The trial in the district court of Tarrant County, Texas, is now slated to kick off on August 6, 2012, instead of the previously slated date, June 13, 2012.

The effect of the ruling is that the truce in the airline-GDS war will remain in effect for a couple of months longer.

American Airlines and Sabre have been battling on the legal front over antitrust issues, and in the marketplace over a new contract, distribution economics and direct-connect.

Sabre issued a statement about Judge Donald Crosby’s extension ruling, noting that the GDS vendors’ travel agency and corporate customers, as well as consumers using sites such as Travelocity, will have access to American Airlines’ fares through the end of the trial.

Sabre spokeswoman Nancy St. Pierre adds:

  We are disappointed with the extension, as it yet again delays the long-term certainty Sabre’s agency and corporate customers have told us is important and which we are dedicated to achieving. It’s unfortunate that AA has chosen a path of litigation with Sabre, particularly since the airline is now focused on its bankruptcy. Our preference is to negotiate with AA and we continue to call on the airline to work with us to reach a deal that meets the needs of all constituents.

In turn, American Airlines states:

American has always been open to resolving our disputes and entering into a fair, new agreement with Sabre through negotiations. Despite American’s past efforts, we have not been able to reach such a resolution. Because we have discovered that Sabre engaged in serious misconduct in violation of the antitrust laws, however, we intend to pursue our losses, absent an agreed resolution. This is just a brief extension, but it is important to give American breathing room to focus on both its successful restructuring efforts and this lawsuit. As a reminder, American’s current distribution agreement with Sabre will remain in effect until 14 days after the conclusion of the Texas antitrust lawsuit.

In my keynote at this week’s Computerized Airline Sales & Marketing Association (CASMA) conference in Beijing, I wanted to create a vision of what an airline that is serious about Direct Connect (DC) as a distribution option should work toward.

That vision, unlike most of the conversation around DC to date, included a significant paradigm shift in the way airlines think about travel agent distribution.

First, I think it’s important to remind everyone of the material benefits that accrue to an airline from a successful DC deployment.

These include:

• Targeting offers based on internal airline assessments and intelligence driven off of customer relationship management (CRM) data.
• Representation of carrier’s value proposition as the carrier desires.
• Offering transparency (“shopping”) to the end-user, but is more opaque to competitors.
• Driving loyalty, enhanced revenue via ancillary sales and higher customer satisfaction.
• Reduced GDS requirements around fare shopping and potentially reduce some GDS-related costs.
• Improved data quality via fare certainty – you price it so you know it’s right.

In my honest opinion, DC is the smartest airline strategy I’ve heard since Bob Crandall announced the B-scale pay system in the 1980′s as a way to rapidly grow American Airlines.

You can see that this is an approach that, if implemented properly, could really make a difference in the profitability and competitiveness of a carrier.

Second, it’s important for carriers to be realistic about what travel agency distribution “nirvana” looks like and understand that going in.

We are probably somewhere near equilibrium in the US between direct booking and travel agency booking at about 50%-50%.

You can’t fight human nature. People have been seeking advice about travel since time immemorial (“So, Marco Polo, where should I stay when I get to China?”).

In addition, many travelers have either technical access or financial system access problems that make ecommerce unworkable for them. Finally, business travelers, certainly for public companies, will likely continue to have third-party managed travel.

Travel agents are going to be a very significant part of the US distribution system for a long time to come. And outside the US even more so.

Airlines, however, have conflated agents and GDSs for so long now that it’s difficult for them to see a different kind of relationship.

When an airline looks at agents, it actually sees GDSs. And we know how challenging most airline-GDS relationships are.

ARC faced similar challenges. Agents have sued and taken us to arbitration. ARC’s role in providing timely payment to airlines on agent sales sometimes put us in the bad guy position. And especially in the paper ticket era, we had some pretty onerous policies and practices – for good reasons, but still…

And today, we offer more optional services to agents than ever. But, many agents’ attitudes were: “ARC? Why would I ever buy anything from them?”

We set out to change those attitudes and become a place that was friendlier, more open and collaborative and ultimately be seen as someone agents would like to do business with.

We started with a corporate identity shift and back that image up with new services such as our non-air ticketing agent accreditation and outreach to over 40 agencies with in-depth Voice of the Customer interviews, a more open relationship with ASTA and other steps to make that image more concrete.

And it’s delivering results. Our treatment by formerly hostile agent media outlets like Travel Weekly (US) have noticed and, while still rightly skeptical, regularly applaud ARC actions in more even-handed fashion.

