Blackstone and Orbitz Tumble

Whose bright idea was it to take Orbitz public under the ticker symbol OWW? That's certainly the sound that Blackstone chief Steve Schwarzman is making today: not only is his own stock trading at a mere $26 per share – down $5 from its offer price – but the stock of Orbitz is down, too. Blackstone took the travel company public today at $15 per share, but it's already trading a good 50 cents below that level. Even Blackstone didn't drop below its offering price on its first day of trading.

It's easy to see why neither business looks particularly attractive right now, despite their multibillion-dollar valuations. The primary fuel driving Blackstone's stellar returns – cheap junk-rated debt – is becoming very scarce. And Orbitz is losing money in the highly competitive world of online travel reservations, where price is king.

In any event, I think that travellers are learning that Orbitz never undercuts the fares available at the airlines' own sites. Perhaps people use the site to find the best fares – but then they buy them directly from the airlines, avoiding the Orbitz booking fee. That's what I do, not because of the booking fee, so much as because I've noticed much better service and much more flexibility from airlines when I've bought the ticket from them directly than when I've bought the ticket through Orbitz. To take one example, Orbitz tickets on Virgin Atlantic are generally non-upgradeable, while the same ticket bought for the same price from the airline can be upgraded easily.

Orbitz is hoping that it will make profits from hotels and car reservations, which should give it profits even if the airline-tickets business is never particularly lucrative. I'll believe it when I see it. But maybe Blackstone is being smart here, for getting out of at least some of the business while it can.