Orbitz Worldwide matched competitors Expedia and Travelocity by temporarily eliminating consumer booking fees on flights.
Orbitz's fees were about $7 on domestic flights and around $11 on international flights at Orbitz.com and sister site Cheap Tickets. Both are dropping the fees for most tickets booked through May 31.
However, unlike at Expedia and Travelocity, Orbitz's fee-less bookings exclude multicarrier itineraries, which are a small proportion of the Orbitz and Cheap Tickets flight mix.
And consumers booking flights originating outside the U.S., Canada, Mexico and the Caribbean still have to pay the booking fees.
There had been much talk that Orbitz would be hard-pressed to drop booking fees, because revenue from fees garners Orbitz about 60% of its earnings before interest, taxes, depreciation and amortization, compared with about 10% at Expedia.
But Orbitz CEO Barney Harford said the move by Orbitz's competitors to remove the fees had been anticipated and that Orbitz had the flexibility to react.
He noted that Orbitz had removed $40 million to $45 million from its cost structure in the last four to five months.
Harford added that Orbitz's removal of booking fees, coupled with Orbitz Price Assurance, which provides consumers with rebate checks if someone books the same itinerary on Orbitz for a cheaper fare, makes Orbitz a prime venue for consumers.
"With the booking fee coming off, there really is nowhere else better to buy your ticket," Harford said.
Less money for metasearch
The online travel agencies' decisions to cut out consumer booking fees for flights -- Orbitz, Expedia and Travelocity are dropping fees temporarily; Priceline has eliminated them -- is somewhat of a double-edged sword for the OTAs.
Now that the playing field between the OTAs and airline sites has been leveled on price, consumers choosing to book online now may opt for an OTA, with their various price-protection plans, instead of on an airline website.
On the other hand, the airline websites may have perks or services, like the ability to purchase premium seats, which still are missing from OTA inventory.
And the OTAs will have less cash to spend on participation in metasearch engines such as Kayak, TripAdvisor, Fly.com, Farecast and Cheapflights and in paid search vehicles such as Google and Yahoo, especially if the booking-fee banishments become permanent.
One analyst, who declined to be identified, pegged the OTAs' revenue from booking fees at about $300 million per year.
Harford said Orbitz's operations included "variable and semivariable costs," so the company has the flexibility to absorb any revenue impact because of the booking-fee deletion.
Referring to paid relationships with metasearch and other search vehicles, Harford said those companies that Orbitz continues to work with will have to "continue to deliver meaningful traffic" and be a good "source of business" if they want to remain in Orbitz's good graces.
"We've already made some changes, and we will continue to focus on that," Harford said, adding that Orbitz's paid relationship with the Kayak metasearch engine "remains strong." Orbitz and Cheap Tickets are the only OTAs that Kayak uses.