Non-air ticketing agents have grown to a community of over 1,400 and products like our service-fee program and even data sales to agents are seeing meaningful growth.

We have a long way to go, but we’re moving the needle. The message to airlines? It can be done.

Airline perceptions, however, are stuck. I’m sad to say that comments around airline headquarters like these are all too common:

• “Agencies are parasites. I’m paying for their success/lifestyle”
• “Agencies are a source of fraud”
• “Agencies are pawns of the GDSs”
• “Agencies don’t present my brand/value prop as I like”
• “We deal with them because we have to”

Of course, airline feelings aren’t the only ones being hurt. Agents are equally unhappy:

• “No way to contact them”
• “They outsourced their audits and we get tons of arbitrary and petty debit memos”
• “Treat us all the same”
• “I don’t even want to sell airline tickets any more”

Even OTAs bring benefits that carriers often don’t include in their calculations. For example, OTA cash sales are up 100,000 tickets per month versus 2010!

That’s driving $600 million in ticket sales where there’s no merchant fee to the airline – saving carriers in the US, for example, in the order of $15 million so far this year on credit card fees.

All this is apparently being driven by OTA package bundling where they act as merchant and pay the airline via ARC settlement in cash. I wonder if this calculation is factored into the airline-OTA dynamic?

At the end of it all, is it really a good idea to have 50,000 or more travel agents out there who don’t like you very much? Selling a local cruise or drive package instead of an airline ticket? Are these sustainable or wise business practices?

Worst of all were comments from a pretty big agent that signed up for Direct Connect.

• “I signed up for Direct Connect. I’m sorry I did.”
• “They treat me no differently than they did before.”

Ouch! So if DC is really worth doing, how SHOULD an airline think about agents? The first thing to do is realize your DC agents will actually be selling in a channel you actually like! Whoa!

The question is, can the airline peel apart the long-held beliefs that GDS equals agents, and vice-versa? If so, the next step is to decide how to treat them.

It’s a well-established fact that what customers desire (whether they say so or not) is a better EXPERIENCE. Airline loyalty programs prove this. Frequent flyers aren’t given cash. They’re promised a better experience. It obviously works, drives (sometimes crazy) customer behavior and costs less.

In my view, carriers need to start with internal work:

• Articulate the DC vision – distinguish clearly between GDSes and agents
• Understand throughout the company that the “what’s-good-for-agents-is-good-for-GDSes-so-we-won’t-lift-a-finger” model no longer applies in a DC world
• Squash the agent-as-parasite talk
• Don’t fight human nature – third-parties will sought or be required by a substantial part of the market. Make it work FOR you – your competition may hang on to the old attitudes and you can steal a march on them
• Understand that airline revenues are a modest part of most agencies’ revenue

Then you can start to outline the experiential differences you want to deliver to DC agents. Ideas might include more robust communications, targeting individual agents (people!) as well as the agency itself, training, sales aids, feedback loops (social media, IM and email) and technical support.

A biggie might be a commitment to no debit memos. Hate doesn’t begin to describe agent feelings towards debit memos, and there shouldn’t really ever be any in a DC environment, should there?

Given the significant benefits of DC, some modest reinvestment into the agency channel seems both affordable and game-changing.

In conclusion:

• Agents and agencies want a different kind of relationship.
• ARC’s experience shows it can be done.
• Direct Connect is a highly desirable distribution solution.
• Resistance to change is high for financial and technical reasons.
• Creating a more fulsome and rewarding Direct Connect agency experience will multiply a carrier’s odds of success.

Getting, say, 30,000 agents who actually sell through a channel a carrier likes and who treat their product and brand as they want should be pretty powerful.

Agency distribution nirvana may not be that far away.

NB: This is a guest article by Mike Premo, president and CEO of ARC (Airlines Reporting Corp).

The saga returned again today, with Travelport triumphant after a court in the US state of Illinois preserved the tech firm’s injunction against AA from June 2011.

The saga dates back to late-2010 when Travelport sued and moved for a temporary restraining order to stop American Airlines pulling its fares from Orbitz, the online travel agency in which the GDS has a 48% share.

A court overturned the decision in December, effectively removing the airline’s fares from Orbitz but also triggering support from rival GDSs such as Sabre and eventually leading to Expedia showing unusual solidarity and wiping the carrier off its system.

In February this year, Orbitz CEO Barney Harford admitted losing American’s fares from the OTA had impacted on its financial results, but the blockade remained.

