Orbitz

Orbitz Worldwide, Inc.
Subsidiary
Industry Travel services
Founded June 2001 (2001-06)[1]
Headquarters 500 West Madison, Chicago, Illinois, United States
Key people
 Barney Harford
(Former CEO) (Pre-Expedia)
Revenue $932 million (2014)[1]
Number of employees
 1,530 (2014)[1]
Parent Expedia Group
Website orbitz.com
Citigroup Center, which houses the company headquarters

Orbitz.com is a travel fare aggregator website and travel metasearch engine. The website is owned by Orbitz Worldwide, Inc., a subsidiary of Expedia Group. It is headquartered in the Citigroup Center, Chicago, Illinois.[2]

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. The company began beta testing early the next year, and Orbitz.com officially launched in June 2001.[3][1]

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 United States 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 ever.[4]

Ownership history

In November 2003, Orbitz filed paperwork to sell shares at between $22 and $24 each in an initial public offering.[5] 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.[6]

On September 29, 2004, Orbitz was acquired for $1.25 billion by New York City-based Cendant Corporation. Cendant paid $27.50 per share.[7]

In 2006, The Blackstone Group acquired Travelport, the travel distribution services business of Cendant, for $4.3 billion in cash. 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 other travel related software brands and solutions.[8]

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 owned approximately 48 percent of Orbitz Worldwide following the IPO.[9]

In February 2015, Expedia announced that it would acquire Orbitz for $1.2 billion in cash, to better compete with Priceline.com. The deal was announced a few days after Expedia agreed to purchase Travelocity.[10][11]

Technologies

Orbitz runs on a mixed Red Hat Linux[12] and Solaris based platform and was an early adopter of Sun Microsystems' Jini[13] platform in a clustered Java environment. JBoss is used as application servers within their environment along with various other proprietary and open source software.[14] 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.[15]

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. In June 2008, Orbitz For Business became one of the first Online Travel Agents to offer Southwest flights on the Orbitz For Business website.[16]

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".[17] 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 claims to have ended its affiliation with the controversial marketer and further claims not to share consumer credit card information with third parties any more.

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.[18]

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.[19] 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.[20] American was later ordered by an Illinois Court to resume offering fares and flight schedules.[21] The court order came only days after American released a video jabbing Orbitz on YouTube.[22]

Media Matters' "War on Fox"

Media Matters runs a website called DropFox.com, aiming to get advertisers to boycott Fox News. Orbitz initially referred to Media Matters' efforts as a "smear campaign",[23] 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".[24]

Skiplagged lawsuit

In 2014, Orbitz and United Airlines initiated a Federal lawsuit against 22-year-old skiplagged.com founder Aktarer Zaman.[25][26][27] The complaint alleges that Zaman "intentionally and maliciously" interfered with airline industry business relationships “by promoting prohibited forms of travel.”[28] The complaint is centered on airline policies against "hidden city tickets." Although the hidden-city practice itself is not illegal,[29] the complaint alleges that Zaman's website is disruptive to their business.

