Expedia has agreed a deal with lastminute.com's American parent Travelocity in which it will operate its US and Canadian websites.
The strategic long-term agreement will see Expedia's technology run the rival Travelocity sites and gives it access to its supply and customer service.
Travelocity will remain owned by Sabre Holdings Corp and the agreement does not include lastminute.com in Europe or the Travelocity Partner Network.
The announcement comes after a short period of speculation that a major acquisition was in the offing in the online travel agency sector.
Expedia, chief executive Dara Khosrowshahi, said: "Over the years, Travelocity has become one of the most recognised travel brands in the US and Canada.
“Going forward, this agreement will enable Travelocity to focus on further building its brand while at the same time providing consumers with an enhanced suite of travel products and services.
"This announcement stands as a true testament to the advanced capabilities that our significant technology investments over the past several years enabled us to build.
“We believe volume generated through the agreement will add further scale to Expedia's global supply and customer service capabilities."
Carl Sparks, president and chief executive of Travelocity Global added: "Since launching in 1996, Travelocity has grown from a pioneering internet start-up to one of the leading brands in travel.
"In staying true to our core values of meeting the needs of both consumers and travel suppliers, we have elected to evolve and strengthen our business model in the US and Canada by working with Expedia to offer a top-notch booking platform and a more robust supply of travel options, allowing us to focus increased resources on building our competitive strengths in marketing and retailing."
According to reports from the US plans to develop the joint venture will begin immediately, with an expected launch in 2014.
The deal comes under a week since Sabre unexpectedly announced a change at the top with president Tom Klein taking over from Sam Gilliland, well-known to have been a big supporter of Travelcity, as chief executive.
This prompted a wave of speculation that Sabre would look to return to public ownership once again after being taken private in 2007 by Silver Lake Partners and Texas Pacific Group.
Given today’s news, this assessment in an article on the Dallas Morning News site has taken on greater significance:
“Sabre operates, in part, in the increasingly fragmented world of online travel agents.
“And numbers from comScore, which collects data on consumer behaviour online, show Travelocity yielding market share.
“Market leader Expedia has consistently been at the top of the pack, with about 60% of the unique visitors to online travel websites.
“Travelocity has seen its share dip from 23.5% of visitors in July 2010 to 17.8% last month. That’s a nearly 35% drop in the number of unique visitors.”
Expedia remains the world's largest travel agency but it too has lost ground after former susidiary TripAdvisor switched away from offering its users pop up ads.
In July the Wall Street Journal reported how "Expedia gets dinged by former subsidiary TripAdvisor" when a second quarter trading update saw its shares plummit 24%, wiping $2 billion off its valuation.
Expedia chief executive Dara Khosrowshahi said: "It is tougher for some of our brands to get the kind of share or voice that we've had in the past."
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