The ruling was finally overturned in June, at a court in Illinois, with the airline’s fares placed back on Orbitz and sister agency Orbitz for Business.

The latest decision came about after AA appealed the June decision, but also comes just six weeks after the airline secured a separate agreement with Orbitz to include its fares on the OTA “into 2012″.

Nevertheless, Travelport is claiming yet another victory.

Travelport chief legal officer and chief administrative officer, Eric Bock, says:

“We are very pleased with the Appellate Court’s recognition of our contractual rights. Those rights are critical to protecting our agencies’ ability to have and fully use AA’s content.”

An AA official says via email:

“We are disappointed by the Illinois court decision, and are evaluating our options. In the meantime, the injunction issued against American terminated by its own terms on September 1.

“We have a new interim agreement with Travelport that provides for our continued participation in Orbitz, and we do not expect that to change in the near term.”

American Airlines has the opportunity to appeal the ruling, so victory is not total just yet.

Sabre Travel Network communicated to travel agency customers today that the Texas trial date for the state antitrust litigation between American Airlines and Sabre has been delayed until June 13, 2012.

The two parties have agreed to extend their agreements through the end of a trial, ensuring that American Airlines’ flight data would remain accessible in the Sabre GDS at least through that time.

“We recognize waiting that long to resolve this is not what our customers want,” Chris Kroeger, senior vice president of marketing for the Sabre Travel Network, said in the email to customers. “However, as earlier communicated, we have an agreement in place with AA that will ensure your continued access to AA content through the Sabre system through the trial.”

Kroeger said Sabre is “ready to get back to the negotiating table at any time” and alleged “AA prefers litigation to negotiation.”

American Airlines commented: “We are looking forward to presenting the facts to the jury about Sabre’s anticompetitive and retaliatory behavior.”

The media is a classic one (we’re online-only at Tnooz, just in case anyone is wondering when the print version will come out) and while the music industry was turned on its head by MP3 players and file sharing (much of its illegal initially).

The battles described in a recent piece in Infoworld techie journal included items on medical support, customer service, media, and many others.

One area the article focused on was Cheaper Flights vs Hidden Cost. Oh dear.

The point is relevant in that the web eliminated barriers to airline pricing information – and it makes sense to look at the impact of the web from the consumer’s perspective.

But while the article focused on air, the same could actually be said for other products in the travel industry.

In the first phase, previously privileged information that only an airline or a travel agent could provide became publicly available.

This was initially via airline websites and online travel agencies, and more recently via the general metasearch/search players such as Kayak and Skyscanner or niche offerings such as Getflight.

This enabled search and shopping, but caused the demise of the legacy channel (agents who only acted as agents for airlines). The scale of data processing that the web enabled was fantastic and opened the digital world up for many new players.

In the next phase, a degree of quality was introduced – better offers, and more information. The writing was on the wall for homogenous information.

Now, most travel and travel-related experiences are now available online. The long tail arrived.

Today we see that the social element has changed how we obtain ideation and validation in our search for travel. This helps get us better results – we hope.

TripAdvisor is the primary example of how we get to find out what others feel about travel. There is also a strong sense of community and personalization. But, sadly, travel products are not keeping pace.

Furthermore the ability to de-commoditize one’s product and to allow different services to be sold either directly or indirectly has changed how travel is presented.

Dynamic packaging allows us to mix and match services in a way that previously only a travel agent used to be able to do. Suppliers learned that their products needed to fight harder for space on the virtual shelves of the web.

But the key question from the article is clear:

Did the web enable cheaper fares and did the web create airline fees? Yes to the former, no to the latter.

Cheaper fares are now easier to find, but the logic underpinning the article claims that cheaper fares are only possible through unbundling.

That is obviously an over-simplification. Product owners/sellers, particularly in air, want to obfuscate the true market price. That is the pure price argument. But there are two other factors that the article misinterprets:

1. Functionality and unbundling enable a la carte and de-commoditization.

This is decidedly a benefit to the consumer. Buying what we want and need rather than a one size fits everything powers consumer choice.

This has to be a benefit. But not purely in terms of travel. Almost every product category has undergone this process.

2. Personalization down to the consumer of one (aka ME!!!) has benefitted all of us.

True, there have been a lot of abuses and many of these remain but in general “mass personalization” has driven consumer benefits unimaginable prior to the web.

Because the infoworld article was short, it did not draw a conclusion, but it’s worthwhile to consider some.

The logical argument should be that the infrastructure of travel needs to get a whole lot better to support additional functionality and personalization at a lower cost.

Now THAT is an epic battle – and price point is just one element of that.

