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Biting the Hand
Cheap Charlie · December 18, 2000

During this past week I had the opportunity to attend the PhoCusWright Executive Conference, the world's most exclusive online travel conference. This is the annual meeting where everyone who is anyone in the online travel industry makes an appearance.

Discussions are vigorous. Disagreements are uncovered. Successes are dissected. Failures are put under the microscope. And scenarios of the possible future are portended. For me, personally, the conference provided fodder for my next few columns.

Two of the more contentious presentations of the travel industry were delivered by Jeffry Katz, Big Cheese from Orbitz, and Karl Peterson, head of Hotwire. Both of these organizations are owned by members of the airline industry.

Normal industry conferences tend to be easy on their major suppliers. There is something of a love-love relationship where supplier and distributor work and succeed together. Not in the online travel industry last week at PhoCusWright.

In the online travel industry, the airlines, who would normally reign as the main suppliers and therefore garner much acquiescence, have decided to become one of the industry's main competitors.

It is tough to be in competition with your number one supplier. It becomes dangerous when those suppliers -- in this case the airline industry -- makes it their focus to bite the hands that formerly fed them.

Before online travel agents, we had brick and mortar agencies. We have all seen, heard, or read of the squeeze that the airlines have been putting on travel agents. The airlines would be most pleased if they could drive the cost of selling tickets through travel agents down to zero -- and they are getting mighty close.

Most of the readers of this column have been involved in booking online travel and purchasing airline tickets for some time through Expedia.com, Travelocity.com, OneTravel, Biztravel, Trip.com, and so on. But Orbitz and Hotwire are two new online corporate kids on the block who are both owned by the airlines.

The airlines have been even more vicious with online agencies than they have been with traditional storefront agencies. Now they are going for the jugular by entering the online agency business themselves and striving to squeeze out competition in order to lower their "distribution costs."

It is not a pretty picture.

When Jeffry Katz smugly claims, "We are focused on customer care," any clear-thinking person has to choke. Orbitz, his airline-owned web site, is being designed strictly for the purpose of putting the Expedias and Travelocitys of this world out of business -- or at least drawing away significant business. Make no mistake about it.

When Karl Peterson of Hotwire announces that the focus for his business is to make life better for the ticket bargain-hunter, I get squeamish.

I get an ache in the pit of my stomach when the airlines recite their sincerest and holiest mantras of customer service if it helps them drive someone out of business, while at the same time -- at airports and on planes -- customer service deteriorates.

Let's lay it on the line. The big airlines will only offer service and low fares when it serves to drive someone out of business. We've seen it time and time again. Once the major airlines have the playing field to themselves, watch out.

If history is our guide, service will dive -- American Airlines didn't even serve peanuts with drinks on the flight from Dallas to Boston -- and prices will soar once again. (Check out any fortress hub fares.)

Charlie Leocha is the Boston-based author of Travel Rights: Know the Rules of the Road and the Air Before You Go. Cheap Charlie appears every Monday on this site. E-mail him at leocha@aol.com or access his Web site.