Orbitz

Orbitz Worldwide, Inc.

Type	Subsidiary of Expedia, Inc.
Industry	Travel services
Founded	2001
Headquarters	Citigroup Center Chicago, Illinois, U.S.
Key people	Barney Harford, Former CEO (Pre-Expedia)
Revenue	US$767 million (2011)[1]
Owner	Expedia, Inc.
Number of employees	1,400 (2010)[2]
Website	orbitz.com

Citigroup Center, which houses the company headquarters

Orbitz Worldwide, Inc. is a subsidiary of Expedia that operates a web site used to research, plan and book travel.^[3] It is headquartered in the Citigroup Center, Chicago, Illinois.^[4] Previously a separate company, it was purchased by Expedia in a $1.3 billion deal that was announced in February 2015^[5] and closed in September 2015.^[6]

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 in the Americas; ebookers in Europe; and HotelClub and RatestoGo, based in Sydney. Orbitz Worldwide also owns and operates Orbitz for Business, 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 lower airline distribution costs. 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.^[7] The company began Beta testing early the next year, and Orbitz.com officially launched in June 2001.^[8]

Pre-launch government review

Even before the site began operating, the company faced intense antitrust scrutiny – because five of the six "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

In July 2003 - two years after the Orbitz launch - 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. The efforts by its competitors to generate government scrutiny and the corresponding media attention only heightened consumer interest in Orbitz and the new ways it would allow travelers to shop. Nielsen's Net Ratings division reported in July 2001 that the Orbitz launch in June 2001 was the biggest e-commerce launch in over two years,^[9] with more than 2 million visitors during the month, exceeding the launch of sites such as Target.com and Walmart.com. Orbitz Worldwide travel sites now generate that many visitors each day.

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.^[10]

In November 2003, Orbitz filed paperwork to sell shares at between $22 and $24 each.^[11] 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.^[12]

On September 29, 2004, Orbitz was acquired for $1.25 billion by New York City-based Cendant Corporation. Cendant paid $27.50 per share. 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. Orbitz Worldwide is publicly traded on the New York Stock Exchange (NYSE) under the ticker symbol OWW.

In February 2015, Expedia announced that it would acquire Orbitz for $1.2 billion in cash, in order to better compete with Priceline.com. The deal comes only a few days after Expedia agreed to purchase Travelocity.^[13]

Technologies

Orbitz runs on a mixed Red Hat Linux^[14] and Solaris based platform and was an early adopter of Sun Microsystems' Jini^[15] platform in a clustered Java environment. JBoss is used as application servers within their environment along with various other proprietary and open source software.^[16] Orbitz licenses ITA Software's Lisp-powered QPX software to power their site. Orbitz Worldwide brands have been migrated to a common technology platform, which enables 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.^[17]

Controversies

Media Matters' "War on Fox"

The anticonservative George Soros-funded and David Brock-run Media Matters runs a website DropFox.com and works to get advertisers to boycott Fox News. Orbitz initially referred to Media Matters' efforts as a "smear campaign",^[18] but agreed, on June 9, 2011, following a three-week campaign by prominent LGBT organizations, to "review the policies and process used to evaluate where advertising is placed".^[19]

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. In June 2008, Orbitz For Business became one of the first Online Travel Agents to offer Southwest flights on the Orbitz For Business website.^[20]

WebLoyalty

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".^[21] 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). Orbitz ended its affiliation with the controversial marketer and does not share consumer credit card information with third parties.

Milgram v. Orbitz

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 allegedly 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.^[22]

Skiplagged lawsuit

In 2014, Orbitz and United Airlines initiated a Federal lawsuit against 22-year-old skiplagged.com founder Aktarer Zaman.^[23][24][25] The complaint alleges that Zaman "intentionally and maliciously" interfered with airline industry business relationships “by promoting prohibited forms of travel.”^[26] The complaint is centered on airline policies against "hidden city tickets." Although the hidden-city practice itself is not illegal,^[27] the complaint alleges that Zaman's website is disruptive to their business.

American Airlines

In December 2010, American Airlines temporarily ceased offering fares through Orbitz following pressure from American to convince Orbitz to use its AA Direct Connect electronic transaction system.^[28] AA tried to establish that Direct Connect would have full control over the distribution of its products and reduce GDS segment fees. Furthermore, Direct Connect enables AA to sell ancillary services to its customers.^[29] American was later ordered by an Illinois Court to resume offering fares and flight schedules.^[30] The court order came only days after American released a video jabbing Orbitz on YouTube.^[31]

References

Sources

• "ORBZ Securities Registration Statement (S-1/A)". 2002-07-03. Retrieved 2006-11-09. 
• Weinberg, Ari (2003-11-26). "Will Orbitz's IPO Fly?". Forbes. 
• "Orbitz IPO Soars". 2003-12-18. 
• "Orbitz Stock Price at $26 for IPO". 2003-12-16. 
• "Orbitz Loses Altitude". 2003-12-18. 
• "Cendant Corporation Completes Acquisition of Orbitz". 2004-11-12. 
• "Carl de Marcken: Inside Orbitz". 2001-01-12. 

External links

• Official website