The world is changing and the infrastructure to support it needs to change. The focus on consumer user experience hides some of the ugly stuff behind the scenes – but that cannot last.

We (collectively) must provide more efficient processes to enable the coming wave of better services and products. Innovation will find a way. But that is not a battle – except in the execution.

It is the second such proclamation within the space of two weeks for the airline, after announcing that it is in discussions with Hogg Robinson Group over Direct-Connect.

Once again, no deal has been struck with American Airlines and AMEX, and the wording in the announcement is almost identical: “…the companies have agreed in principle to explore a long-term arrangement for the benefit of their corporate clients.”

In short: the companies have agreed that they should talk to each other.

The talks, of course, could eventually lead to American Airlines receiving a massive validation of its fabled Direct-Connect system through one of the biggest corporate travel agencies in the world.

Such a partnership would still need the participation of a GDS, ironically.

“Under this arrangement, American Express Global Business Travel would receive guaranteed direct long-term access to AA’s fares, schedules, and customized travel products and services via AA’s direct connect link through aggregation technology for such content provided by one or more global distribution systems (GDSs).”

Similar to the HRG announcement earlier this month, no further details are being disclosed.

The timing of the statements regarding exploratory talks with AMEX and HRG comes, coincidentally, just as American Airlines is in the final stages of negotiations with Sabre over its long-term distribution deal.

Earlier this week, American Airlines moved to reassure agents they will continue to have access to the airline’s content “either by commercial agreement ort court-imposed injunction”.

The strategy of disclosing the airline has agreed “in principle” to simply have talks with big corporate travel agencies has raised a fair number of eyebrows since the HRG deal a few weeks ago, not least among those in the GDSs.

The most deeply cynical suggest the announcements are just a ploy to illustrate momentum around Direct-Connect while the GDS distribution negotiations rumble on in the background.

The unofficial line that seems to be coming out of a number of GDSs is that if corporate travel agencies feel Direct-Connect will benefit their businesses, then the GDSs would happily pursue it and agree commercial terms (as they are essentially still acting as the switch).

“But this isn’t what we’re hearing,” says one source.

Another claims:

“Since when did an organisation pump out carefully worded press releases just to say it has agreed to talk to someone about something that may never happen – and now twice within two weeks. It’s a tactic, nothing else.”

Curiously, if it is such a tactic, then it is clearly one that has been sanctioned by the same army of lawyers at American Airlines who, meanwhile, are trading blows in the US courts with the likes of Sabre and Travelport.

One industry figure on the side AA says:

“If the whole exercise brings about a better resolution for American Airlines with its GDS negotiations then, sure, the lawyers may have been extremely nervous about playing the game through the PR machine, but it may have worked.”

In fact, officials say that during the second quarter, which ended June 30, Delta.com’s share of ticket sales climbed 4 percentage points to 37% of all Delta tickets sold.

How did this happen?

Since last last year Delta has terminated its relationships with 21 online travel agencies and has barred other online travel agencies from showing Delta flights in metasearch engines such as Kayak, Bing Travel and Hipmunk.

Those 21 online travel agencies on Delta’s hit-list included CheapAir, CheapOair, Vegas.com, AirGorilla, Globester, BookIt.com and OneTravel.

Expedia, Priceline, Travelocity and Orbitz continue to sell Delta’s flights.

But, the changes mean if you see a Delta flight in a travel metasearch engine, the link will be to Delta.com and not to an OTA.

And, Delta also barred OTAs from showing interline flights under the Delta brand.

Delta, of course, also invested in and overhauled Delta.com to make it easier to use, officials say.

“And our strategy really is to control our content, both with respect to combinability [interlining] and scheduled display criteria, so that we make certain that our schedules are accurately displayed and there’s no combinability,” CEO Richard Anderson said during the airline’s second quarter earnings call July 27.

“And utlimately, if our fair rules are followed and our display and content rules are followed by OTAs, then the only question is their fees have got to be similar to what it would cost us to distribute on Delta.com,” Anderson added.

In the context of the website improvements, Anderson also mentioned a direct-connect agreement the airline has with Farelogix to enhance distribution to travel agencies and corporations.

In connection with that agreement, Delta is expected to re-introduce a travel agency portal.

Details are sketchy and language carefully chosen in a joint statement released this afternoon by the pair, but both have agreed in principle to explore a long-term agreement so HRG can “would receive guaranteed direct long-term access to American’s fares, schedules, and customized travel products and services”.

