Airfare Hikes Could Trigger 2009 Travel Cutbacks, Expedia Warns

Expedia Corporate Travel has seen no evidence of a reduction in client travel, despite recent economic concerns, but rising airfares spurred by capacity cuts and consolidation could trigger such cutbacks, said Dara Khosrowshahi, president and CEO of ECT parent Expedia Inc. in today’s fourth-quarter investor call.

During the quarter, Expedia’s overall gross bookings increased 25 percent compared with the fourth quarter of 2006, including a 36 percent increase in “other bookings,” comprised primarily by ECT and Asia/Pacific operations. For full year 2007, other bookings increased 28 percent and total Expedia gross bookings increased 16 percent.

While “air travel continues to be fairly robust,” Khosrowshahi said higher airfares shouldn’t impact until 2009, due to existing carrier contracts and the lengthy regulatory approval process that would precede any airline consolidation.

“From a long-term perspective, we would expect to see further discipline as far as capacity goes,” said Khosrowshahi, who added that worldwide airfares increased 9 percent on average in 2007, including an 8 percent increase in North America.

In 2008, the company plans to provide more European hotel content, especially for smaller cities and towns, and further develop its new technology platform, which Khosrowshahi said was delayed for three to six months, but will begin a staged rollout this year.

Meanwhile, Expedia chairman and CEO Barry Diller said a conflict with Liberty Media surrounding plans for the breakup of InterActiveCorp into five publicly traded companies, is independent of Expedia, which spun off from IAC in 2005.