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A new online discount ticketing company called Hotwire has opened for business, giving struggling Priceline.com a direct competitor. And the new company is no fly-by-night start-up: It has financial backing from six of the largest U.S. airlines.

Funded by United Air Lines, American Airlines, Continental Airlines, Northwest Airlines, U.S. Airways Group, and America West Airlines, Hotwire plans to auction off vacant airline seats to last-minute and price-fixated travelers. Priceline.com was the first entrant in that market, but it has been beset by a variety of problems in the past two months.

For example, Priceline found itself kicked out of the Better Business Bureau of Connecticut for a failure to respond to customer complaints. The company also ran into tax problems in Massachusetts (see "Priceline Shoppers Face Taxing Problem").

The company also warned that its airline ticket sales fell short of expectations in the third quarter, and an affiliate that handled Priceline.com's name-your-price service for gasoline and groceries said it plans to go out of business by year's end (see "Priceline.com Affiliates Close Their Digital Doors").

Another blow was dealt on Monday, when Delta Air Lines--one of Priceline.com's earliest investors--announced plans to sell off its remaining holdings in the company. Delta officials declined to comment on the reasons for the move.

But Henry Harteveldt, an analyst at Forrester Research, said he thinks the sell-off is a prelude to Delta taking an equity position in Hotwire. "Delta's not going to give United and American any kind of competitive advantage," Harteveldt said. "Priceline was an interesting experiment for [Delta], but the airlines are clearly getting behind Hotwire."

Hotwire is the second ticketing venture to emerge with backing from the major U.S. airlines, although its Web site is the first of the two to become operational. The other ticketing venture, Orbitz, recently delayed the planned launch of its Web site until next spring.

Hotwire chief executive officer Karl Peterson wouldn't comment specifically on the likelihood that Delta will sign on as an investor in the new venture. But Delta "clearly fits the criteria we have for [participants]," he said. "We would be excited about having Delta as a partner."

Unlike the way Priceline.com initially operated, Peterson said, Hotwire doesn't plan to sell any airline tickets at prices below the actual cost of the flights. He also pledged to make it clear to users of the Hotwire site exactly what they will be charged for each transaction--an effort to avoid the kind of complaints Priceline.com has received from customers who said they were unaware of fees tacked on to purchases until they received their bills.

Given Hotwire's airline backing, Harteveldt said the new venture should be able to provide enough cut-rate tickets to satisfy discount-hungry travelers. The real challenge for Hotwire is to expand beyond airplane tickets into hotel reservations and other forms of travel booking without overextending itself, he added.

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