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Online travel industry reeling from US attacks

Share collapses, job losses, services suspended

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The online travel industry, specifically the airlines themselves, are still reeling from the terrorist attacks in the US last week.

Share prices of online travel agents have plummeted and several US airlines have warned they may have to declare themselves bankrupt unless federal aid is forthcoming. The shining light of Internet commerce - online travel tickets - is severely diminished.

American Airlines, United Airlines, US Airways and TWA have suspended their online ticket buying systems since the great flexibility afforded by the Internet to fill empty seats is no longer practical thanks to reduction in demand and in the number of flights.

There remains a huge backlog of travellers as all plane traffic in the US was delayed for a number of days and many more remain uncertain of travelling by plane, constraining fresh demand. This, and new security measures, has created an enormous cash flow problem for airlines - who are also estimated to be losing $200 million a day collectively - and has led to them warning US Congress of possible liquidation unless aid arrives soon.

Yesterday, US Transportation Secretary Norman Mineta said he hoped to have such aid ready by early next week and that airlines may be reimbursed for losses due to the shutdown of US airspace.

Congress remains unhappy though about the $7.8 billion in tax relief that the airlines asked for as part of a $24 billion plan. Every main airline in the US has seen its share price fall by at least 40 per cent and several have announced heavy job losses. European airlines are now asking for similar aid packages to cover their losses.

Meanwhile, online travel agents have had an equally rough time of it. Expedia, Priceline and Travelocity have seen equally large drops in share price. Tickets sold online now account for about 10 per cent of all airline tickets but have been the hardest hit since they are often the last to be bought for a particular flight.

The online market virtually disappeared when all planes were grounded for two days and although demand is now picking up again, it is still far below normal levels. Such agents have also had to deal with hundreds of calls from customers with cancelled tickets. On top of that the added convenience of e-tickets has been effectively removed due to new security measures at all airports.

However, they are in far better shape than the airlines since overheads are extremely low in comparison and we have yet to see any job losses. Plus, while it is inevitable that the horror of the hijacked planes will make people think carefully about catching a plane, air travel has now become such a part of modern life that it shouldn't be long before things are back to normal.

One indication of this comes from an official announcement today from UK-based online agent ebookers. It said it has seen 650 cancellations - most to the US - which accounts for 0.6 per cent of bookings made in the first six months of the year. Ebookers deals mostly with European travel.

With many agents diversified into hotel bookings and car rental, they should be able to weather the storm. And, with luck, learn from the situation to make online booking a more stable industry from now on. ®

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