Orbitz, the online travel agency owned by five major US carriers, last month levied a $5 service fee on each airline ticket it sells

Expedia and Travelocity do not charge users, making Orbitz the first of the big three online travel agencies to do so. However, it is not entirely alone. Cheap Tickets, priceline and Trip.com also make service charges, with the latter coming in highest at $15 per ticket. Travelocity also began charging $10 for Northwest tickets when the carrier stopped paying commissions in 2001.

Roland Jacobs, chief marketing officer at Orbitz, said the agency had been considering imposing a fee "for many months. But we didn't want to do it until we delivered on our original promise. We have a significant customer base and the time is right," he added.

According to Jacobs, Orbitz, which officially began operating in June, has more than three million registered users, and has recorded in excess of $700 million in gross bookings. He said that Orbitz had asked its users about the possibility of imposing a charge, and found they believed that the "value we delivered was worth the $5 fee". He also said the agency would not charge fees for other travel services like hotel rooms or rental cars. More than three-quarters of its business is from airline ticket sales.

Market analysts Paul Keung, who follows online travel agencies for CIBC, said it was "wise for Orbitz to impose the fee early in its lifecycle. The longer you wait to institute a fee, the harder it is for customers to adjust to it."

Henry Harteveldt, an analyst with Forrester Research, said he did not expect web travellers to move off-line to avoid paying the Orbitz service fee, because "service fees are nearly ubiquitous offline. According to the American Society of Travel Agents, nearly 90% of offline agencies charge service fees, which an average of $15 per ticket."

Harteveldt also predicted that service fees charged by online travel agencies would become standard by 2003. "Good service is why bookers who use either Travelocity or Expedia are 32% more likely than US leisure bookers overall to buy travel online - but delivering that service is not free. Thinner margins, along with a rising volume of inexperienced web travellers and higher costs to provide customer service, will increase pressure on web agencies' financial performance, making fees a necessary source of relief," he said. n

Source: Airline Business