With American Airlines and HP having just signed a contract for HP to build a new reservations system, called Jetstream, for the airline, it now turns out that American has an exit clause in the event it gets cold feet about the massive project, according to a source.

The airline apparently can walk away from the deal 90 to 120 days — the source wasn’t sure which — after the contract signing.

The thinking is that the out clause gives American further time to evaluate whether HP, a technology company with little airline experience, is up to the task of building the airline a new passenger services system.

HP acquired EDS in August 2008 for $13.9 billion.

EDS has tons of airline-reservations system experience, but apparently downsizing and restructuring at HP over the last year means that several key people involved in developing Jetstream — the reservations system doesn’t actually exist yet — have either been reassigned, fired or have otherwise left the company, the source says.

American and HP took their time in transitioning from a letter of intent, signed in August 2009, to the recently signed contract, and the exit clause in the new agreement is another signal that the path to a new reservations system, which would replace Sabre as American’s longtime host-system provider, is not set in stone.

Some seven months after American Airlines and HP signed a letter of intent for HP to build a new passenger services system for American, an airline spokesman revealed the two parties have reached a formal agreement.

“Yes, the contract has been signed,” spokesman Billy Sanez says. “We are not sharing details, but, as you know, contracts take time.”

A spokeswoman for HP declined to comment.

AMR chairman and CEO Gerard Arpey created a bit of a stir Jan. 20 when he revealed that the two parties had yet to move beyond a letter of intent, which had been signed during the summer.

That fed speculation that perhaps the two companies were having difficulties coming to terms, or maybe the airline was having second thoughts and had decided it wasn’t ready to commit to such a massive project.

After all, in 2009, Air Canada withdrew from longstanding plans to have ITA Software build the the carrier a new reservations system, dubbed Polaris.

American Airlines currently uses Sabre to host the airline’s reservations system, and HP is tasked with the multiyear project to craft a new reservations system, called Jetstream, for American.

American Airlines is HP’s first customer for Jetstream, which HP describes as a next-generation passenger services system.

Amadeus’ Altea platform had been a contender for the American Airlines contract, but HP was the airline’s final choice.

Amadeus revealed today that it signed a memorandum of understanding with Asiana Airlines.

American Airlines in May will begin to charge coach passengers $8 for a pillow and blanket set, according to USA Today.

Citing an Associated Press report, USA Today quotes an airline spokeswoman as saying: “American evaluates all aspects of the business to ensure that economic decisions are prudent and strategic for the long-term success of the company.”

It almost sounds like a hoax.

But, apparently JetBlue, which doesn’t charge — yet — for a first checked bag, began in 2008 selling blanket and pillow sets on flights of at least two hours for $7, the New York Times reported.

The AP reports that US Airways, too, charges $7 for a blanket and pillow, but tosses in ear plugs and eye shades, making it a relative bargain compared to American Airlines’ plans.

In its all-out drive for to implement ancillary services and deliver new revenue, is American going too far?

Will other airlines match the move?

Even though travelers may rebel in the belief that they are being fleeced?

UPDATE: Forrester Research principal travel analyst Henry Harteveldt says the lack of a definite agreement between American Airlines and HP for development of the Jetstream host system “raises concerns.”

Harteveldt says he would have surmised that the transition from signing a letter of intent in August to reaching a definitive agreement would have been completed by now because American Airlines is known to be very carefully about going public with these sorts of preliminary agreements unless there is a strong expectation that the basic terms are wrapped up. Ninety to 120 days typically is an adequate period to move from a letter of intent to a final agreement, Harteveldt says, although he acknowledges that the scope of a host system transition can be a different animal.

The Forrester analyst speculates that perhaps the two parties may have disagreements about the capital investment, pricing, intellectual property rights and/or the technology, or perhaps HP is finding that American may be “a difficult potential client.”

However, reaching an agreement is critical for HP because it needs a “first-tier” airline client for Jetstream, and American is HP’s first known client for the as-yet-to-be built product, Harteveldt says.

The original post follows:

Some five months after American Airlines’ parent company AMR Corp. signed a letter of intent with HP for it to develop a new passenger service system, Jetstream, for the airline, AMR chairman and CEO Gerard Arpey said Jan. 20 that the two parties have yet to sign a definitive agreement.

During AMR Corp.’s conference call about its fourth quarter 2009 earnings, in which the airline recorded a net loss of $344 million, Arpey said that the two parties have held detailed conversations about a definitive agreement, but haven’t “pushed it over the finish line.”

