US travel agency fee cuts could become permanent

* Orbitz, Expedia fee cuts were supposed to be temporary

* Travel bookings mostly down in second quarter

* Once demand perks up, agencies may reinstate fees slowly

By Kyle Peterson

CHICAGO, May 13 (Reuters) - U.S. online travel agencies,
hungry for business in an economic recession, may extend or make
permanent the booking fee cuts and waivers they implemented this
year on a promotional basis.

The companies like Orbitz Worldwide (OWW.N) and Expedia Inc
(EXPE.O) suspended or reduced some of their booking fees
recently to spur demand during the peak summer travel season.

The moves, which lag Priceline.com's (PCLN.O) airline
booking fee waiver by nearly two years, were intended to be
temporary. But experts think they could become permanent as the
agencies compete for customers. Industry leaders have hinted the
same.

"The combination of measures that we've taken ... certainly
give us the flexibility to sustain the actions if we choose to
do so," Orbitz Chief Executive Barney Harford told Reuters last
week, referring to cost cutting and revenue-generating steps.

Orbitz, Expedia and Travelocity waived airline booking fees
as part of promotions that extend through May. Orbitz and
Expedia also temporarily cut hotel booking fees.

Priceline eliminated fees for published-price airline
bookings in 2007 and reduced fees for published-price hotel
bookings in 2008. The fees were unchanged for Priceline's
name-your-own-price auction.

"Our competition has cut fees on a promotional basis this
spring, and all are matching, resulting in a material hit to our
competitors' profitability," Priceline CEO Jeffery Boyd said
Monday on a conference call with analysts and reporters.

"If the fee reductions are made permanent by our
competition, we expect a reduction over time in the domestic
market share gains we have experienced," he said.

Travel businesses are wrestling with an economic recession
that has drained both leisure and business travel budgets.
Online travel agencies hope they can boost demand with sales,
fee waivers and price guarantees.

Of the three publicly traded online travel agencies --
Expedia, Priceline and Orbitz -- only Priceline saw bookings
growth in the second quarter.

Morningstar analyst Warren Miller it is possible that the
agencies may reinstate their fees slowly to avoid attracting
attention.

"We're not going to see big ad campaigns about the fees
being reinstated," Miller said. "They're going to just kind of
creep in there, and one day they'll just be there."

"They're going to wait until they actually see the demand
uptick before they reinstate them," he said.
(Reporting by Kyle Peterson, editing by Matthew Lewis)