Orbitz Takes Off

NEW YORK - An earthquake has just hit the online travel business, and its name is Orbitz.

The company, backed by five of the six largest airlines, officially launches this month. But thanks to a beta version that's been online for weeks, rivals can already tell it's bad news: Orbitz can match or beat their lowest fares for most standard reservations. Now the two biggest players, Microsoft-backed Expedia and Travelocity.com, which is controlled by the giant airline computer reservation system company Sabre, are scrambling to push different offerings as they confront an unpleasant and perhaps unfair reality.

The upstart, which is backed by American, Continental, Delta, Northwest and United, just unveiled a multimillion-dollar advertising campaign. Orbitz CEO Jeff Katz says his firm's marketing budget will match his rivals', spending as much as $100 million annually. The campaign's message is that no other site can touch Orbitz's rock-bottom fares. That's no idle boast.

In a comparison of five flights, Orbitz generally offered the least expensive fare when limited to cases where the airline is identified and frequent-flier miles can be earned. Orbitz critics say the results are not exactly a surprise; they say the airlines have promised Orbitz special access to the lowest fares.

Orbitz denies having exclusive deals with the airlines. Its execs say its advanced search capabilities are the reason for its edge. Searches on Orbitz often retrieve lower fares than even the ones provided by airlines' own sites.

The exception to Orbitz's claim of lower prices is the category known as opaque fares: discounted tickets with strings attached. Under this arrangement, the airline's identity and the flight times aren't disclosed until purchase; frequent-flier miles are not awarded. The agencies negotiate with the airlines for the right to sell these tickets, promising low distribution costs. The agency, rather than the airline, sets the price, making money from the sale's profit rather than a commission. Firms like Hotwire and Priceline.com specialize in opaque fares. Orbitz so far does not offer any.

To capitalize on the gap in Orbitz's selection, Travelocity and Expedia have added opaque fares. They've also stepped up efforts to offer other exclusive low fares that they can negotiate with carriers, in return for prime advertising on their sites.

But Orbitz is looking to expand into opaque fares. A company spokeswoman says its execs are talking with Hotwire and Priceline to help it sell such tickets, which would make Orbitz practically unbeatable in price.

Faced with what could be an unwinnable price war, Travelocity and Expedia are emphasizing customer service, their lack of bias and offerings besides tickets. Expedia, for instance, launched a new search engine in January to give customers more choice and control. Travelocity is giving greater exposure on its site to packages, including air tickets, car rentals and hotel rooms.

The two agencies are also counting on regulators to halt Orbitz in its tracks. Executives at both firms, along with 25 consumer groups, say Orbitz has an arrangement with the airlines that is an abuse of the carriers' monopoly power. The critics charge that this will ultimately allow Orbitz and the airlines to set higher prices. They're banking on the Justice Department to intervene.

Orbitz brushes aside such concerns. After delays in its launch last year, it's aggressively pushing ahead, promising to deliver great deals. With the battle just beginning, this summer may be the perfect time to buy cheap tickets.