Airlines Losing Share of E-Commerce Pie

The majority of online ticket sales will be generated from independent travel agencies and not from sites directly connected with the major airlines, according to a study released Monday by International Data Corp. (IDC).

Although Web sites run by airlines currently account for more than half of all online ticket sales, their share will fall below 50 percent by 2001 and will continue to drop through at least 2004, the report predicts.

“Because of their sizable marketing muscle, these [independent travel agencies] will create good publicity for the online travel business,” said Joshua Friedman, senior analyst for IDC’s consumer e-commerce division.

Major Growth Projected

Analysts at IDC attribute the forecasted boom for independent travel agencies to their ability to tailor services for travel consumers more effectively. “The traditional travel agency model, which includes Internet pure-plays and clicks-and-mortars, will better understand the needs of the traveler and will be unbiased and will therefore get more business,” said Friedman.

However, the study, “U.S. Online Airline Ticket Sales: Market Forecast and Analysis, 1999-2004,” also found that airlines may be in store for a silver lining. Online ticket sales are expected to more than triple from over $5 billion (US$) in 1999 to over $18 billion in 2004, said IDC.

“Many factors will contribute to the growth of online airline ticket sales,” explained Friedman. “An increasing number of Americans are going online, the demographics of online users are shifting favorably, and online users overall are getting increasingly comfortable with e-commerce in general. Additionally, we expect the online airline purchasing process to improve considerably over the next few years.”

Turbulence for Orbitz

One of the largest and most controversial online travel ventures being undertaken by airline giants is Orbitz.com. Backed by a consortium that includes American, Continental, Delta, Northwest and United, the company has been the subject of an investigation by the U.S. Department of Transportation (DOT) and the Department of Justice during the past few months.

The agencies began examining Orbitz’s proposal after critics complained that it would create extreme turbulence in the online travel industry by restricting access to flight information and low-priced tickets, ultimately forcing out competition. The DOT is expected to issue its decision by the end of the year.

Orbitz, which offers online flight booking on more than 30 participating U.S. and foreign carriers, will officially launch its site next June.

Heightened Competition

Many analysts predict that the relatively new niche of online travel will be one of the fastest-growing segments of the travel industry. According to investment firm Bear Stearns, online travel sales will quadruple from last year’s level to $29 billion in 2003.

In a separate study by PhoCus Wright, 40 percent of consumers said they have bought airline tickets online. By comparison, 44 percent of Net shoppers have purchased computers or software, and 42 percent have purchased books.