Southwest's Orbitz Fight Could Mean A Win For Travelers

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For years, Southwest has grudgingly played on the airline-industry team. It has long been a member of the Air Transport Association, the Beltway's 800-pound lobbyist gorilla that for years has been aggressive — and successful — in defending major airlines' interests. But not a happy one, and in 1997, after a few instances of getting what it thought was the brush-off from several members of Congress, the notoriously independent-minded Dallas-based airline broke down and opened its own lobbying office in the nation's capital.

That's because Southwest has never really been one of industry pack. Part of the difference is that Southwest has been the most consistently profitable airline over the last 30 years precisely at the expense of the other major carriers. Southwest's lower costs, cheaper seats and better attitude has made it a darling of passengers and investors alike. Anger at the industry often excludes Southwest.

Southwest was also the first of the large airlines to embrace the possibilities of the Internet, and has been the most successful major in marketing and selling tickets online. And it's on the battlefield of the Web where Southwest may make its most determined stand against its brethren. Southwest, which has maintained its rebel streak even as its grown to rival its competitors in size, has filed a lawsuit "to protect itself and its customers from potential harm." From whence the threat? A new travel website, called Orbitz, which is to Southwest the airline industry version of a nuclear weapon.

It's not the prospect of another Travelocity or Expedia that Southwest finds so worrisome, it is who is behind it. Unlike, say, Expedia, which is an independent online travel agent (it's owned by Microsoft) that displays fares provided by all carriers, Orbitz is owned by American Airlines, Continental, Delta, Northwest and United, which alone account for more than three quarters of the total U.S. air travel market. While Orbitz, which is already serving customers ahead of its scheduled launch in June, also includes fares from other airlines, Southwest claims it being treated unfairly on the site, saying that Orbitz is using airline information without Southwest's permission and is posting flights that don't actually exist. They say that while Orbitz's home page cheerily claims to offer the lowest fares, Southwest has a number of ticket prices that Orbitz, funnily enough, didn't mention.

At the basis of the suit is the smell of a cartel. Web sites of individual airlines have long contained fares not available on, say, Expedia — a legitimate move designed to draw customers and thus avoid having to pay commissions to the independent agents. However, opponents say, if the Big Five get together, they are likely to offer such fares on their own combination site, thus providing an online petri dish for anticompetitive collusion. At first, say critics, those fares will beat those of their competitors, but once the competitors are forced into submission — either by bankruptcy or "if you can't beat them, join them — the prices will be jacked up.

"We regret that Southwest must take the extraordinary step of legal action," said Southwest vice president Jim Parker. "Most observers believe that the airline industry needs to be more competitive. Orbitz is a step in the wrong direction."

The conflict looks certain to escalate. Orbitz and its backers deny that they are doing anything wrong, while Southwest is receiving overt and covert backing from allies. For instance, the Interactive Travel Services Association, the trade association for online travel agents, has endorsed the lawsuit, saying that it aims "to protect millions of consumers from Orbitz's unfair and deceptive practices."

Orbitz was recently cleared for takeoff by the Department of Transportation. But the progress of Southwest's suit will be closely watched by the Department of Justice and more than two dozen state attorneys general across the country who currently have Orbitz on their anti-trust radar screens.

Who do you root for? Southwest doesn't pick many fights. But when it does, consumers usually end up winning.