A group of US carriers are joining forces in another new web site that will make its debut later this year as a head-on competitor with Priceline.com, which auctions cheap seats.

Dennis Blank/ORLANDO

Investment management firm Texas Pacific Group is spending $75 million to launch Hotwire.com. With super web site Orbitz.com requiring investment from the airlines, there is surprise that carriers might also spend big on Hotwire.

Their financial commitment to Hotwire will be less straightforward, however. Despite reports that the airlines will be investors, Hotwire says they have been offered free stock options instead. Carriers to be signed so far include American Airlines, America West, Continental Airlines, Northwest Airlines, United Airlines and US Airways.

No airlines are represented on the board of directors of the privately held Hotwire company and the six airlines that have been offered stock options will receive no favouritism, says Hotwire chief executive Karl Peterson.

Priceline sells 80,000 discounted airline tickets a day. Its stock slumped shortly after the announcement on 30 June of the Hotwire proposal, then climbed back to an average of $36 a share. But it remains down 69% from its 52-week high of $119.

"We're complementary to Orbitz," says Peterson, who came from Texas Pacific to run the San Francisco-based company. "We're enabling people to travel who wouldn't otherwise travel."

Peterson says Hotwire can charge low prices because it will mask the identity of carriers until after the customer buys a ticket. Customers will not bid for their tickets, but pick a discount fare from a selection of posted fares.

Hotwire also offers to talk to other airlines about supplying some of their last-minute ticket inventory. "We are committed to being an open model," says Peterson.

Priceline and the airlines say they will continue to supply seats through Priceline. Analysts say one of the drawbacks to Priceline is the time it takes to buy a seat.

Source: Airline Business