Expedia has removed fares from American Airlines in its search results in an unprecedented show of support for rival online travel agency Orbitz.
Expedia confirmed that as of yesterday (Thurs 22 December) it had “adjusted” the way the carrier’s fares are displayed across its sites – meaning the carrier now features at the far end of its list of available airlines and prices will not be shown, replaced with a link to a results page elsewhere on the site.
In essence, American is a “de-preferenced” airline on Expedia.
An official says the move was made for two reasons: in the light of AA’s decision to prevent Orbitz from selling the carrier’s inventory and “possible disruption” in Expedia’s ability to sell tickets from American Airlines when its contract expires.
Expedia’s existing agreement with American Airlines is due to run out Dec. 31.
In a strongly worded statement, in which Expedia also says the now infamous Direct-Connect system is “fundamentally bad for travelers”, the official adds:
“American Airlines has shown it only intends to do business with travel agencies through a new model that is anti-consumer and anti-choice.
“We believe American Airlines’ proposed direct connect model will result in higher costs and reduced transparency for consumers, making it difficult to compare AA ticket prices and options with offerings by other airlines.
“American Airlines’ direct connect model is of questionable, if any, benefit to travelers, costly to build and maintain and would compromise travel agents’ ability to provide travelers with the best selection.”
American Airlines has hit back with a strongly worded statement.
The carrier is essentially either no longer listed at all (its own doing) or seeing its fares way down the pecking order (by virtue of Expedia’s latest action) for visitors on two of the biggest online travel agencies in the US.
The question now is whether the carrier – and, indeed, the OTAs – can live without one another commercially and if consumers will cry foul.
PhoCusWright‘s senior research director, Douglas Quinby, says:
“Expedia is calling American’s hand, but I am not so sure the airline is bluffing. The current supply/demand dynamics, with strong corporate demand and still soft leisure demand, favor airlines. What is clear, we’ve gone from brinkmanship to all out warfare. The only question is, who’s next, and when?”
Meanwhile, according to Forrester‘s top travel analyst, Henry Hartveldt, Orbitz drives around $800 million in sales to American Airlines every year – this is not a figure to be sniffed at, yet American Airlines clearly believes its actions earlier this week and the wider Direct-Connect issue are worth doing.
Sabre, which was quick to lend its support to Travelport and Orbitz earlier this week, has issued its own statement:
“Sabre has seen the action taken by Expedia and we fully support Expedia taking steps to protect its customers’ interests and make clear its preference to continue using the proven system that enables it to efficiently and cost-effectively serve its customers.”
Sabre-owned Travelocity has not got involved as yet.
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It seems we will need FairAirline, FairGDS, and FairOTA groups now as well. The question is who would be in what group?
@jonathan – FairTravel perhaps?
@kevin – good one. Hopefully that would be the overall goal, yes? Perhaps FairTravel could be the intersection in the Venn diagram where each group promotes its alignment toward consumer interests – though how each defines that would be interesting given the commentary going on…
Fascinating skirmish going on in the business where the retailers compete directly with their suppliers…
Obvious titles if this was a movie: “The Empire Strikes Back” or “Revenge of the Nerds.”
The only problem is that it is hard to tell who is playing the role of the Empire and who are the Nerds….
Truly, Only one definitive solution…
Cage Match. The winner gets a belt and the ability to boast about world domination.
So what will Egencia, Expedia’s corporate booking division, do with its AA inventory? Can’t quite see them telling their corporate accounts “Sorry, you’ll have to work harder to book AA through us now, or call your traditional TMC.”
Excellent point Scott – The corporate market segment is what made Expedia back off with InterContinental Hotels in 2004 when the battle for hotel pricing control occurred and InterContinental cut off Expedia.
I have to think the Orbitz for Business customers are not very happy. Wondering how it will play out for Egencia – corporate accounts don’t like being told something is being taken away – especially if it is still available through competitors…
Today was one of those days when the world changes. For better or worse. Analysis next year will in my view demonstrate this was the seminal moment when indeed things changed.
Perhaps one perspective is to consider that there is a peeling back of the onion skin. The web is about transparency – as we see here at TNooz – we can comment freely – and this is part of the fabric of today’s business and social world.
The true cost of the airline ticket has morphed from a homogeneous single bundled (and commoditized) price to a more transparent view of the components that make up the airline ticket. Obviously that makes it harder from the consumer’s point of view to shop. But we all need to get over that. The Genie was let out of the bottle a long time ago and its ain’t going back. From today onwards that now includes the cost of distribution. This transparency allows the product owner and the seller to attach a clearer monetary value to its brand – good or bad. Further as this dispute has demonstrated the brand proposition of the intermediary now becomes clear.
In my view Expedia’s move is very ballsy but I question whether it was smart. In my view they have traded demonstrating their power for their value as an unbiased intermediary. Sadly if Expedia is not able to offer a level playing field to its customers and ends up in dispute with its supply chain then it must accept that its value proposition has changed. In my judgment that change is irrevocable – another genie out of the bottle that isn’t going back. The preemptive action by Expedia today demonstrates how they feel. Expedia can no longer position itself as the champion of unbiased neutral intermediary, which to the consumer is an essential part of its proposition. It becomes clear that the company and its brand have optimized its product offerings to its own selfish ends and now ‘games’ the customer as much as the suppliers can do through their own direct channels such as their websites.
Thus now the Expedia Company through its own actions has removed the (admittedly thinly veiled) veneer of neutrality from not only the Expedia brand but also its family of brands from Hotwire to TripAdvisor.
The reaction by the intermediaries and organizations who have thrown more than vocal support of support of Orbitz in its dispute with AA, in my view – may have shot themselves in the foot. The consumer will now realize that the intermediary channels as a class are not acting in the best interests of the consumer. As I noted in my 2011 predictions the concept of value finding will now emerge. For those Intermediaries who support the Orbitz and its 48% owner Travelport their position becomes tainted in my opinion. Value Finding will definitely be part of the Social Web. Thus they have forfeited their ability to be an arbiter of customer value which has very broad and deep long lasting implications.
Unlike in media where there is a definitive traditional separation between publishing and editorial content, in travel etailing, the line for an unbiased intermediary has been crossed. Thus anyone owning an outlet will now find it harder to maintain some semblance of neutrality and consumer advocacy.
It gives a whole new meaning (not necessarily good) to Expedia’s current tag line – where you book matters.
Cheers
So how is Expedia’s move to “de=preference” AA that much different from Expedia not offering Southwest’s fares? Seems one is by the airline’s choice, the other by the OTA’s, yet both have the same consequences for the consumer.
Robert: Expedia’s policy so far does not apply to Egencia. So for Expedia’s corporate customers nothing is being taken away — for now.
However, look for things to heat up even further because the AA-Expedia contract runs out in a few days…. Dec. 31.
Kevin Mitchell: Yes, it is more than moral support on Expedia’s part. Expedia and AA are locked in a contract battle, as well.
The reporter did not say or imply, in my reading, “moral” support. “Expedia has removed fares from American Airlines in its search results in an unprecedented show of support for rival online travel agency Orbitz,” is merely a statement of fact. Like many other observers and airline participants, Expedia likely sees alignment of interests among consumers, competitor Orbitz and its own business interests.