Just weeks after the Department of Transportation gave Orbitz the green light, Southwest has filed a suit against the multi airline-owned Web site claiming that Orbitz provides its customers false and misleading information regarding Southwest’s flights and fares.
In the lawsuit, Southwest contends that Orbitz, which is controlled by five of the largest airlines that account for 85% of the total U.S. air market, uses proprietary information with respect to Southwest`s fares and schedules without Southwest`s permission.
Although Southwest is based in Dallas and Orbitz is based in Chicago, Southwest filed the suit in a Central District Court in California. Southwest said it filed the suit there because some of its major markets lie within the Central District’s jurisdiction, including Los Angeles, Burbank, Ontario and Long Beach, Calif.
“It is with great regret that Southwest must take the extraordinary step of legal action,” said Jim Parker, Southwest`s vice president and general counsel and future vice chairman and CEO. “But we were not able to convince Orbitz to cease and desist from its misleading, untrue, and harmful representations with respect to Southwest`s service, schedules, and fares.”
Southwest said it was forced to take legal action because the site was opening for business while still under review by the U.S. Department of Justice. Southwest said that it felt a lawsuit was necessary in order to “prevent the continued unauthorized and inappropriate use of proprietary information and to prevent harm to the traveling public.”
According to Southwest spokesperson Beth Harbin, Orbitz, which has been operating a beta test site, provides routes and fares with Southwest that Southwest doesn’t even offer. For example, on a recent search on Orbitz, the site was offering a round-trip Islip, N.Y.-to-Baltimore flight with a connection on the return via Nashville.
“There are routes listed on Orbitz that simply don’t make sense,” Harbin told WebTravelNews. “They would be horribly inconvenient for our customers, and that’s not the type of service that we sell.”
In a response to Southwest’s accusation, Orbitz claims it is doing nothing wrong and asks the airline to reconsider its legal action.
In a letter to Southwest Airlines general counsel, Deborah Ackerman, Orbitz’s general counsel, Gary R. Doernhoefer said: ” We are sorely disappointed by Southwest`s position given that we see our mission to be similar to Southwest`s - providing the best possible service at the lowest possible cost ... Orbitz is a neutral and unbiased online travel site that allows consumers to shop and compare more fares and alternative routes than its competitors, all at lower cost.”
Orbitz said it will continue to display publicly available fare and schedule information. It contends it has the right to use the information because it pays a fee to clearinghouses—OAG and Airline Tariff Publication Company—for the data. “Through these same clearinghouses, Southwest also provides its flight information to thousands of travel agents and other travel providers,” Orbitz said. “We think it would be unfair and improper for Southwest to prevent Orbitz` access to public information and to interfere with the license agreements that allow us to offer the best possible Web site to the traveling public.”
Orbitz has offered to discuss with Southwest how they can display the airline’s fares to display lower Southwest fares not made available through airline clearinghouses. The site has removed Southwest trademark and updated its software to make it more consistent with restrictions on booking tickets from Dallas` Love Field. Whether or not Southwest has a legitimate complaint will be up to the court to determine, but it’s easy to see why Southwest is so staunchly opposed to Orbitz’ representation. The airline has opted to not be represented on third party sites like Expedia and Travelocity and, according to Harbin, it does not wish to be marketed through its five biggest competitors.
Thanks to its early start online—Southwest was the first airline to have a Web site—and heavy marketing of its consumer-friendly site, Southwest’s site has been the most successful airline in selling tickets through its own Web site. Last year it booked more than $1 billion online. It is also distributed through more than 30,000 travel agents through Sabre. For Southwest to keep its market share, it will need to do what it has been doing all along—offering great deals on its site and marketing those deals. What is perhaps of most concern to carriers like Southwest is that Orbitz does turn up some very good prices with fairly reasonable connections—like a round-trip Los Angeles to Islip flight on Southwest for $261 with a connection in Nashville—several hundred dollars cheaper than what was available on Southwest’s site.
This can be threatening to the airlines, especially low-fare airlines like Southwest that keep a tight hold on their distribution and fares.
Because of such concerns, it’s likely that Orbitz will not see the end of controversy anytime soon, although the DOT has given its go-ahead to the Orbitz launch. That approval did come with conditions; the DOT will revisit the site in six months to see how it is conducting business. “Most observers believe that the airline industry needs to be more competitive,” Southwest’s Parker says. “Orbitz is a step in the wrong direction. Many Orbitz opponents contend that the top airlines controlling a single site will lead to price fixing, which will eventually be bad for the consumer.
However, the DOT’s approval means that Orbitz will almost definitely be a reality—and the travel industry will have to deal with it. It’s unlikely that Orbitz will lead to true price fixing. The airline market is just too competitive and the recent state of the airline business is forcing them to be even more competitive.
Orbitz may be the airlines` baby, but they still have to offer deals through other retailers, like Travelocity and Expedia, in order to push the volume they will need to offset factors like falling business travel and rising labor and fuel costs.
Perhaps Orbitz’ biggest hurdle as it moves forward won’t be legal. It may well be on the marketing name recognition. Sites like Southwest.com, Expedia, Travelocity and Priceline have spent tens of millions of dollars and been in the market place for years building their brand names. Orbitz has to play a serious game of catch up. Ultimately, consumers will determine the success or failure of Orbitz. Consumers have already become quite savvy and are looking for simple, no-nonsense ways to find and book great deals online. Orbitz`s goal is to do just that—but it is playing to a demanding audience.