US airline industry expresses concern over Expedia-Orbitz deal
14 February 2015
The US airline industry yesterday expressed concerns over the tentative merger of online travel reservations portals Expedia Inc and Orbitz Worldwide Inc, saying it would hurt travel business, but hinted it would not oppose the deal, Reuters reported.
The $1.33-billion deal announced Thursday comes as the latest in a raft of acquisitions Expedia and the larger Priceline Group Inc had made to emerge as the world's dominant online travel agencies.
According to experts, the merged companies would have undue power in n negotiating contracts with hotels and airlines, which relied on the sites to sell their products. The number of unique visitors at Orbitz, Travelocity and Expedia totalled 39 million in December 2014, according to internet analytics company comScore Inc. Expedia acquired Travelocity in January.
These mergers "strengthen Expedia's position in the distribution chain and could have implications for consumers, travel agents and airlines," Melanie Hinton, spokeswoman for the trade group Airlines for America, said yesterday in an email.
"We would expect the Department of Transportation and the Department of Justice to carefully examine these transactions and their impact on consumers and competition."
The president of the American Hotel and Lodging Association, Katherine Lugar, also issued a statement on the merger saying, it "appears to be counter to the goal of creating more consumer choice."
Meanwhile, shares of Priceline rose 4.1 per cent since the announcement of Orbitz's acquisition of Expedia while shares of Expedia shot up 14 per cent, CNBC reported.
The industry believes that by having fewer rivals there was diminished competition in search and on industry-specific sites like TripAdvisor, which was all the more important, because Google was viewed as more than just a critical source of traffic.
According to James Cordwell, an analyst at Atlantic Equities in London, one would expect a more consolidated online travel agent (OTA) sector to increase both Expedia and Priceline's power versus the hoteliers, and maybe over time push down the amount they had to spend to acquire customers, given fewer players competing for traffic from channels such as Google and TripAdvisor.
Expedia's agreement to buy Orbitz for $12 a share worked out to a premium of 25 per cent from the prior day's closing stock price.
The deal comes only weeks after Expedia, which owned brands like Hotels.com and Hotwire, acquired booking site Travelocity for $280 million.