American Airlines pulled its inventory from Orbitz and its corporate travel solution Orbitz for Business Dec. 21 after a circuit court judge’s ruling cleared the way, giving American at least a temporary victory in the escalating battle over how its inventory is distributed.
But the legal battle is not over. Travelport, which owns 48% of the online travel agency and filed the lawsuit, says it will continue to pursue its case.
The decision by the circuit court Judge Martin Agran in Cook County, Ill., dissolves the temporary restraining order that had prevented American from removing its bookable flights and fares from Orbitz as of Dec. 1. And the dispute is emblematic of a broader battle going on among airlines and third-party distributors.
American demanded that Orbitz directly connect to American’s internal reservations system for flight and fare data instead of getting it from the Worldspan global distribution system, which it says will enable American to better customize its pricing and lower its costs.
With direct connect, American says it can better access its customer relationship management database to personalize pricing offers—including fares and fee-based ancillary services—based on who is buying the ticket. It also would avoid paying a fee to Travelport for each booking.
“In today’s competitive marketplace, it is important for American to be free to customize its product offerings to improve the customer experience as well as distribute its products in a way that does not result in unnecessary costs,” American said in a statement released after the judge’s Dec. 21 ruling.
Orbitz, however, says its GDS agreement with Travelport limits its ability to meeet American's demands. And Travelport, the parent company of the Worldspan and Galileo GDSs, says American is contractually obligated to provide full content to Orbitz and other Travelport affiliates to the same extent it is offered to competitors.
Travelport also argues that American’s direct-connect insistence would make it much more difficult for consumers to compare prices and for travel agents and corporate travel departments to manage their business.
But while the current fight pits just one airline against one GDS company, the potential impact is much broader. Many other airlines are pushing direct connect and more personalized pricing as well, but American has been the most aggressive, making a big pitch to travel agencies to access its inventory with direct connect instead of a GDS.
Kurt Ekert, Travelport GDS chief commercial officer, told the court that “if American is successful in its actions here, I believe the customer migration away from Travelport to American’s direct connect or other solutions will be massive.”
The validity of that concern can be questioned—in his ruling, the judge noted that Ekert also testified that he is not aware of any travel agent that will switch to using American’s direct connect—but others in the industry clearly are worried about the broader implications.
The Business Travel Coalition, which represents corporate travel departments, declared the lawsuit “represents merely the opening skirmish in the larger battle for the future of the open marketplace for travel.”
Single-supplier direct connect proposals, like the one advanced by American, “can cause massive fragmentation of airfares and ancillary fees, depriving consumers of the ability to compare the total cost of air travel options across all airlines,” BTC Chairman Kevin Mitchell asserts.
Charlie Leocha, director of The Consumer Travel Alliance, decried “a heavy-handed attempt by American Airlines to prevent consumers from easily searching and comparing its fares against those of other airlines.”
Sabre said, “We strongly agree with the many industry and consumer groups who believe American’s actions will make it much harder and more costly for agents and consumers to easily comparison shop among airlines, which will result in increased prices for consumers," says Chris Kroeger, senior VP, Sabre Travel Network.
The National Business Travel Association also criticized American and says it believes direct connects that bypass the GDSs "will result in a significant increase in capital expenditure that business travel buyers will ultimately bear.
Orbitz says it will “continue to seek an arrangement” with American to get the inventory back. It is not clear how, which may be why Orbitz also emphasizes that American’s absence will not have a huge impact on its business.
From the fourth quarter of 2009 through the third quarter of 2010, Orbitz Worldwide generated more than $800 million in sales for American, the company says. Revenue earned on American tickets and the associated ancillary products—such as rental car and hotel bookings and travel insurance sales—accounted for approximately 5% of Orbitz Worldwide total revenue for the nine months ended Sept. 30.
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