European airline-led venture plans to float in 2005 after launching travel service in France, Italy and Spain

European online travel service provider Opodo launched operations in the UK last week, less than two months after the company introduced services in Germany. The European airline-led venture will move into France next, and plans to float by 2005, says chief executive Giovanni Bisignani.

Opodo was established last year by nine European airlines - Aer Lingus, Air France, Alitalia, Austrian Airlines, British Airways, Finnair, Iberia, KLM and Lufthansa - in response to the growth in online travel service providers, such as Expedia, Travelocity and US airline-led Orbitz, and in an effort to slash airline distribution costs. According to Bisignani, the former head of Alitalia, distribution costs have been reduced by just 3% over the last decade - from 18% of total costs in 1990 to 15% in 2000 - and the internet is the only new strategy that "reduces costs of distribution and increases ticket sales at the same time".

Opodo's country-specific strategy is targeting the European market only, where online sales are forecast to grow from €4.5 billion ($4 billion) to c38.7 billion by 2006, according to Forrester Research.

Opodo.co.uk offers over 350,000 net fares from more than 45 airlines, 54,000 hotels and 23,000 car hire locations; has a 25% lower cost base than traditional offline travel agents; and claims to be cheaper than the average online fare for 85% of top destinations from the UK.

In the first month of operations in Germany, Opodo beat all of its sales and bookings targets, with sales "double digits over targets", says Bisignani. The French site will be launched in April, to be followed by Italy, Spain and the Netherlands.

The airline partners have invested €128 million in Opodo and are "committed to funding it until 2004" when the business case calls for it to be profitable, says Bisignani. The company has enough funds for launches in France and Italy, but he concedes that extra investment may be needed after that.

Air France, BA and Lufthansa each own 22.8% of Opodo. Alitalia, Iberia and KLM have 9.14% each, while Aer Lingus, Austrian Airlines and Finnair have over 1% each. The partners have not discounted taking on additional shareholders as Opodo "is not a limited club", says Bisignani. Despite the collapse of dot.com companies and the post-11 September traffic downturn, Opodo's owners still plan an initial public offering in 2004/5.

Source: Flight International