References

  1. 1 2 3 4 ORBITZ WORLDWIDE, INC. 2014 Form 10-K Annual Report
  2. ↑ Orbitz Worldwide: Contact Us
  3. ↑ "FundingUniverse". FundingUniverse. Retrieved February 27, 2012.
  4. ↑ "NetRatings: Orbitz is Web's biggest e-commerce launch". Computerworld. July 11, 2001. Retrieved February 27, 2012.
  5. ↑ Ari Weinberg. "Will Orbitz's IPO Fly?". Forbes Magazine. Retrieved August 29, 2015.
  6. ↑ Taulli, Tom (2003-12-18). "Orbitz Loses Altitude". The Motley Fool. Retrieved 2012-10-23.
  7. ↑ "Cendant Corporation Agrees to Acquire Orbitz, Inc. for $1.25 Billion; $1.05 Billion Net of Acquired Cash" (Press release). Orbitz. September 29, 2004.
  8. ↑ "Affiliate of Blackstone Group Completes Acquisition of Cendant's Travelport Subsidiary; $4.3 Billion Transaction Represents PE Firm's Largest Equity Investment in the Technology Sector" (Press release). PRNewswire. August 23, 2006.
  9. ↑ PREPETITION SOLICITATION OF VOTES WITH RESPECT TO PREPACKAGED PLAN OF REORGANIZATION
  10. ↑ "Expedia Buys Orbitz For $1.6B In Cash To Square Up To Priceline", techcrunch.com, February 12, 2015; accessed February 27, 2012.
  11. ↑ Ingrid Lunden (February 12, 2015). "Expedia Buys Orbitz For $1.6B In Cash To Square Up To Priceline". TechCrunch.
  12. ↑ "At Orbitz, Linux Delivers Double the Performance At One-Tenth the Cost". Network Computing. November 23, 2003.
  13. ↑ Carol Sliwa (September 6, 2004). "Have Jini, will travel". Computerworld. Retrieved 2012-08-02.
  14. ↑ Gruman, Galen (2006-04-03). "Orbitz gets up and running fast with open source". InfoWorld. Retrieved 2012-08-02.
  15. ↑ Asay, Matt (2008-06-27). "Orbitz paves the way to enterprise open-source contributions". CNET. Retrieved 2012-08-02.
  16. ↑ "Center for Asia Pacific Aviation". Peanuts.aero. 1999-03-26. Retrieved 2012-10-23.
  17. ↑ Greg Sandoval (November 23, 2009). "E-tailers snagged in marketing 'scam' blame customers". CNET. Retrieved 2009-08-22.
  18. ↑ "N.J. judge dismisses lawsuit over concert-ticket sales", David Porter, A.P. Philadelphia Inquirer, September 1, 2001; accessed September 8, 2010.
  19. ↑ "American Airlines pulls fare data from Orbitz site", Chicago Tribune, December 22, 2010.
  20. ↑ Strauss, Michael (2010): Value Creation in Travel Distribution, https://www.amazon.com/dp/0557612462
  21. ↑ "American Airlines Court Ordered Back Upon Orbitz Websites", CBS Local, June 1, 2011.
  22. ↑ "American Airlines jabs Orbitz on YouTube", Tnooz, May 31, 2011.
  23. ↑ Bond, Paul (May 19, 2011). "Orbitz Backs Fox News Channel Amid Media Matters' 'Smear Campaign'". The Hollywood Reporter. Retrieved May 28, 2011.
  24. ↑ "Orbitz agrees to review advertising policies following campaign by LGBT groups". Miamiherald.typepad.com. Retrieved 2013-11-28.
  25. ↑ "Case: 1:14-cv-09214"
  26. ↑ "Supporters donate thousands to Skiplagged defense fund"
  27. ↑ "This 22-Year-Old Computer Whiz Figured Out How To Game Airlines — Now Orbitz and United Are Suing Him"
  28. ↑ "United, Orbitz Sue Travel Site Over ‘Hidden City’ Tickets", bloomberg.com; accessed August 19, 2015.
  29. ↑ "No More Flying and Dashing? Airlines Sue Over Hidden City Ticketing", yahoo.com; accessed August 19, 2015.

Sources

  • "ORBZ Securities Registration Statement (S-1/A)". July 3, 2002.
  • Weinberg, Ari (November 26, 2003). "Will Orbitz's IPO Fly?". Forbes.
  • "Orbitz IPO Soars". December 18, 2003.
  • "Orbitz doesn't take off on first trade day". January 16, 2004.
  • "Orbitz Loses Altitude". December 18, 2003.
  • "Cendant Corporation Completes Acquisition of Orbitz". November 12, 2004.
  • "Carl de Marcken: Inside Orbitz". January 12, 2001.
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