America Online buys into rival of travel websites

Aiming to put itself in the vanguard of the Internet travel business, America Online will invest an undisclosed amount in an upstart that threatens to lure customers away from Orbitz, Expedia, and Travelocity.

America Online Inc. plans to say today that it is taking a minority stake in Kayak Software Corp., whose software allows travelers to simultaneously scour the offerings of thousands of airline, hotel, and car-rental websites.

The investment in Norwalk, Conn.-based Kayak is part of a larger strategy at AOL, a unit of Time Warner Inc., to establish standalone businesses that attract an audience beyond its Internet service customers.

In September, AOL unveiled InStore, a comparison-shopping site.

The new multiyear agreement between AOL and Kayak, which intend to launch a new travel search engine early in 2005, follows a similar partnership Yahoo Inc. sealed with FareChase in July.

Both deals are somewhat of a blow to Travelocity, a unit of Sabre Holdings Corp. whose technology is the booking engine for the travel offerings available at the main pages of Yahoo and AOL.

"It will certainly put AOL and Travelocity at odds," said Henry Harteveldt, an analyst at Forrester Research in San Francisco.

Travelocity isn't taking the assault lightly. Its chief executive, Michelle Peluso, last month accused Kayak of poaching her company's inventory, and Kayak subsequently stopped listing Travelocity's offerings.

Kayak excludes Expedia Inc.'s inventory at the request of the Bellevue, Wash.-based company, a unit of IAC/InterActiveCorp.

"But this does not impact the breadth of the product that we offer to consumers," Kayak cofounder Paul English said. "We can get access to other online agencies, as well as working with the suppliers themselves." Kayak is allowed to search Orbitz and OneTravel.com, for example.