Arpey said AMR Corp. expects to reach a definitive agreement with HP in the “near future.”

HP’s Jetstream, which would host American Airlines’ internal reservations system, would replace Sabre as the airline’s host system.

Airline reservations systems transitions usually are prolonged and extremely complex.

That apparently holds true even for reaching a definitive agreement between HP and American Airlines.

HP declined to comment on the issue.

In other news, American said it would aggressively contest any JAL-Delta Air Lines alliance and said AA’s offer to JAL was a “no-brainer.

Also, an official stated that American felt no appreciable financial impact from the Christmas Day Northwest Airlines terrorism incident.

Despite protests to the contrary, the move by Carnival Corp.’s brands in North America to bar travel-agency partners starting Jan. 1, 2010, from participating in keyword bidding on the lines’ trademarks likely comes down to an economic decision.

You know, in these things, you have to follow the money.

It likely has become so expensive for Carnival to bid on keywords in the Google, Bing and Yahoo search engines and then to consummate a booking that it is tempting for the cruise company to try to swat away the bids of those online travel agencies and other cruise sellers that it can pressure to bow out of the process.

Carnival’s decision has created an uproar in the ranks of some major online cruise sellers, and came as it also decided to implement a controversial policy on social media.

Some would argue that it is awkward indeed for cruise lines — or any companies, for that matter — to be out-bid on its own brands and trademarks, and assuredly the search engines should afford the trademark-holders some influence and protections.

But, in the relatively free market of keyword bidding, isn’t there something wrong with companies being able to just swat away the competition by fiat? Isn’t there an anticompetitive practice issue at work here?

When I plunked the search term Carnival Miracle into Google a moment ago, the top sponsored listing was from America’s Vacation Center.

Beginning Jan. 1, unless it gets permission, America’s Vacation Center would be missing in action from the paid-for listings or risk losing the right to book Carnival cruises.

Should cruise lines and other travel sellers thus have the right to drive direct bookings and lower their paid-search bids by eliminating the competition?

American Airlines apparently has had some luck in protecting its trademarks in search engines, although it has taken a different tack than Carnival. American sued Google over the issue of the search engine’s allowing other companies to bid on the airline’s trademarks and and the two parties reportedly reached a settlement, with the terms undisclosed.

But, upon a bit of  investigation, I have an idea how the tussle ended up. Just contrast a search for American Airlines on Google versus a search for Delta Air Lines.

The following, a link to AA.com, was the lone sponsored result I got from an American Airlines search on Google a moment ago.

In contrast, a Google search for Delta Air Lines turned up sponsored listings from Delta Air Lines, SmartFares.com and Expedia.com, like this:

The pattern holds true with other American Airlines searches I did on Google.

Apparently American Airlines has not yet articulated its trademark message to Bing in a similarly strong manner. Here’s what a search for American Airlines comes up with on Bing in terms of sponsored results:

In addition to a paid result from American Airlines, there were sponsored site entries from TripMama.com, EscapeWizard.com, Travelation.com and SearchAirlinePrices.com.

So here’s the question: Is it equitable that American Airlines must bid for its own trademarks against the likes of SearchAirlinePrices.com — or against a competitor airline?

Or would it be fair for American Airlines or Princess Cruises or any travel company XYZ to exert its influence to bar partners from competing in keyword bidding, and thus artificially lower its paid-search costs?

Depending on the answer, there is a whole lot of money hanging in the balance.

The earthquake that rocks the world of distribution was quietly delivered in a session at CASMA last week.

Cory Garner, the newly appointed director of merchandising strategy for AMR subsidiary American Airlines, made an unequivocal statement about the future direction of AA’s distribution.

Further clarification came for the team with Don Bender, manager of distribution strategy, highlighting the components of the strategy.

Essentially AA will deploy two forms of direct distribution: an XML toolkit and a web-based solution.

AA has been working with Farelogix on this solution for quite some time and has deployed the capability in more than one geography.

What is somewhat interesting here is that the team took a very holistic approach and addressed more than the usual connection services.

AA has already engaged with the financial fulfillment process via ARC and presumably BSPs to arrange for direct distribution on a very broad scale.

My team at T2 has contacted large scale intermediaries in several markets and can confirm that contracts are now out to players for use of the tools associated. AA waited until the whole process was in place before going public with the announcement.