Talks appear to be at an early stage, with HRG saying it plans to access American’s inventory and other content through the Direct-Connect platform and using its own technology.

This, HRG says, will be “either directly or via a global distribution system (GDS) application programming interface (API)”.

HRG currently connects to American Airlines through multiple GDSs, depending on the location of the agent, an official says.

The move shouldn’t comes as a huge surprise given the noises HRG CEO David Radcliffe has made in recent months when asked about the ongoing GDS-AA debate.

But the company’s move is in stark contrast to that of fellow business travel agency giant CWT, which has not exactly given the idea of Direct-Connect universal support.

Speaking in June this year, Radcliffe told ABTN:

“I certainly think that if you look down the path, and if you take out the personalities, and you just look at the principal of what the airlines are trying to do…

“They’re not trying to do anything different to any other manufacturer or service industry, or anyone that supplies a product. What they’re trying to do is distribute that product in the way that they want to distribute it.”

Radcliffe has expressed “sympathy” for the GDSs involved in the ongoing row (“probably still the most efficient distribution method that there is”), but says the relationship is “broken” between.

HRG is no small-fish in the debate, having operations in 120 countries around the world.

NB: It will be interesting to hear what the Business Travel Coalition, arguably one of the most vocal of the anti-Direct-Connecters, has to say when the news sinks in.

Since the beginning of time in the travel industry, there has been a need for content aggregators of some description.

It has never made any sense for your Mom and Pop travel agent on Main Street (or the High Street depending on where you are reading this) to have relationships with every airline, every hotel chain and every rental car agency in the world in order to fulfill the needs of their customers.

And hence, the original Global Distribution Systems (GDSs) were born (this is ignoring the fact that originally GDSs were just automated booking systems for individual airlines – such as Sabre and American Airlines - but we’ll gloss over that for now.)

A brief history of the GDS

In the emerging era of the GDSs (late ’70s to early ’80s), they served an enormously useful function of allowing travel agents to connect to multiple travel providers (by this time starting to include hotels and rental cars) in a single system, minimizing the need for development to multiple systems for the sellers.

It also therefore provided a great service to the suppliers: because the GDSs were connected to a huge number of travel sellers, the suppliers could reach a broader audience than they could with direct connections themselves.

By the late 1980s, the GDSs were starting to realize that they held an enormous position of power, providing a great deal of value both to the suppliers and the distributors, and since then have imposed a number of incremental price increases on fees in both directions, which, I guess unsurprisingly, has unsettled some of the players in the chain.

What is driving the likes of American Airlines away from the GDS?

As a result of this behavior, you are starting to see the “revolt”, ironically starting in particular by American Airlines pulling out of the content aggregation portals and demanding direct connections to their system.

It is worth pointing out, however, that this is driven by three key points:

• The increase in fees from the GDSs (as mentioned above)
• The massive advance in technological capabilities of both travel agents and airlines, making a direct connection to the airline actually feasible, which was not the case 30 years ago; and perhaps most importantly,
• The significant concentration of the travel-sellers market in the last few years, concentrating consumer demand through a few key portals, and the decline of the Mom and Pop travel agent as a means to book travel on a regular basis (as exemplified in corporate travel by the growth of the mega-travel management companies (TMCs), but also on the leisure side with the likes of the mega-OTAs such as Expedia and Orbitz etc)  This can be seen in Travel Weekly’s PowerList where the top 3 agencies make up over 50% of the top 20 in the US, and the largest (Expedia) is 43x larger than number 20 (Ovation Travel)

How does this relate to rail

The rail industry, in terms of ticket distribution, is roughly comparable to the state of the air industry in the late ’70s and early ’80s.

Connecting to rail lines tends to be very technologically challenging, and the standards that have developed in the air market (ticketing standards, timetable standards, airport / station codes, standards on fares) do not exist in rail at all.

Not only that, but there is the added complexity of traveling by rail, in that there are 1000x more train stations in the world than there are airports, which therefore creates the exponentially more complex combination of routes.

On some trains in Canada on Via Rail, for example, you can request a stop at any point between two stations and there are 67 scheduled stops on the direct train between Toronto and Vancouver (taking three days)!

Therefore the need for content aggregation, journey planning, standardization of ticketing, station codes etc, are all critical to the success of major travel sellers like the TMCs and OTAs to be able to sell rail in an efficient manner.

The future of the GDS

The concept of content aggregation is always going to be a powerful one, with new technological solutions constantly emerging (for example, Farelogix in air, and GDSx in middleware).

