Orbitz Response

29th Mar 2001

After recent media coverage of an academic study calculating that airlines and consumers pay a total of $1.7 billion a year in the form of higher airfares to the travel distribution oligopoly, the huge GDS’ have decided to respond through the GDS-dominated trade association ITSA.
“The ITSA-financed study is nothing new, just a repackaging of the same misinformation and distortions ITSA has been spreading for months. This study is a last-ditch attempt to thwart what the travel global distribution systems fear most: superior technology that gives better information and access to low fares directly to consumers,” said Orbitz General Counsel Gary Doernhoefer. “ITSA and its GDS sponsors have been nothing but vocal in their desire to protect the GDSs` excessive profits and a 70% market share in online third-party travel, at the expense of consumers.”
The author of the ITSA-sponsored paper has neither had contact with Orbitz nor asked Orbitz for any corporate documents, thus raising serious credibility questions, Doernhoefer said.
The paper further confuses the impact of airline mergers, which results in fewer competitors, with the electronic travel distribution channel, where there has been a lack of price competition for years. In doing so, the paper fails to recognise the consumer and marketplace benefits of adding a new Internet entrant designed to provide the first new competition to the GDSs since the 1970s.
The ITSA paper appears to be a response to a study released March 14 by Dr. Aaron Gellman, Professor of Management at Northwestern University, and Jon Ash, Managing Director of Global Aviation Associates.
The study concluded that fees paid to GDSs by airlines and their customers have escalated at a rate of about 7% a year for the last 10 years, despite the fact that computing costs rapidly declined during the period.
GDS companies and some traditional travel agents are attempting to use legislative and regulatory action to block technological progress in the form of more cost-efficient, online distribution options such as Orbitz.
The Progressive Policy Institute, based in Washington, also recently concluded in a paper by Dr. Rob Atkinson that the development of a new online system like Orbitz that has the potential to cut the cost of airline ticket distribution “should be embraced, not resisted.” Copies of “Revenge of the Disintermediated” can be downloaded at The paper can be accessed at www.ga2online.com



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