The service, to be named Opodo, will be launched later this year.
It follows a moves by five US airlines to set up a similar online service.
Growing market
Orbitz, which is owned by United, Continental, Delta, Northwest and American airlines, claims to offer more choice, and often better prices, than the web's current offerings.
Europe's online travel market is currently estimated to be worth £3.7bn and is expected to grow to £24.9bn by 2005, according to Forrester Research.
The partners in Opodo claim it will become the European market leader.
Low fares
Opodo aims to offer cheap flights from more than 480 airlines, accommodation from 54,500 hotels and 23,500 car rental locations worldwide as well as travel insurance.
It plans to launch initially in Germany, UK and France, and later across Europe, between 2002 and 2003.
Former Alitalia CEO, Giovanni Bisignani will take charge of the new company, which aims to recruit over 100 permanent staff by the end of the year.
Mr Bisignani said: "Opodo will give consumers a wealth of local knowledge and our aim is to utilise this experience to make Opodo the number one online destination in Europe for online travel bookings.
"Opodo aims to be a low cost distribution channel with the objective of providing consumers with choice and low fares.
'Explosion in demand'
He added: "Europe has for some time lagged behind the US for online travel bookings and we believe that Europe is about to witness an explosion in demand for online travel services surpassing US growth by as early as 2004."
Nicolas de Santis, Marketing Director for Opodo, said Opodo aimed to stand out in a crowded market by offering a more trustworthy and personal service.
He said: "Our site and product offering will be a tangible manifestation of our brand values."
Network of sites
Opodo will have local independent sites serving each European market allowing customers to navigate and book in their own language.
The company claims it will be staffed by travel experts, who will use the experience derived from the nine shareholding airlines.
Opodo says it will primarily target leisure and business travellers who have used the web to research travel, but may not necessarily have booked, along with seasoned online travel bookers.
The site will also offer travel information including destination guides and interactive maps, and a range of travel brands tailored to each country market.
The name Opodo is derived from the phrase "opportunity to do".