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AOL plans to launch travel site

Free online service intended to search the Web for the best airline, hotel and car rental deals.

America Online said Thursday it will launch a free online service for searching the Web for the best travel deals, highlighting the online giant's ambitions to boost its free Web-based businesses.

AOL will partner with Kayak Software to create a comparison-shopping travel site featuring Kayak's search technology for finding airline, hotel and car-rental deals. Kayak was created by the founders of Expedia, Orbitz and Travelocity, according to a notice on its Web site, currently still in beta.

As part of the deal, AOL will make a "minority investment" in Kayak, although financial terms were not disclosed.

The creation of a Web-based travel site marks another step by AOL to break out of its "walled garden" roots as an online service only for subscribers. The Time Warner division has witnessed a staggering loss of its core dial-up subscribers for more than two years, coupled with a dramatic decline in online-advertising revenue.

As part of its turnaround strategy, AOL is taking another stab at becoming a free Web portal and another swing at catching up to Yahoo and Microsoft's MSN.

Overall, online-advertising revenue has surged, driven by commercial search businesses such as Google and Yahoo's Overture Services. AOL has benefited from this resurgence largely through a revenue-sharing deal to host Google's AdWords links on AOL Search. The partnership helped AOL report advertising revenue growth last quarter.

As a sign of things to come, AOL recently launched a redesign of its AOL.com Web site, although initially only for its subscribers. In the coming months, AOL plans to release for a general Web audience more of the services and content currently found only in AOL's proprietary online service. The idea is to attract the growing advertising dollars flowing back into Web companies.

In the meantime, the company is planning to trim the fat. Earlier this week, AOL confirmed it will reorganize its business units to focus on its Internet access businesses, its content programming, its digital services and AOL Europe.

A week earlier, sources close to AOL confirmed that the company plans to lay off 700 employees. The process could begin as soon as early December, the source said.