Two years ago American Airlines transformed the travel industry by charging for checked bags. It may be on the verge of changing the way we fly again.
A fight between American Airlines and travel web giants Orbitz and Expedia threatens to expand to the entire airline industry as American is looking to fundamentally change its relationship with the middlemen who sell their tickets. Because of the feud, both Orbitz and Expedia kicked American off their sites. Now the question is which side will give in.
Kevin Mitchell, chair of the Business Travel Coalition, said American has near-zero interest in preserving an open and transparent marketplace.
“It is an outrageous act that will negatively impact consumers nationwide who are in the midst of comparison-shopping,” Mitchell said of American.
Both travel agents and travel sites use what are known as Global Distribution Systems (GDS) to search for fares. The GDS’s – created decades ago by the airlines themselves but now independent companies – receive a commission for each sale, as do the travel agents or travel sites that use them. American – ironically an original investor in Orbitz – argues it’s providing free inventory for others to sell.
“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,” said Derek DeCross, American’s vice president of sales.
If consumers were forced to buy their tickets directly from American on its own site, the airline would save millions on commissions – it spent more than $500 million on them in 2009 – and potentially make even more money if customers then booked hotels and rental cars through it as well.
That model is one that Southwest has been using for years. Southwest fares typically have not been available through travel sites.
“From a consumer point of view, this isn’t good,” said Charlie Leocha of the Consumer Travel Alliance based near Washington, D.C.
Toby Nash, owner of Salt Lake City’s Cruise and Travel Masters, said a move to force consumers to exclusively use its website to book seats “could force us to pay a fee back to American to keep us in their system. And every fee charge on a GDS passed on to travel agencies is passed on to the customer. In the long run, the consumer pays for the information. … If American charged $1 per segment of a four-segment flight to have access for information, our service fee instead of $15 would have to be whatever American is charging. Orbitz and Expedia are refusing to pay those fees to American so they are pulling their information out of the system.”
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