Orbitz faces rough skies at takeoff

The Web travel site formed by a bevy of top airlines suffered a series of setbacks as it tried to get its operations off the ground. Orbitz officials blame the problems on large traffic numbers.

Orbitz, the Web travel site formed by a bevy of top airlines, had trouble getting off the ground this week as its Web site suffered a series of setbacks.

An Orbitz representative confirmed that a damaged fiber-optic cable on Monday--the first day of Orbitz's official launch--stalled the site for three hours. Orbitz also said it hired too few customer-service personnel to handle the "higher-than-expected call volumes."

On Thursday, a phone call placed by CNET News.com to Orbitz's phone center led to a 13-minute wait on hold. The company said starting next week it will double the number of phone-service representatives.

Chicago-based Orbitz delayed the site launch almost a year to ready the Web site. The Web has seen a multitude of stalled or crashed Web sites in the past five years as retailers have had to learn the ins and outs of selling over the Net. Companies have had to learn best practices through trial and error.

The good news for Orbitz is that its malfunction was because of the large number of customers that hit the site in its first three days in business. Orbitz said gross online bookings totaled more than $1 million on Monday and surpassed $3.3 million on Tuesday.

Orbitz has come under fire from its competitors and some consumer groups since the venture was announced in November 1999. Critics say the travel site has an unfair link to the airlines' discounted fares and could violate antitrust law. The airlines and Orbitz deny the accusations.

An investigation by the U.S. Justice Department into possible antitrust violations is still under way. The U.S. Department of Transportation said in April that, although it would monitor the company's operations, it had no reason to prevent the site from opening for business.

Away from the controversy, analysts maintain that Orbitz has a long way to go before it can challenge Travelocity or Expedia, the two dominant players in the online travel sector.

A report issued last week by investment banking firm C.E. Unterberg Towbin said the costs of playing catch-up to the leaders will cost Orbitz too much for things such as attracting and acquiring new customers, as well as building competitive customer service.

"Rather than provide value to customers and profit to its owners, Orbitz may instead lack the customer base and services needed to serve it, resulting in perpetual losses and cash drain on its owners," the report said.

Unterberg Towbin also questioned why the airlines need Orbitz when they are doing much to promote their own Web sites.

"If Orbitz were to grow to the magnitude of Travelocity or Expedia, haven't the airlines in fact created another competitor to their own Web sites, diluting both Orbitz's value to the airlines and the airlines' Web sites themselves?" the report said.