updated 11/12/2004 2:41:46 PM ET 2004-11-12T19:41:46

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 the industry's most dominant players, such as Orbitz, Expedia and Travelocity.

America Online Inc. on Friday announced it is taking a minority stake in Kayak Software Corp., one of a handful of companies whose software allows travelers to simultaneously scour the offerings of thousands of individual airline, hotel and car rental Web sites.

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. "There's no question that this will take some of the business that Travelocity is getting and divert it to suppliers who are available on Kayak."

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

Kayak also 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 co-founder 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, and English said the company is in the process of negotiating deals with other online travel agencies.

Other well-known travel search engines, or aggregators, include SideStep, Mobissimo and Qixo, the only one in the bunch that charges a fee.

Copyright 2004 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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