Web travel agencies brace for airline downsizing

By Kyle Peterson - Analysis

CHICAGO (Reuters) - Online travel agencies, after growing rapidly for years, could face a slump in domestic bookings later this year when U.S. airlines slash the number of tickets for sale.

All three publicly traded online travel agencies (OTAs) -- Expedia Inc (EXPE.O: Quote, Profile, Research, Stock Buzz), Orbitz Worldwide Inc (OWW.N: Quote, Profile, Research, Stock Buzz) and Priceline.com Inc (PCLN.O: Quote, Profile, Research, Stock Buzz) -- have warned that airline downsizing could hurt other travel businesses.

None predicted a specific impact on their industry, but at least one expert says the implication is clear:

"We expect it to hurt the OTAs because it could lead to higher air pricing, which could deter travel," said Marianne Wolk, an analyst at Susquehanna Financial Group.

Capacity cuts are certain to put a crimp in domestic air travel sales, she said, adding that "there should be a secondary negative impact on travel overall."

The trouble stems from a crisis in the airline industry resulting from surging fuel prices that have offset a series of fare hikes and led to steep quarterly losses for carriers.

Major airlines like AMR Corp's (AMR.N: Quote, Profile, Research, Stock Buzz) American Airlines and UAL Corp's (UAUA.O: Quote, Profile, Research, Stock Buzz) United Airlines have responded by downsizing to cut costs and command higher fares.

American has promised to cut domestic capacity by up to 12 percent in the fourth quarter, while United said it would cut its fourth-quarter mainline capacity by up to 16.5 percent.