June 29, 2000
Priceline has a powerful new foe. Six major airlines who've been disposing of excess inventory through Priceline are launching their own Web site to sell deeply-discounted seats without Priceline's confusing bid system.
Operating in secret, America West, American, Continental, Northwest, US Airways and United have raised $75 million from outside investors to fund development of Hotwire.com, expected to take off this fall.
Hotwire will sell the same excess seats that Priceline now auctions off, except that consumers won't have to play the Priceline guessing game. Hotwire will let them choose the fare they want to pay on a selected route.
It still won't be like buying a standard ticket. The system will mask the name of the airline, the exact routing and the exact flight times until the purchase has been completed.
Priceline has been a huge business with its patented bid system but is still not profitable and faces a growing number of complaints from consumers who feel the bidding system is unclear and confusing, if not downright deceptive.
Priceline reports that it sells 80,000 tickets per week for 30 airlines. It had revenue of $482 million in 1999.
The six airlines launching Hotwire.com are not expected to pull the plug on Priceline, and Priceline founder Jay S. Walker says he expects the new entrant to have no negative impact. In fact, he told the Wall Street Journal, its impact may be positive.
"The more people you see shopping online, the better," he said.