Priceline 2010 Annual Report Download - page 89

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operations and we experienced an increase in credit card chargebacks from customers with tickets on those airlines.
To the extent major U.S. airlines that participate in our system declare bankruptcy or cease operations, they may be
unable or unwilling to honor tickets sold for their flights. Our policy in such event is to direct customers seeking a
refund or exchange to the airline, and not to provide a remedy ourselves. Because we are the merchant-of-record on
sales of Name Your Own Price® airline tickets to our customers, however, we could experience a significant increase
in demands for refunds or credit card chargebacks from customers, which could materially adversely affect our
operations and financial results. In addition, because Name Your Own Price® customers do not choose their airlines,
hotels or rental car companies, the bankruptcy of a major airline, hotel or rental car company, or even the possibility
of such a bankruptcy, could discourage customers from using our Name Your Own Price® system to book travel.
Some travel suppliers are encouraging third-party travel intermediaries, such as us, to develop technology
to bypass the traditional GDSs, such as enabling direct connections to the travel suppliers or using alternative global
distribution methods. For example, in December 2010, American Airlines terminated its participation in the Orbitz
service and withdrew its fares from the Orbitz website. This is consistent with an effort on the part of American
Airlines, and the airline industry in general, to reduce distribution costs. American Airlines’ termination of its
distribution arrangement with Orbitz could be indicative of the airlines in general becoming more aggressive toward
requiring online travel agents to implement direct connections. In addition, in December 2010, Expedia
preemptively removed American Airlines flights from its site as its contract with American was set to expire on
December 31, 2010. It is feasible that a dispute between an airline and a GDS could lead to an airline removing its
fares from the GDS. Despite the fact that such a dispute may not involve us, our business could be adversely
affected if we are denied access to airfares in a major GDS. During 2010, we implemented a direct connection with
American Airlines. Development and implementation of the technology to enable additional direct connections to
travel suppliers could cause us to incur additional operating expenses, increase the frequency/duration of system
problems and delay other projects. In addition, any additional migration toward direct connections would reduce the
compensation we receive from GDSs.
The loss of any major airline participant in our Name Your Own Price® system could result in other major
airlines electing to terminate their participation in the Name Your Own Price® system, which would further
negatively impact our business, results of operations and financial condition. In addition, fewer independent
suppliers reduces opacity and competition among suppliers. In such event, if we are unable to divert sales to other
suppliers, our business, results of operations and financial condition may be adversely affected.
In addition, given the concentration of the airline industry, particularly in the domestic market, our
competitors could exert pressure on other airlines not to supply us with tickets. Moreover, the airlines may attempt
to establish their own buyer driven commerce service or participate or invest in other similar services.
United Airlines prohibits certain travel agents from using United’s merchant processing system for retail
credit card transactions. When accepting credit cards for payment, such agents must use their own merchant
accounts and settle with United with cash. By requiring such agents to act as merchant of record, United passes the
credit card processing costs onto the travel agent. United has not informed us that we must cease using United’s
merchant processing system for credit card transactions, however, if United or another airline changes its policy
with respect to us and requires us to act as merchant of record for retail airline ticket transactions, we will incur
additional credit card processing costs and increased chargeback activity and expense, including chargeback expense
in connection with the bankruptcy of any such airline.
Avis is currently in discussions to acquire the Dollar-Thrifty Automotive Group. The merger or acquisition
of the Dollar-Thrifty Automotive Group by Avis or another rental car company could result in a decrease of rental
car reservations available to our rental car service. If another major rental car supplier merges or consolidates with,
or is acquired by, another company that either does not participate in the priceline.com system or that participates on
substantially lower levels, the surviving company may elect not to participate in our system or to participate at lower
levels than the previous supplier. The loss of any rental car supplier participant in our Name Your Own Price®
system could result in other rental car suppliers electing to terminate or reduce their participation in the Name Your
Own Price® system, which would negatively impact our business, results of operations and financial condition.
Similarly, industry consolidation and any resulting reduction in rental car capacity would limit the amount of
availability for TravelJigsaw’s rental car service. Furthermore, many major rental car companies are highly
leveraged and the worldwide recession creates the potential for severe financial difficulty, including without
limitation, the inability of a rental car company to refinance its debt, restructure its operations or emerge from a
bankruptcy, any of which could lead to a reduction in rental car supply made available to us. In addition, fewer