At this point we can only speculate on what role the GDS will play in the future of AA’s distribution.

Last month SITA’s IT trends 2010 was released and it showed a clear move by the world’s airlines away from GDS based distribution. In the space of ten years from 2000 to 2010, the GDS based distribution share has fallen by 50%.

But AA is creating in effect a brand new category of distribution that is not unlike a dealer model.

Moving the control of display of product from the GDS to the agency is a fundamental shift that will forever change the paradigm how product is served and managed.

For the future – this will mean a major change for the world’s intermediaries.

Commercially it puts perhaps the final a nail in the coffin  of the GDS segment fee model.

Technology wise it creates a challenge for the intermediaries to develop independent supply chain systems.

Companies like Farelogix will become increasingly valuable to both sides of the value chain.

Large scale players like the OTAs who have strong technology platforms and resources will find the adoption of multiple supply chains easier.

Many TMCs will struggle with the challenge and will probably regret having put all their eggs in the GDS basket.

Ultimately the AA announcement last week in Las Vegas is just another step along the way from holistic to heterogeneous (read fragmented) supply.

Anyone who wants to play in this game now needs to assess their future positions carefully.

In my humble opinion GDSs can still play in this field but no longer in the exclusive central role where they have held sway for so long.

I find it ironic that but a few months back Sabre was chastising Farelogix for creating a fragmented world.

The core reason the airlines like AA are moving away from the old ways is that the GDS companies failed to come to terms with their airline partners in addressing the cost model. Now they are paying the price.

Welcome to the new world order.

American Airlines is getting downright social as it launches Black Atlas, a community website where African-American travelers can “explore stories, reviews, travel tips, videos and photos as seen through the eyes of black travelers” — and also book some AA flights.

The airline is set to roll out more functionality for the website in about a week, around Oct. 15.

It is great that American, like other airlines including British Airways with its MetroTwin initiative, see some value in social media. American already has community websites for women, gays and lesbians, and business travelers.

But, with the exception of some stars like JetBlue, Southwest, Virgin Atlantic and Air New Zealand, as outlined in The Airline Industry and Social Media, the aviation community generally is afraid of its own social-media shadow, and is floundering.

For example, the report’s authors, Innovation Analysis Group and the Centre for Asia Pacific Aviation, found that 80% of the surveyed airlines had just one person handling all of their social-media activities.

But, before I get further into that, I have to say I’m a bit skeptical about AA”s BlackAtlas. Will the airline really engage with the Black community and permit the free flow of information? Or will this be just another stilted effort and more corporate-speak?

The terms and conditions of BlackAtlas forbid users from hyperlinking without written permission. That kind of puts a damper on show and tell.

And, when I submitted a story about my alleged travels so I might take BlackAtlas for a test-run, I received the following message:

“Thanks for the story! We review all submissions for content before they are posted to the site. We’ll send you an email with the status of your story within two business days. Thanks again and keep the stories coming!”

Two business days is an eternity, of course, in the social-media universe.

Steven Frischling, who has written about airline community websites and worked with IAG on the report, says American  “never promotes, advertises or talks about them [its social media sites] and they wonder why no one ever talks about them.”

And, the airline’s seemingly disorganized approach carries over to its Aairwaves account on Twitter, Frischling says.

American wasn’t included in the report because it didn’t respond to surveys and it was difficult getting an answer from the airline about social media because the airline outsources its Twitter efforts to a public relations firm, Weber Shandwick, he says.

“ Five people claim to be in charge and none of them actually work for American,” Frischling says.

Like some other airlines, American Airlines does a great job of promoting fare sales on Twitter, he adds, but falls short on other aspects of social media.

“They don’t search to engage in the conversation,” Frischling says of American’s Twitter efforts. “They sort of passively wait for the comments to come to them.”

“The Airline Industry and Social Media” report provides a very useful breakdown of each participating airline’s Twitter efforts, and draws conclusions about the industry as a whole.

The report cites numerous issues pertaining to airlines’ social media engagements, and staffing levels are particularly problematic.

“Airlines have eviscerated their staffing levels to a minimum,” the report states. “This is especially true among the U.S. airlines, where people involved with social media are frequently doing the function as a part-time job (intern) or simultaneously with another job. Given the flow of information, this is virtually a guarantee of failure.”

And, besides the staffing issue, there has to be a commitment to social media from the highest levels of the corporation — and the will to succeed.