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Issue 2001-8 - Thursday, May 10, 2001

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  Can airline fares and schedules be considered as proprietary information ?

Can airline fares
and schedules be considered as proprietary information

Big hotel chains
faced with the
harsh reality of Internet


In any case, this is what the lawsuit filed by Southwest Airlines against Orbitz in federal court in California will tend to prove.

According to Southwest, the conflict originates in the fact that Orbitz only displays part of Southwest's fares and schedules and, what's more, fails to include many of Southwest's lowest fares.

What this means is that Orbitz does not display the fares that prove lower than those offered by its five main founders (American, United, Northwest, Delta and Continental).

What's more, Southwest complains that some of the flights displayed on Orbitz Web site are not even available...

Let me remind you that Southwest refused to take part in the Orbitz project; indeed, when an airline company agrees to take part in the Orbitz project, it means that it is no longer allowed to display its best fares only on its own Web site or on any online travel agency but it is bound to display them on Orbitz Web site as well.


This is how Southwest's fares and schedules are presently displayed on Orbitz Web site on Orbitz's sole initiative, as the latter gathers Southwest's information via the GDS networks, among other ways.

It is a long time since Southwest has decided to go in the eTourism battle alone and its strategy seems to have borne fruit, up till now at least. Indeed, it seems that Southwest alone is responsible for 14% of the whole airline turnover that is made online (data provided by Nielsen in January 2001).

As a result, Southwest wishes to keep this exceptional position by preventing any other Web site to display its own fares.

Orbitz is not the only Web site questioned by Southwest as the latter recently asked Travelocity to suppress its offer on the online travel agency arguing that Travelocity allocated seats that had already been booked, which caused difficulties among Southwest's customers.

The action carried out against Travelocity was only a commercial one but this time Southwest opted for a legal action against Orbitz, as it claims that its fares and schedules were proprietary information and that they could not be used without its specific agreement. Of course, Orbitz contests the claim, arguing that these data are public information.

What proves particularly interesting here is the Internet strategy used by Southwest: I am the leader on my niche, my visitors are customized, and as a result I want them to be able to access my products exclusively via my own Web site.

This "exclusivity" , for a brand that proves well established, has nothing but advantages: no commissions on sales, impossibility for users to compare my prices with the prices displayed by my rivals unless they leave my Web site... not to mention the fact that I "know" my customers on a personal level and that I am well able to offer them products that match their favoured destinations.

It is a real strategic battle that Southwest just launched on a legal point of view, and the stakes go much further than the simple Orbitz's phenomenon

It goes without saying that a little media hype cannot do your turnover any harm and that it is always good to show your customers you're there to protect them.

Besides, to reinforce things a bit further, the ISTA (Interactive Travel Services Association) just announced that it fully supported the lawsuit Southwest filled against Orbitz.

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   Big hotel chains faced with the harsh reality of Internet investments  

As some big hotels chains recently reported their first-quarter earnings, it also brought out into the open errors that were made concerning dot-com investments.

The most impressive one concerns Starwood Hotels and Resorts Worldwide Inc, as it declared losing $19 million in Internet investments.

These losses correspond to shares bought from companies such as Netcentives Inc, whose stock once traded as high as $20 but only trades around 90 cents today or even whose stock traded as high as $20 per share in the Nasdaq Stock Exchange but only trades at about $3 and 4 per share today.

Starwood Hotels indicated that it would keep on looking for Internet investments but that it was hardly the best time to do so...

Marriott International Inc. finds itself in a similar situation and as the company released its first quarter earnings, it also indicated that it lost $6 million because of its Internet investments.

Hilton Hotels Corp. appears to be the only one that managed to deal with these Internet investments successfully as it does not report any loss related to its Internet investments.

According to the statements made by these different companies, it seems that they will have to make strategic Internet investments in the future so that they can benefit from the technology or know-how of the company in which they might be tempted to make any financial investment.

This "wait-and-see" attitude adopted by the big groups is hardly surprising given the current economic situation, but it does indicate a strategic change in the way bricks and mortars are about to deal with the new economy: let's wait for the first results before we take our analysis any further...

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