Site Defends Against Allegations
Site Defends Against Allegations
Jun. 09, 2000
NEW YORK (AP) _ Executives of a travel Web site being launched by five major airlines are defending their business model amid antitrust allegations from competitors.
The site is not yet online and it does not have a name. But already, complaints about its close ties to the airlines are under review by the Justice Department and will be the subject of Senate hearings later this month. Critics say the Web site would use its relationship with the airlines to restrict rivals' access to flight information and low-priced tickets, ultimately choking off competition.
``Our contract with the carriers is unbiased and unfiltered,'' Alex Zoghlin, chief technology officer of the new site, said Thursday. Zoghlin contends that rather than antitrust fears, competing travel Web sites worry that the site, which has been temporarily dubbed ``T2,'' will lure more travelers through better technology and better prices.
The site is expected to be online by the end of the summer, offering plane tickets, hotel rooms, car rentals and cruises. A name for the service is to be announced next week.
The major investors in T2 are Delta Air Lines Inc., UAL Corp., Northwest Airlines Corp., Continental Airlines Inc. and AMR Corp. More than 30 other airlines will participate as ``charter associates,'' marketing T2 through in-flight videos and magazines and by offering the most inexpensive fares listed on their own Web sites to customers of the new venture.
In return, airlines have been promised reduced commissions and booking fees, which can run upward of $10 per reservation on other travel sites.
T2 said that its partners and ``charter associates'' will be free to establish similar deals with other companies.
The primary critic of T2 has been Dallas-based Travelocity.com, the leading online travel company, which has some 19 million registered users and had sales of more than $1 billion in 1999.
``The issue is fair access to fare information,'' said Bruce Charendoff, senior vice president of government affairs for Travelocity. ``There have been recurring rumors that carriers (that list fares with T2) are going to be required to jointly boycott other travel Web sites and use T2 exclusively for a certain portion of their fares.''
But T2's Zoghlin counters that his company will actually provide better prices and itinerary options for consumers.
T2's search engine will display hundreds of flight options, regardless of which airline offers them, whereas existing sites typically return fewer than a dozen, Zoghlin said. Customers using T2 will be able to search by airline, airport or flight time.
Zoghlin also launched a counterattack against existing travel Web sites, which he accused of preventing consumers from ever seeing the lowest air fares. These sites are able to shift business to particular airlines through special contracts, he said.
Technology consulting firm Forrester Research Inc. said it believes T2's strategy is sharp and could help it become a leading site. In a brief report about T2, Forrester wrote: ``It's designed to cut out Travelocity.com and Expedia, which, if left unchecked, could grow large enough to negotiate better fares and commissions with large suppliers of their own.''
The technology underpinning T2's site was developed by ITA Software, which is based in Cambridge, Mass.
The Senate Commerce Committee will hold hearings on June 22 to address two major concerns about T2. One is to take an overall look at how this partnership of major airlines could make it easier to fix prices. The other concern is that if T2 successfully drives out its competitors, the cost of airfare could begin to creep up.
Still, Spencer Waller, a professor at Brooklyn Law School, said, ``I could imagine a version of this joint venture that makes it easier for consumers to get better price information. The mere fact that a competing online service might be harmed does not make this an antitrust violation.''
T2 has provided the Justice Department with copies of its contract with the major partners and the charter associates. Zoghlin said T2 has not been given details of the government's review.