Airlines Work on Their Web Footing

Airlines have been polishing their online ticket counters to a fine sheen, adding best-price guarantees and features like online check-in to their own Web sites in an effort to get travelers to buy direct.

Yet for the most part, they're not ending their reliance on third-party Internet sellers, because they still want broad distribution in a market where many customers view air travel as a commodity and shop purely on price.

"They need the agencies, but at the same time they want people to book direct," said Henry Harteveldt, an analyst at Forrester Research, a Cambridge, Mass., technology consulting company. "The airlines have little brand loyalty and little differentiation, so they rely on online and offline travel agencies."

The airlines' strategy appears a bit less aggressive than that of large hotel chains, which have pushed hard to reduce their reliance on online travel agencies. (Click here to see related story.)

That said, airlines are getting picky about the costs of acquiring customers through third parties, and in at least one case, have ended relationships when the costs outweighed the added revenue.

Cost control is particularly important for airlines right now. Revenue is under pressure from too much capacity and fierce price competition. Delta Air Lines' (DAL) recent nationwide fare restructuring will likely only add to the pressure. Meanwhile, jet fuel remains costly, even after the recent decline in oil prices. Analysts have forecast huge losses for the industry in 2005.

Continental (CAL) offers a good example of major airlines' Internet efforts. Early last year, it unveiled a lowest-fare guarantee. A traveler who finds a Continental fare at another Web site that's more than $10 cheaper than at continental.com receives the difference plus a $100 credit toward another flight. The guarantee excludes tickets hotwire.com and Priceline.com (PCLN) sell with the "opaque" method, whereby customers learn what airline they will fly only after committing to buy.