In a move that turns up the heat on rivals Expedia and
Travelocity, Orbitz Monday filed for an initial public
offering (IPO) that could be worth up to $125 million.
The company said it would use the proceeds for general business purposes and
possibly to acquire other companies.
"Orbitz did the unthinkable and pulled into a solid third place in about a
year's time," said Phillip Wolf, CEO and president of PhoCusWright, an
online travel consultancy. "That's quite an accomplishment."
But Orbitz made those strides mostly on the back of its parentage. The
company was formed by five major airlines: American Airlines, Continental
Airlines, Delta Air Lines, Northwest Airlines, and United Air Lines. With
such backing, Expedia and Travelocity, joined by consumer groups, have
complained that Orbitz has the potential to form an illegal monopoly by
using its founders to secure preferential deals. The U.S. Department of
Transportation (DOT) is currently investigating the company's business
practices.
Becoming a public company could help Orbitz defend itself against
anti-competition charges, since it would be legally bound to disclose
information on any arrangement with its five founding airlines. Late last
month, in another move that might bolster its case, Orbitz struck a
deal that will allow travel agents to access its fares.
"The DOT has been dogged in its pursuit of Orbit," Wolf said. "I don't think
it's going to modify Orbitz's behavior."
The fight for market share in the online travel industry is fierce. At stake
is one of the few bright spots of e-commerce. According to a report last
month by ComScore Networks, online travel sales totaled just shy of $7
billion in the first quarter of this year, accounting for 41 percent of all
e-commerce sales.
Last month, Cendant Corp. re-launche
d Trip.com with a $40 million marketing campaign, hoping to break into
the top ranks of the online travel industry, which has been dominated by
Expedia, Travelocity and Orbitz.
In Orbitz's filing with the Securities and Exchange Commission, the company
reported incurring heavy losses during 2001. For the year, the company
reported a net loss of $103.2 million on $43.4 million in revenue. In the
first quarter this year, it reported $9.2 million of losses.
The filing did not include either the date of the IPO or the number of
shares to be offered.
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