U.S. airlines, hotel industry wary of Expedia-Orbitz merger

[February 14, 2015]  By Jeffrey Dastin
 
 (Reuters) - The U.S. airline industry expressed concerns on Friday about the tentative merger of Expedia Inc <EXPE.O> and Orbitz Worldwide Inc <OWW.N>, saying it could hurt the travel business, but hinted it would not lobby actively against the deal.

Expedia's agreement on Thursday to buy Orbitz for $1.33 billion marked the latest in a spree of acquisitions it and the larger Priceline Group Inc <PCLN.O> have made to become the world's dominant online travel agencies.

Experts say the companies' followings give them power when negotiating contracts with hotels and airlines, which to varying degrees rely on the sites to sell their products. Combined with Orbitz and Travelocity, which it acquired in January, Expedia received about 39 million unique website visitors in December 2014, according to Internet analytics company comScore Inc.

These mergers "strengthen Expedia's position in the distribution chain and could have implications for consumers, travel agents and airlines," Melanie Hinton, spokeswoman for the trade group Airlines for America, said on Friday in an email.

"We would expect the Department of Transportation and the Department of Justice to carefully examine these transactions and their impact on consumers and competition."

When asked whether the trade group would take action to oppose the merger, Hinton repeated that regulators would review the deal thoroughly.

The President of the American Hotel and Lodging Association, Katherine Lugar, also said in a statement that the merger "appears to be counter to the goal of creating more consumer choice."

Expedia has downplayed concerns that consolidation would drive up prices, saying there are more deals for consumers now that companies such as Google Inc <GOOGL.O>, as well as individual airline and hotel sites, are competing.

Three antitrust experts also told Reuters on Thursday that they expect government to approve the deal because the bookings market has no barrier to new entries.

"The airlines are not at all happy, nor are hotels, about yesterday's announcement," said Henry Harteveldt, a founder of the travel-focused Atmosphere Research Group.

"As these companies grow, they're able to negotiate larger and larger rebates," he added, referring to the amounts that bookings sites extract from fare distribution companies.

Also discussed in contract talks are transaction fees airlines are charged and commissions that online travel agencies take for hotel sales. Expedia has given no indication it would raise rates on businesses.

Harteveldt added that major U.S. carriers retain some leverage because travel agencies rely on their flights for listings.

(Reporting by Jeffrey Dastin in New York and Diane Bartz in Washington. Editing by Andre Grenon)

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