T2 says government misunderstands its intentions

The spin wars over the proposed online ticketing Web site that's being formed by the country's largest airlines officially kicked into high gear yesterday, when the Internet venture's executives went public in an attempt to address what they said has become a negative public perception of their company due to upcoming antitrust investigations.

Insisting that the airlines funding the so-called T2 ticketing site won't be able to control its content or pricing, the T2 officials promised complete disclosure of all flights and fares that are made available on the site and said no bias will be shown to any of the five equity and 30-plus nonequity partners involved in the project.

Founded by United Airlines Inc., Delta Air Lines Inc., Continental Airlines Inc., Northwest Airlines Inc. and American Airlines Inc., the T2 site is scheduled to debut this summer. But both the Senate Commerce Committee and the U.S. Department of Justice (DOJ) have launched antitrust-related inquiries into the site's business plans. The Commerce Committee is scheduled to hold an initial hearing on the matter on June 22 (see story).

Alex Zoghlin, T2's chief technology officer, yesterday said one of the problems facing the Web site is that it's still under development and has been unable to aggressively market itself thus far. "When our competitors have more lobbyists in Washington than we have employees, eventually the misinformation gets repeated enough that it becomes fact," he said.

Zoghlin said T2 -- which has been the subject of complaints to the government from two associations of travel agents -- will receive the fares that get offered through its Web site from an airline industry clearinghouse, just like other online travel agencies do. It also will be paid the same commissions that other online and brick-and-mortar agencies receive, he said.

"We are receiving no pricing (directly) from the airlines, period," Zoghlin said. And information about customers won't be shared between the participating airlines, he added.

"For us to be successful, we have to be an independent company," said Carl Rutstein, an executive at the Boston Consulting Group and T2's interim chief operating officer. The Chicago-based consulting firm is overseeing the development of the Web site until a permanent management team is hired.

According to Zoghlin, T2 gave copies of its contracts with the various founding airlines to the DOJ in April and has expressed its willingness to provide any and all information requested by the government. But he added that the DOJ announced its investigation of the site publicly without officially notifying T2.

"I can't speak for the DOJ," Zoghlin said, when asked why T2 is still being investigated despite the contract disclosures. "I don't know what they're concerned about, and frankly they haven't told me."

Zoghlin pushed for an open market in which T2 can compete with other online ticketing sites, such as Expedia.com and Sabre Inc.'s Travelocity.com, in a game of technical one-upmanship. If T2 manages to leapfrog its online rivals on technical grounds, "I expect them to respond, adapt, become better, as will I," Zoghlin said.

Yet many remain skeptical of T2's intentions. Paul Ruden, senior vice president of legal affairs at the American Society of Travel Agents (ASTA), has been a vocal opponent of T2 and yesterday said he still believes the company will create a collusive atmosphere in the airline travel business and drive up ticket prices.

"This thing did not spontaneously generate, and it's still a mystery to us why one of these big (airlines) didn't just grab this software if it's so wonderful and put it up on their own site," Ruden said. "Why did they approach the marketplace as a pack?"

Ruden also questioned T2's promise of openness regarding fares. "Their initial announcements said they'd have exclusive access to unique pricing," he said. "Now, they're trying to spin away from that."

While T2 may not like having to run the federal gauntlet, Philip Wolf, an analyst at online travel researcher PhoCusWright Inc. in Sherman, Conn., said the company should long ago have prepared its arguments for investigators. "The airlines knew beyond a shadow of a doubt in announcing T2 that this was going to get looked at by the feds," Wolf said.

Wolf added that he believes that the airlines see T2 as an opportunity to control the distribution of their own flight-and-fare offerings, especially now that Travelocity and Expedia have grown large enough that they can start throwing their weight around in the industry. "Originally the airlines were behind those sites, but it turned out the only thing worse (for them) than 30,000 travel agencies is two," he said.

Despite the government inquiries, though, Wolf said he expects T2 to launch on time this summer with the airlines then doing everything in their power to keep it running. "I think they'd rather die on (their) sword than give up," he said.

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