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Orbitz to net airline owners a tidy profit
Airlines might not be making much money from selling tickets in the current economic environment, but luckily investing in online travel agencies seems to be a different matter. Orbitz revealed the price for its Initial Public Offering yesterday in an official filing. And the company looks set to makes its five airline owners – Continental, American Airlines, Northwest, Delta and UAL – a tidy profit. It will offer 11 million shares to the public, priced at between $22 and $24, making the five airlines around $161 million. What’s more the airlines will continue to hold on to 70% of the company – which at $23 per share – is worth another $650 million. It follows an initial investment of around $215million. But it isn’t all plain sailing. Orbitz faces tough competition from Expedia, owned by InterActive, and Sabre-owned Travelocity. While the flotation will help it raise funds to compete against its bigger rivals, this will be no easy task. Orbitz itself pointed out: “Many of our competitors have longer operating histories, larger customer bases, more established brands and significantly greater financial, marketing and other resources than we do.” No date has been yet been set for the flotation. Meanwhile a spokeswoman for Opodo – Orbitz’s European equivalent which is owned by nine airlines along with GDS firm Amadeus – said there were “no immediate plans” for a similar flotation. She also declined to give details on the private company’s booking figures.
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