Dara Khosrowshahi, the Expedia Inc. president and CEO, was getting downright philosophical about the crisis the company faced a year or so ago, the situation that led to its fee-cutting frenzy.

“I think it was [White House Chief-of-Staff] Rahm Emanuel who said, ‘Never let a good crisis go to waste,’” Khosrowshahi says, drawing some laughs from the crowd at Citi’s 20th Annual Global Entertainment, Media & Telecommunications Conference in San Francisco Jan. 5.

The end result was Expedia eliminated air and reduced hotel booking fees and took a pretty good whack at Orbitz and Travelocity. As Khosrowshahi describes it: “I do think that from a philosophical standpoint, as we scale, we do want, to some extent, to take the air out of the competition. Our cutting air fees hurt some of our competititive brethren in Orbitz or Travelocity a heck of a lot more than it hurt us because of our scale, because of our hotel business. And that allowed us, we think, to gain scale pretty significantly, at least on the hotel side of the business.”

The Expedia CEO provided a lot more color than I’ve heard him give before on what led to the decisions.

Prior to the fee cuts, Khosrowshahi explains, air capacity had come out of the system and there were no assurances that it would expand in the future. Thus, Expedia was losing share to airline websites in a contracting market.

And, although losing share in a growing market might not be great, dropping share in a declining market was “unacceptable,” Khosrowshahi says.

The product wasn’t good enough, he says, in part because of the fees, and the strategy wasn’t working.

Thus, Expedia had to spend more on marketing to get consumers to buy airline tickets and book hotels, and at the same time, with the economy hitting the skids, consumers were getting more price sensitive, he adds.

At the same time, as Expedia was mulling its options, it knew that its competitors’ balance sheets were weak and that eliminating or reducing fees would hurt them more than Expedia, Khosrowshahi says.

So Expedia cut its fees, and is still in the process of trimming more internationally, and dealt a setback to its rivals.

But, it is also taking steps to limit future competitors.

“From a philosophy standpoint,” Khosrowshahi says, “I do think that we have a management team that is very focused on building a business that leverages, that scales and makes entrée into this business on a scale basis very, very difficult.”

Expedia has rolled out a series of fee cuts and that’s in line with its new-found philosophy, he says.

The company wants to eliminate any impediment — any “friction,” as Khosrowshahi calls it — that gets in the way of consumers completing a transaction.

And, he vows Expedia will get there by any means necessary, including by eliminating costs or changing the business model.

Flexibility — and hardball — apparently rule the day.

Expedia Inc. historically has dabbled less in metasearch than Orbitz Worldwide and some of its other online travel agency competitors, but CEO Dara Khosrowshahi now is bullish on the channel.

“We’ll play in metasearch and we think metasearch will be around forever,” Khosrowshahi told attendees at Citi’s 20th Annual Global Entertainment, Media & Telecommunications Conference in San Francisco Jan. 5.

At the advent of travel metasearch several years ago, the channel was widely seen as a supplier medium that might bring the OTAs to their knees, but much has changed since then.

Khosrowshahi says metasearch is not one of Expedia’s top 3 channels, but it’s an important one.

And, he doesn’t view metasearch as competition, although he’d rather, of course, get direct traffic.

Expedia’s TripAdvisor launched flight metasearch early in 2009, and Khosrowshahi says he forsees “quite significant growth” from the metasearch channel — not just from TripAdvisor’s flight metasearch — in 2010 and 2011.

Khosrowshahi says metasearch has been a “fairly efficient” channel for Expedia, and the OTA will take advantage of it, partipating up to the level that the company’s efficiency metrics allow.

When Expedia eliminated air booking fees and other OTAs followed, there was a school of thought that flight metasearch was dead because there now was parity with airline websites and not much differentiation.

But, if you listen to Khosrowshahi, then the Kayaks and Travelsupermarkets of this world have a few good days ahead of them.

I caught up with Expedia Inc. President and CEO Dara Khosrowshahi this afternoon, a couple of hours before he was scheduled to appear on center stage before all the attendees at the PhoCusWright conference in Orlando Nov. 19.

I asked Khosrowshahi, who was decked out in a pinstripe suit as we sat outdoors in the Florida sun, whether he expected to be breaking any news in his “executive interview” with PhoCusWright President and CEO Philip Wolf later in the afternoon.

Referring to a recent contract battle with Choice Hotels, Khosrowshahi said he didn’t think so because “we’ve made enough news lately.”

Khosrowshahi declined to get into any of the contract details, but said the Choice contract is similar to deals with other chains, adding, “I was confident we’d get it done.”

Looking to upcoming deals with major chains, Khosrowshahi said typically renewals with large chains are almost prenegotiated in the months leading up to contract expirations.

“I certainly don’t see any big disruptions coming up,” Khosrowshahi said.

Then, we turned our attention to the strides being made by Priceline’s Booking.com and the prospects for Expedia’s Venere hotel business in Europe and Asia.

I asked him if he’s nervous about Booking.com and I got a surprise answer.

“Of course, I’m nervous about Booking.com,” Khosrowshahi said, adding that Booking.com’s trajectory is encouraging because it shows that there is plenty of room for growth if a company “executes well.”

Khosrowshahi noted that Expedia’s Easy Manage program, which uses the agency model for small and independent hotels in Europe and Asia-Pacific, has signed some 6,500 properties.

He said the merchant model is most appropriate in large tourist destinations, and having both models at the company’s disposal is advantageous.

The Expedia CEO also said the company would monitor the tack that Orbitz Worldwide is taking with a modified agency model in Asia-Pacific to see if would be worth adopting or not.

In response to a question, Khosrowshahi said Priceline’s exploding market cap, which recently surpassed Expedia’s, is another “encouraging sign” because it shows how the market is growing.

“Priceline’s market cap didn’t come at anyone else’s expense,” Khosrowshai said, noting that Expedia’s market cap has tripled this year.

There have been numerous rumors over the last year about online travel agency consolidation, but Khosrowshahi discounts the buzz, saying he doesn’t expect large-scale consolidation in the short term because you usually don’t see such consolidation in a growth market.

Depending on the number of small and independent hotels that sign on, Khosrowshahi believes TripAdvisor’s new Business Listings product, where hotels on TripAdvisor can display their URLs for direct bookings, could be a significant revenue stream for the Expedia Inc. unit.

“It looks good on paper,” he says, adding that theoretically there is always the possibility when you introduce a new advertising product that it could cannibalize other advertising.

“If we don’t build a good product,” Khosrowshai said, referring to Business Listings, “then someone else will.”

Looking into his crystal ball, Khosrowshahi said he believes the advertising/media business will be “the most significant mover” over the next few years.

Media revenue, including that from Expedia Inc.’s TripAdvisor business, accounted for some $300 million, or roughly 10%, of Expedia Inc.’s $2.9 billion in revenue in 2008.

It wasn’t exactly a headline, but Khosrowshahi said he believes that percentage will grow.

He said there is a huge opportunity in the media business, but it hasn’t scaled yet and there has been no product out there “to move the needle.”

Khosrowshahi expects that needle-mover in the media business will emerge over the next five years.