February 24, 1982...
Jini
Jini
Jini , also called Apache River, is a network architecture for the construction of distributed systems in the form of modular co-operating services.Originally developed by Sun, Jini was released under an open source license...
platform in a clustered Java
Java (programming language)
Java is a programming language originally developed by James Gosling at Sun Microsystems and released in 1995 as a core component of Sun Microsystems' Java platform. The language derives much of its syntax from C and C++ but has a simpler object model and fewer low-level facilities...
environment. Both JBoss
JBoss
JBoss Application Server is an open-source Java EE-based application server. An important distinction for this class of software is that it not only implements a server that runs on Java, but it actually implements the Java EE part of Java...
and Oracle WebLogic Server
Oracle Weblogic Server
Owned by Oracle Corporation, Oracle WebLogic consists of a Java EE platform product-family that includes:* a Java EE application server, WebLogic Application Server* an enterprise portal, WebLogic Portal* an Enterprise Application Integration platform...
are used as application servers within their environment along with various other proprietary
Proprietary software
Proprietary software is computer software licensed under exclusive legal right of the copyright holder. The licensee is given the right to use the software under certain conditions, while restricted from other uses, such as modification, further distribution, or reverse engineering.Complementary...
and open source
Open-source software
Open-source software is computer software that is available in source code form: the source code and certain other rights normally reserved for copyright holders are provided under a software license that permits users to study, change, improve and at times also to distribute the software.Open...
software. Orbitz licenses ITA Software's
ITA Software
ITA Software is a travel industry software company in Cambridge, Massachusetts. The company was founded by computer scientists from the MIT Artificial Intelligence Laboratory in 1996. On July 1, 2010 ITA agreed to be acquired by Google. On April 8th, 2011 the US Department of Justice approved the...
Lisp-powered QPX software to power their site. Orbitz and ebookers
Ebookers
Ebookers.com is an online travel company based out of the UK and is a wholly owned subsidiary of Travelport, the former travel arm of Cendant which was bought in October 2006 by an affiliate of Blackstone Partners. Travelport split out itself into three companies...
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.
Southwest Airlines
Southwest AirlinesSouthwest Airlines
Southwest Airlines Co. is an American low-cost airline based in Dallas, Texas. Southwest is the largest airline in the United States, based upon domestic passengers carried,...
filed a lawsuit against Orbitz for trademark
Trademark
A trademark, trade mark, or trade-mark is a distinctive sign or indicator used by an individual, business organization, or other legal entity to identify that the products or services to consumers with which the trademark appears originate from a unique source, and to distinguish its products or...
infringement and false advertising
False advertising
False advertising or deceptive advertising is the use of false or misleading statements in advertising. As advertising has the potential to persuade people into commercial transactions that they might otherwise avoid, many governments around the world use regulations to control false, deceptive or...
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
Airline Tariff Publishing Company
The Airline Tariff Publishing Company, ATPCO, or ATP, is a corporation that publishes the latest airfares for more than 500 airlines multiple times per day. Based at Washington Dulles International Airport outside of Washington, D.C.,ATPCO also has offices in London,UK and Singapore...
, 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.
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.
WebLoyalty
In July 2009 CNETCNET
CNET is a tech media website that publishes news articles, blogs, and podcasts on technology and consumer electronics. Originally founded in 1994 by Halsey Minor and Shelby Bonnie, it was the flagship brand of CNET Networks and became a brand of CBS Interactive through CNET Networks' acquisition...
revealed that Orbitz, along with other popular consumer websites Buy.com
Buy.com
Buy.com, Incorporated is an online retailer based in Aliso Viejo, California.Buy.com began by selling computers and electronics in 1997 and has since expanded into many other categories...
and Fandango
Fandango (ticket service)
Fandango is a corporation in the United States that sells movie tickets over the telephone and Internet, enabling customers to ensure ticket availability and avoid lines at the movie theater.-Services:...
, 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".
The scam works by charging a monthly fee (many users report a $12 charge from Reservation Rewards or Webloyalty
Webloyalty
Webloyalty is an online marketing company and the parent company of the UK company Shopper Discounts & Rewards. Its founding partner and CEO is Richard Fernandes...
showing up on their credit card statements) that is piggybacked with the Orbitz sale (as it stands, Orbitz Terms of Service
Terms of Service
Terms of service are rules which one must agree to abide by in order to use a service. Unless in violation of consumer protection laws, such terms are usually legally binding...
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.
Alleged fraud
In 2009, the state of New JerseyNew Jersey
New Jersey is a state in the Northeastern and Middle Atlantic regions of the United States. , its population was 8,791,894. It is bordered on the north and east by the state of New York, on the southeast and south by the Atlantic Ocean, on the west by Pennsylvania and on the southwest by Delaware...
filed a lawsuit against the company alleging violation of their Consumer Fraud Act surrounding events with a Bruce Springsteen
Bruce Springsteen
Bruce Frederick Joseph Springsteen , nicknamed "The Boss," is an American singer-songwriter who records and tours with the E Street Band...
concert, where tickets were offered for sale on their website which did not actually exist. The court in Milgram v. Orbitz
Milgram v. Orbitz
In Milgram v. Orbitz Worldwide, LLC, the New Jersey Superior Court held that online ticket resellers qualified for immunity under Section 230 of the Communications Decency Act , and that such immunity preempted a state law consumer fraud statute...
granted summary judgment for Orbitz, finding that Section 230 of the Communications Decency Act
Section 230 of the Communications Decency Act
Section 230 of the Communications Decency Act of 1996 is a landmark piece of Internet legislation in the United States, codified at...
preempted the state law consumer fraud claims.
American Airlines Pulls Fares from Orbitz
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. 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 servicesAncillary revenue
Ancillary revenue refers to airline revenue from non-ticket sources, such as baggage fees and on-board food and services, and has become an important financial component for low-cost carriers in Europe, the United States and other global regions...
to its customers. American was later ordered by an Illinois Court to resume offering fares and flight schedules. The court order came only days after American released a video jabbing Orbitz on YouTube.