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'Online monopoly' could push up air fares by $3.2bn
US air travellers could face a massive hike in flight prices totalling up to $3.2bn when the country's top five airlines join forces in an online sales venture this summer.

By Sonya Rabbitte

Published: Thursday 29 March 2001

Orbitz - a joint venture between American, Continental, Delta, Northwest and United Airlines - will launch an online ticket distribution site that could command up to 85 per cent of US internet airline sales. The five airlines already control 74 per cent of the US domestic market.

In a study on the new consortium, released yesterday, Jerry Hausman, professor of economics at MIT, warned that the anti-competitive nature of Orbitz will result in passengers footing the bill for an extra $3.2bn added onto airline ticket prices, and called on the US government to regulate the new venture.

He said: "Orbitz should not be allowed to operate, at least not as currently structured, and at a minimum should be subject to federal regulation."

Orbitz has been under development since 1999 and was envisaged as a direct competitor to independent travel sites Expedia and Travelocity. But as member airlines will be obliged to provide Orbitz with exclusive access to their cheapest flights, competition between the five airlines, and alliances with travel agencies, will suffer, warned Hausman.

Jupiter MMXI estimates that the online travel market will be worth $28.2bn by 2005, but Jupiter analyst Nick Jones claimed that as less than five per cent of total US air sales are made over the internet, Orbitz could not be regarded as a threat to fair competition. Special government intervention is therefore unnecessary.

Jones said: "You can't call it a monopoly when not everyone has access to the internet. You need 30 per cent market share to have a monopoly. Orbitz will just be another travel site but it won't be the terminator site it intends to be."