PHOENIX -- While the trade wonders how Orbitz's market entrance
will impact Expedia, Travelocity, brick-and-mortar agencies and the
airlines, don't worry. Financier and former TWA chairman Carl Icahn
has it all figured out.
Speaking to a room packed with delegates to the PhoCusWright
Executive Conference here, Icahn, who heads Lowestfare.com,
said the airlines will move to control Internet travel and
distribution. On-line agencies like Travelocity and Expedia must
become niche players and sell things like distressed inventory to
survive, he said.
Icahn's remarks were received by the delegates with rapt
attention, if not necessarily agreement.
He said the economy's cyclical nature will kick in with a
recession, resulting in "a lot of bloodletting in this
industry."
He reserved much of his ammunition for the airline industry,
which he termed "an awful business. The worst business you can
imagine."
The airlines, with the exception of Southwest, are entering "a
very precarious phase," he said, because of the power of unions,
poor management and huge debt.
In response to a delegate's question after his remarks, Icahn
said Southwest's stock price also would be impacted by a recession,
although it would make money because it has good contracts,
competent management and is making inroads into corporate
travel.
"The airlines can't take a strike because they are
over-leveraged," he explained. "The union guys are much brighter
than airline managers."
The airlines' over-leveraged position and a looming recession
are a "prescription for disaster," he said. "The airlines won't be
able to gouge the business traveler."
Icahn did not directly address how brick-and-mortar agencies
will ride out Orbitz's market entrance, which is slated for
June.
Icahn said on-line agencies will survive if they can carve out a
niche. But they must do it wisely, he said, noting that Priceline.com, the
name-your-own-price distressed-inventory pioneer, "is a perfect
example of what didn't make sense," partly because it doesn't buy
merchandise and spends millions on advertising.
"It was misguided (for Priceline.com) to do airlines and totally
ludicrous to do groceries," Icahn added.