Orbitz 2008 Annual Report Download - page 20

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manner or on comparable terms, we may not be able to operate our business effectively, and our financial performance may suffer.
Our arrangements with the airlines generally do not require the airlines to provide any specific quantity of airline tickets or to make tickets available for any
particular route or at any particular price. The significant reduction on the part of any of our major suppliers of their participation in our system for a sustained
period of time or their complete withdrawal could have a material adverse effect on our business, financial condition and results of operations. Moreover, the
airline industry has experienced a shift in market share from full-service carriers to low-cost carriers that focus primarily on discount fares to leisure destinations
and we expect this trend to continue. Some low-cost carriers, such as Southwest Airlines, have not historically distributed their tickets through us or other
third-party intermediaries.
The travel industry is highly competitive, and we are subject to risks relating to competition that may adversely affect our performance, including
adjustments to customer processing fees.
Our businesses, which consist primarily of our travel websites, operate in the highly competitive travel industry. Our continued success depends, in large
part, upon our ability to compete effectively against numerous competitors, some of which have significantly greater financial, marketing, personnel and other
resources than we have. If we cannot compete effectively against our competitors, we may lose customers or be unable to acquire new customers, which would
adversely affect our financial performance.
Factors affecting the competitive success of our businesses include price, the availability of travel inventory, brand recognition, customer service, ease of
use, fees charged to travelers, accessibility and reliability. We compete with online travel companies such as expedia.com, hotels.com and hotwire.com, which
are owned by Expedia, Inc.; travelocity.com and lastminute.com, which are owned by Sabre Holdings Corporation; and priceline.com and bookings.com, which
are owned by priceline.com Incorporated; and smaller regional operators.
We also face competition from a number of large Internet companies and services that have expertise in developing online commerce and in facilitating
Internet traffic, including Google, AOL and Yahoo!, the latter two of which partner with Travelocity to offer travel products and services directly to consumers.
We also may compete with metasearch companies such as Kayak.com, Sidestep, Inc. and Yahoo! Farechase, which are companies that utilize their search
technology to aggregate travel search results across supplier, online travel and other websites. We also compete directly with suppliers, such as airlines, hotel and
car rental companies who distribute their products through their own websites. Suppliers who sell on their own websites typically do not charge a processing fee
and, in some instances, offer advantages such as bonus miles or loyalty points as an incentive to use their websites, which could make their offerings more
attractive to consumers than offerings through third-party distributors like us. Although some of our primary competitors also charge customer processing fees,
we believe we are more dependent on these fees and we would be negatively impacted if competitive dynamics caused us to reduce or eliminate these fees. In the
offline travel company category, our competitors include Liberty Travel Inc. and American Express Travel Related Services Company, Inc. Increased
competition from these and other sources could have a material adverse effect on our business, financial condition and results of operations.
Some of our competitors may be able to secure services and products from travel suppliers on more favorable terms. In addition, the introduction of new
technologies and the expansion of existing technologies may increase competitive pressures. Increased competition may result in reduced operating margins, as
well as loss of industry share and brand recognition. We may not be able to compete successfully against current and future competitors, which would have a
material adverse effect on our business, financial condition and results of operations.
13
Source: Orbitz Worldwide, In, 10-K/A, August 28, 2008