Orbitz CEO: Airline ticketing site doesn't want to rush things

Explaining his decision to delay the launch of the controversial airline-funded Orbitz online ticketing venture by nearly a year, company CEO Jeffrey Katz today said trying to start booking flights through its Web site on a more rapid schedule wouldn't have been a wise move.

"It is far better, at least in my view, to do it right rather than to do it faster," Katz said during a teleconference this afternoon. Katz, who joined Orbitz in July (see story), chalked up the Web site's original launch date of this summer to the optimism of the consultants who were managing the company before he was hired as president, chairman and CEO.

Chicago-based Orbitz today announced that its Web site now isn't scheduled to become fully operational until next June, following a beta-testing program that's due to start in February (see story). Noting that the company is building its fare searching and flight booking capabilities from scratch, Katz said there's "no professional [manager] out there" who would look at the challenge still before Orbitz and advocate an immediate start-up.

While the search engine being developed by Orbitz is nearly complete, Katz said scalability and reliability questions must be addressed before the Web site opens for business. "We are quite confident this site is going to be hit harder than any launch has been before," Katz said.

Orbitz -- which is being funded by the five largest U.S. airlines and has deals to sell tickets for more than 30 airlines -- hopes to quickly grow to an equivalent size as established online travel market leaders Travelocity.com and Expedia.com. Those two companies could each process more than $2 billion in gross travel bookings this year.

To break into the business, Katz said Orbitz plans to invest more than $300 million upfront, with more than $100 million of that amount coming in the form of a marketing campaign aimed at attracting users to the Web site. He estimated that it will take the company three to five years to reach profitability.

Fiona Swerdlow, an analyst at New York-based Jupiter Communications Inc., said the delayed debut of the Orbitz Web site is understandable given the difficulty of delivering on the company's promise of guaranteeing that it will offer the lowest-available fares to travelers. Fulfilling that promise "is what every [online travel] company wants, and none of them can do," she said.

Swerdlow noted that Orbitz also is unusual because it plans to book car rentals, hotels, cruises and vacation packages right off the bat in addition to airplane tickets, instead of growing its Web site in phases. "Orbitz has a very ambitious plan," she said. "Really, the model has been to launch something just to get out there -- start small and build in steps."

Katz acknowledged that the company's development plans are "far more complex" than the consultants who helped create Orbitz may have realized. "I don't consider [the delay] a setback," he said. "We just want to make sure we do this right."

Under the new launch schedule announced today, Orbitz will make its search engine available free of charge to users in October, but without the capability to book any flights. Katz said a "monster" beta-testing program, which the company hopes will involve at least 100,000 users, is due to begin in February for airline bookings and then be expanded to other travel categories next April.

Because of its airline owners, Orbitz has attracted considerable opposition from two groups of travel agents and from other online travel companies that contend the new site will stifle competition. Complaints from the company's opponents have resulted in antitrust-related investigations of Orbitz by the U.S. departments of Justice and Transportation as well as the U.S. Senate's Commerce Committee (see story).

But Katz today said he doesn't expect any federal action to be taken against the company, adding that the different airlines involved in funding Orbitz are far too competitive with one another to conspire together through Orbitz. "There's no better natural governance than that [competition]," he said.

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