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Airlines cash in with online ticket sales

Total Internet sales for major U.S. airlines will reach $8.7 billion in 2000, up 85 percent from 1999 revenues of $4.7 billion, according to a new report.

Sales of airline tickets online are expected to grow 85 percent from last year, according to a new industry report.

Total Internet sales for major U.S. airlines will reach $8.7 billion in 2000, up 85 percent from 1999 revenues of $4.7 billion, according to a report released today from PhoCusWright, a travel research company based in Sherman, Conn.

Airlines are grabbing the lion's share of online ticket sales through their own sites. Sales from airline company Web sites will account for 58 percent of total online air travel bookings this year, a 5 percent jump from last year, the report found.

The landgrab can be attributed to the major airlines' investment in technology, customer-loyalty programs and distribution to third-party Web sites, the report said. Because online travel agencies such as Expedia and GetThere are starting to branch out with other travel services, including cruises and hotel rooms, the airlines are able to garner greater loyalty from consumers directly.

The recent economic downturn for e-tailers has put a damper on momentum in the industry. But instead of using the Internet as their main sales conduit, airlines are simply using the medium to compliment or improve upon their existing sales structure.

"Airlines aren't looking to use the Internet to impress shareholders; and they haven't borrowed money from venture capitalists," said Lorraine Sileo, vice president of information services at PhoCusWright. "The Internet is just a more efficient way to sell tickets and a proven way to save money on distribution costs," she said.

The airlines have already saved more than $100 million in distribution costs within the last 12 months, she said. Every time a consumer books an airline ticket on a Web site vs. traditional travel agencies, it can mean a savings of about a tenth of the normal ticket cost. "They're highly motivated because of this," she said.

But while the airlines continue their steady climb in Internet sales, at least 75 percent of all airline bookings are still made through traditional travel agencies, Sileo said. Airlines will book 9 percent of total ticket sales online this year, up from 2 percent in 1999.

Regional airlines are selling the most tickets through the Web. "Smaller, regional airlines will sell a larger percentage of their air through the Internet (because) the product is simple, it's priced lower and it's usually a repeat purchase," Sileo said.

Southwest, for example, books about 25 percent of its tickets through the Internet, while United books about 7.40 percent, she said.

Southwest leads in online ticket sales with $877 million in sales last year, a 19 percent share of the total online market, according to PhoCusWright. Delta and United follow closely with Internet revenues of $671 million and $505 million, respectively.

The report said the airline Web sites will still likely sell more tickets than airline-backed online travel agencies, including Orbitz and Hotwire. Research for the report, called "Airlines and the Internet: Nonstop Growth and Competition," was based on surveys of Internet executives at 10 major U.S. airlines.