Push came to shove and Expedia says it suspended American Airlines flights on Expedia websites today after the two sides failed to reach a new agreement.
The prior contract expired Dec. 31.
The American Airlines blackout impacts all Expedia Inc. leisure websites globally, including all of the Expedia-branded sites and Hotwire, but does not impact Expedia Inc.’s corporate travel agency, Egencia, which still features American Airlines flights for business travelers.
Expedia pinned the failed talks on American Airlines’ direct-connect strategy.
Expedia stated: “We have been unable to reach an agreement with American Airlines due to American Airlines’ new commercial strategy that we believe is anti-consumer and anti-choice.  American Airlines is attempting to introduce a new direct connect model that will result in higher costs and reduced transparency for consumers, making it difficult to compare American Airlines’ ticket prices and options with offerings by other airlines.  American Airlines’ direct connect model is of questionable, if any, benefit to travelers, would be costly to build and maintain and would compromise travel agents’ ability to provide travelers with the best selection.”
On Dec. 22 Expedia removed American Airlines flights from its flight display matrix, making it difficult to find American Airlines’ flights way down in flight search results.
But, with its action Jan. 1, Expedia takes its fight with American to a new level as American Airlines’ flights are totally absent from Expedia-branded websites around the world and Hotwire.
Expedia says it remains open to resolving its dispute with American Airlines “on terms that are satisfactory to Expedia and do not compromise our ability to provide consumers with the products and services they need.”
The online travel agency notes that it has plenty of flight options for travelers in lieu of their flying American.
As of this morning, Jan. 1, if you tried to use Expedia.com’s search by airline feature, American was no longer listed as an option.
Expedia positions the current standoff as an Expedia-American Airlines issue and not as a show of solidarity with Orbitz in its own battle with American over the direct-connect issue.
However, when Expedia de-preferenced American’s flights Dec. 22 the online travel agency expressed support for Orbitz, a competitor.
The Expedia-American Airlines battle gives lie to reports several weeks ago that the American-Orbitz-Travelport drama was a standalone event.
Clearly, American now faces an all-out war with some online travel agencies and all major GDSs as the airline tries to reduce its distribution costs and upend distribution dynamics by taking more control of its merchandising through a direct-connect strategy.
Expedia’s action is a clear signal that the company views the GDS model as the most economically viable and efficient one moving ahead.
In a statement Jan. 1, American Airlines said: “ Because Expedia had already de-emphasized AA fares on its site and those sales largely shifted to other outlets, we don’t anticipate significant incremental impact from today’s action.”
“American has continued to see a year-over-year increase in its overall ticket sales since Dec. 21, when it removed its schedules and airfares from Orbitz.com and websites powered by Orbitz.com, and since Dec. 23, when Expedia.com began discriminating against American’s flights and schedules by listing them lower in the search display than those of other airlines,” American Airlines stated. “American also has noted a shift in ticket sales to other channels as well as increased volume on its own website.”
As it did when Expedia de-preferenced the airline’s flights, American again advised travelers to book its flights instead on AA.com, Priceline, offline travel agencies or to search for American’s flights using Kayak.
American confirmed that its flights are absent from Expedia websites as of Jan. 1, 2011, but remain available to Egencia.
Prior to Expedia’s Dec. 22 action, American and Expedia had been in talks to renew their expiring contract. Expedia’s action seemingly took American Airlines by surprise.
American claims it has seen an uptick in bookings since it pulled its flights off Orbitz and Expedia hid American’s flights, but Expedia’s outright removal of the airline’s flights takes the skirmish to a new level.
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…and something tells me that ‘customer’ has been seldom mentioned or thought about.
The only winners will be lawyers.
I don’t buy Expedia or Orbitz’s lack of consumer choice argument. It only reduces consumer choice on THEIR websites. AA still offers their fares through a variety of sources and through their own website. In my opinion, it’s no different than McDonalds only offering Coke products. Maybe diehard Pepsi fans won’t eat at McDonalds, but most people just don’t care.
If AA doesn’t want to offer their fares through a particular channel then so be it. It’s their choice and they will benefit or suffer based on that decision. If they benefit, however, then watchout, because the other airlines will quickly follow. Will that cause lack of consumer choice? Perhaps in the short term, but I don’t doubt that the metasearch engines or Google will adapt and figure out how to display options for consumers.
The only ones here at risk are the intermediaries.
Without Expedia and other OTAs, AA and other airlines will soon discover than marketing has a high cost per click.
Do you have any data to back up that statement or is it your opinion? I, for one, would be interested to see if there is any quantifiable evidence to show that when intermediaries are removed that the cost of marketing increases for suppliers.
I would be interested in knowing if marketing costs would go up “online”. My first thought is that they would not by a substantial amount. Regardless, one would think that having other online travel sites or other affiliates selling your product would definitely increase revenue. Otherwise all of these merchants would not have these programs. I believe your point was that it will affect them in some way and I agree.
AA’s direct connect strategy does create additional costs for OTAs and traditional travel sellers who will be pressured to build and maintain direct connections that where not previously needed. If AA is allowed to succeed then it is just a matter of time before other airlines attempt similar strategies requiring more and more direct connects and driving the costs upwards for travel resellers. Not a good thing for the industry in its current state.
I definitely agree with jMac, I don’t see how the customer will benefit. This is a fight between a supplier and one of his distribution channels, but with a wider context. In my opinion, Expedia could lose more if they don’t come to an agreement. AA realized this when they made the decision about the distribution strategy and clearly started the whole thing.
So simple go to AA.com if you want a fare with the best rate guarantee. I dont see how airlines creating new distribution channels will drive the cost up for the traveller, the gold is on the carrier site. Imagine the billions it costs the airlines to distribute to middle men? If I was an airline I would pour those dollars into Google/ITA and own the customer.