Airline ticket sales dropped by Lowestfare.com

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By Todd R. Weiss

(IDG) -- Online travel company Lowestfare.com has given up trying to make money selling airline tickets to consumers and businesses and will now focus on selling its still-profitable vacation, cruise and tour packages.

An announcement posted Thursday on the Las Vegas, Nevada-based company's Web site said that tickets issued previously would still be honored, but future sales have been suspended.

Sherry Bailey, a Lowestfare.com spokeswoman, said the decision was largely the result of the bankruptcy sale last year of the former TWA Airlines to American Airlines. Lowestfare.com had an agreement with TWA to sell its tickets at healthy discounts online, but American Airlines nixed the program when it purchased TWA's assets in April 2001, she said.

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"The failure of American Airlines...to take over the ticket sales dealt a mortal blow to this operation," Bailey said. The TWA discount ticket sales had been a significant part of Lowestfare.com's business, she said.

Also contributing to the company's decision to drop airline ticket sales were recent changes by airlines to drop or reduce commissions paid to travel agencies for ticket sales. "In this environment, ticket sales are no longer a viable option," Bailey said.

Instead, Lowestfare.com is "going with business models that are proven and that have a viable future," she said, including vacation travel, cruise and tour packages.

Kate Rice, an independent travel analyst in New York, said Lowestfare.com's decision is "a pretty dramatic move," especially since the company's name literally refers to air fares. The company's move, though, was very specific to the damage done due to TWA's sale to American and is not likely to be replicated, she said.

"I don't think we'll see other major players do this," she said.

The reduction in airline-paid commissions for ticket sales has hit many online and traditional travel agencies, Rice said, but many have stayed with the sales to help bring in customers who can then be steered to other more profitable products, such as tour and cruise packages. "That is where the profit [is]," she said.

Lorraine Sileo, an analyst at PhoCus Wright Inc. in Sherman, Connecticut, said, "It's not surprising; They've been hurting for a while," since the TWA sale. The earlier agreement for discount TWA tickets was their claim to fame, she said, and the company "really wasn't able to recover after that [ended.]"

A spokesman for online travel industry competitor Bellevue, Washington-based Expedia.com Inc. refused to comment on Lowestfare.com's announcement. A spokesman for Fort Worth, Texas-based Travelocity.com Inc. couldn't be reached.

Lowestfare.com was founded in August 1995, and launched its Web site in October 1996, offering full-service travel arrangements to consumers and business travelers. The company offers its products through its Web site, a toll-free reservations center and more than 10,000 travel agencies.

In late 1999, the company acquired luxury tour provider Maupintour and international ticket consolidator JetSet Tours. Last year, Maupintour created a new division called Gutsy Women Travel as a specialized travel provider only for women.

The company is owned and led by financier Carl Icahn, who serves as chairman and formerly ran TWA Airlines from 1985 until 1993.