Bear Stearns Believes Orbitz Will Survive Federal Scrutiny.

Business Editors

ORLANDO, Fla.--(BUSINESS WIRE)--September 22, 2000

Anti-Competitive Concerns Appear to be Overblown, but Execution

Challenges Still Remain for the New Internet Travel Company

It is a business that has attracted plenty of controversy even before it has served its first customer. The management of Orbitz, the airline owned travel web site, was called before federal regulators this summer to answer charges that its new business model is a monopoly in the making. Despite this heightened scrutiny, Bear Stearns Internet travel analyst Robert LaFleur does not believes Orbitz will be forced to close its doors even before they open. "We believe that much of the anti-competitive concerns surrounding Orbitz are overblown and that it is unlikely the federal government will force it to disband," commented LaFleur. LaFleur does not believe, however, that just because Orbitz may avoid regulatory scrutiny that success is guaranteed. "It is our belief that the success or failure of Orbitz will lie not in the hands of federal regulators, but instead in the ability of the company to execute its very ambitious business plan," said LaFleur. LaFleur made his comments at the E-Travel World conference in Orlando, Florida.

Overcoming Objections

Throughout his research, LaFleur has kept a close eye on the proceedings in Washington and the subsequent fallout surrounding Orbitz. Anti-competitive accusations have been made by travel agents and other industry groups, which state that Orbitz will have a stranglehold on airline ticket supply. LaFleur does not believe these arguments hold much weight with regulators. "The anti-competitive arguments are mostly hyperbolic and we believe Orbitz is more likely to be consumer-friendly rather than a monopolistic monster," explained LaFleur.

There is one area where LaFleur believes federal regulators may choose to step in. Orbitz plans to offer Web-only fares that currently appear strictly on each airline's individual web site, an option that is not available to other major travel sites. "Web-only fares would give Orbitz a distinct advantage over travel sites which do not have access to this information; because of this discrepancy we wouldn't be surprised to see Washington insist that suppliers install a mechanism to make these fare available through additional channels," said LaFleur.

Federal Regulation - The First Hurdle in a Long Race

While LaFleur believes Orbitz will overcome anti-competitive concerns, he points out that does not guarantee smooth sailing for the start-up. "The Internet travel arena already has a few well-entrenched players, including Travelocity and Expedia, and it will be challenging and expensive for any newcomer to establish a toehold in this very competitive space," according to the Bear Stearns analyst. That said, LaFleur does believe Orbitz will bring a great deal of ammunition to the Internet travel battle. Backed by five major airlines and having alliances with at least twenty-five more, Orbitz will provide consumers with a complete selection of all available airfares and travel itineraries. Orbitz has developed cutting edge technology to deliver these options to the consumer and promises to offer the lowest prices anywhere. "Orbitz has developed an impressive business model and if they can execute on it they should end up being a key player in this ever-expanding market," said LaFleur.

A Quick Trip to 3rd Place

Travelocity and Expedia have a firm grip on the top two spots in the Internet travel space and LaFleur predicts that will not change. LaFleur believes Orbitz will have to develop into a full-scale travel site if it is eventually going to compete with the industry leaders. In addition to airfare, Travelocity and Expedia offer a wide range of travel options including hotels, rental cars, cruises and full vacation packages.

LaFleur does believe that if Orbitz successfully executes the aggressive business plan it has laid out, it could vault to the number three spot in relatively short order. "Travelocity and Expedia seem safe for the foreseeable future, but if I were the third or fourth most popular travel site, I'd be looking in my rearview mirror," concluded LaFleur.

Members of the Press

To learn more, or to speak with Robert LaFleur, members of the press can call Laura Conover at 212-272-8768.

Founded in 1923, Bear, Stearns & Co. Inc. is a leading worldwide investment banking and securities trading and brokerage firm, and the major subsidiary of The Bear Stearns Companies Inc. (NYSE:BSC). With approximately $24.6 billion in total capital, Bear Stearns serves governments, corporations, institutions and individuals worldwide. The company's business includes corporate finance and mergers and acquisitions, institutional equities and fixed income sales, trading and research, private client services, derivatives, foreign exchange and futures sales and trading, asset management and custody services. Through Bear, Stearns Securities Corp., it offers global clearing services to broker dealers, prime broker clients and other professional traders, including securities lending. Headquartered in New York City, the company has more than 10,800 employees located in domestic offices in Atlanta, Boston, Chicago, Dallas, Los Angeles, San Francisco and San Juan; and an international presence in Beijing, Buenos Aires, Dublin, Hong Kong, London, Lugano, Sao Paulo, Seoul, Shanghai, Singapore and Tokyo. For additional information about Bear Stearns, please visit our Web site at http://www.bearstearns.com.

Any recommendation contained in this report may not be suitable for all investors. Moreover, although the information contained herein has been obtained from sources believed to be reliable, its accuracy and completeness cannot be guaranteed. Bear Stearns may make markets and effect transactions, including transactions contrary to any recommendations herein, or have positions in the securities mentioned herein (or options with respect thereto) and may also have performed investment banking services for the issuers of such securities. In addition, employees of Bear Stearns may have positions and effect transactions in the securities or options of the issuers mentioned herein and may serve as directors of such issuers. Copyright (c) 2000. All rights reserved by Bear, Stearns & Co. Inc.