American pulls fares off Orbitz again: observers cite high costs, low ancillary sales
American Airlines and US Airways are pulling flight listings from Orbitz after the carriers and the online travel agency failed to agree to a fresh contract from Orbitz and its sister sites, such as ebookers.com and cheaptickets.com)
This is a repeat of history. In 2010, American also pulled its fares from Orbitz.
Today’s dispute is once again over how much American Airlines Group is willing to pay Orbitz for referrals.
What’s changed in the past three years is that American has expanded its bargaining power, thanks to its ongoing merger with US Airways, which has made it the largest carrier group in the US by traffic.
The airline is also more focused on controlling its distribution costs in an era when technological savvy lets it build relationships directly with potential fliers.
Why pick on Orbitz?
According to industry guru Henry Harteveldt:
“Orbitz was American Airlines’ most expensive, poorest performing online travel agency. High costs, poor business performance, and an inadequate ancillary development roadmap were behind the decision.”
Last time, Expedia pulled American’s fares, too. That act of solidarity may not necessarily happen again this time: Expedia’s comment to Tnooz today is:
“American Airlines and US Airways fares continue to be available on Expedia sites.”
That last round, a judge commanded American to restore its flights to Orbitz, a legal win for the intermediaries. Presumably the airline has made sure it has a more legally watertight case this time around.
Splitsville: A signal of broader industry change?
While something of a typical business dispute, the spat may portend even tougher negotiations between all of the airlines and the travel companies.
Thanks to years of mergers, North American airlines have consolidated their marketing power, giving them a fresh advantage. American, thanks to its US Airways merger now surpasses in traffic size low-cost carrier Southwest, whose fares are also not available on Orbitz.
If American’s initiative is successful, it may embolden other airlines to push harder for lower fees.
The moves come in light of the legal adoption this summer of the airline industry’s New Distribution Capability effort, or the updating of communications standards to enable airlines to be more selective in how they distribute and present their fares and inventory.
As airline expert Seth Miller blogs:
Today the moves are wholesale – pull all the flights from a sales channel – while the future offers up the potential to only pull certain flights or specific fares.
UPDATE 4:37pm Eastern
Orbitz released the following statement about today’s decision:
American Airlines has notified Orbitz Worldwide that as of today, its flights will not be available on Orbitz sites. Our sites offer hundreds of airlines which are eager to capture the revenue American is choosing to forego and we will continue to show our customers a broad range of flight options to thousands of destinations in the U.S. and worldwide.
Orbitz for Business is not impacted.
The news may have come as a surprise to the airline, which recently slipped the bonds of ownership of a single global distribution system (GDS), Travelport.
For more on the technological backstory, see Tnooz’s “Shifting sands of technology and distribution as American Airlines and US Airways merge“