Firms are also finding ways to make the data available through these aggregation systems more useful and practical to their customers (the obvious example being ITA Software taking GDS data and making it useful for agents).

And new industries will continue to be covered (for example, CarTrawler in rental cars).

As long as the aggregators are providing value to their partners (both suppliers and distributors), and not taking advantage of their position in the chain, a role will always continue to be played in this space, even if the exact form does not remain constant.

NB: This is a guest article by James Harland, VP of operations at SilverRail Technologies.

The agreements between American Airlines and Travelport’s Apollo, Galileo and Worldspan GDSs were due to expire August 31.

And in a court filing in July, American Airlines had indicated that Travelport was set to dramatically increase the airline’s GDS fees starting Aug. 1.

The two parties said today: “Terms of Travelport’s subscriber opt-in programs for American remain unchanged. No further details will be disclosed at this time.”

The GDS agreements “have been extended concurrently and are no longer due to expire in 2011,” the companies said in a joint press release.

American Airlines and Sabre still face an Aug. 31 expiration date of their current agreement.

The airline said that Sabre raised American’s GDS booking fees on July 8.

American Airlines is battling the GDSs over its wish to have them tie into the airline’s systems using direct-connect technology, and distribution economics.

Just recently back from a sabbatical in Nepal, where he went to get “centered,” the Farelogix Jim Davidson character answers questions about GDS bypass direct-connect versus GDS pass-through direct-connect, content fragmentation, third-party online booking tools, codeshares and interlining, agency workflows, and integration with mid- and back-office systems.

The video is clearly promotional for Farelogix, but it does take on distribution issues of wider interest.

Here it is:

httpv://www.youtube.com/watch?v=3Ik7Rqg41_s

The original post follows:

Don’t expect any big announcements, but Delta Air Lines and Travelocity have reached a new distribution deal within the past couple of weeks, according to sources.

There had been speculation over the last couple of months that the two parties were at loggerheads in negotiations and that Delta’s flights might disappear from Travelocity, but a new contract was signed.

In the last year, after all, Delta, the world’s largest airline by passenger traffic, has embarked on a new distribution stance and removed its flights from several second-tier online travel agencies.

And, in April Delta publicly revealed that it is pursuing a direct-connect strategy with travel agencies, although it is apparently taking a less aggressive stance on the issue than is American Airlines.

Travelocity declined to comment when asked if the two sides had reached a deal, and Delta couldn’t immediately be reached for comment.

Under the terms of the deal, Travelocity will continue to access Delta’s flights through the Sabre global distribution system and not via a direct-connect, sources said.

But Orbitz’s pioneering role in establishing airline direct-connects is left out of the official look-back.

The online travel agency, founded by American Airlines, Continental Airlines, Delta Air Lines, Northwest Airlines and United Airlines, launched in June 2001 amidst controversy.

The U.S. Department of Justice had Orbitz under the microscope out of antitrust concerns and Southwest Airlines had sued Orbitz for displaying the airline’s flight schedules without authorization.

Regulatory authorities eventually gave Orbitz the green light, the Southwest Airlines’ schedules were dropped, and Orbitz, after an IPO, a merger and another IPO, eventually evolved into public company Orbitz Worldwide with its global footprint.

It is interesting to note that among numerous accomplishments listed in a press release about its decade of existence, there is no mention of Supplier Link, which Orbitz heralded in 2002 as a “breakthrough,”  stating that its introduction made “Orbitz the first Internet company to replace all intermediary functionality in order to book tickets directly with airline reservation systems.”

Supplier Link was a direct-connect between Orbitz and major airlines and at the time it bypassed the Worldspan global distribution system.

Today, Orbitz is locked in a battle with cofounder American Airlines over the direct-connect issue, and under court order American Airlines’ fares have been restored to Orbitz.com using a combination of Supplier Link and GDSs [see last Nugget] owned by Travelport, which controls Orbitz Worldwide.

In addition to the direct-connect issue, another self-acknowledged challenge Orbitz Worldwide faces is transforming its hotel program into one that is competitive on a global basis.

So, appropriately, to celebrate 10 years in business, Orbitz is conducting a 10th Anniversary Hotel Sale.

No, the Expedia Affiliate Network doesn’t tie into Farelogix, but connects to aggregator ezRez, which accesses Farelogix.

It’s all part of a just-announced agreement between AirTran Airways (now a Southwest Airlines subsidiary) and the Expedia Affiliate Network to give consumers the ability to book standalone hotel rooms or vacation pages from AirTranVacations online or through travel agents.

ezRez is the entity which accesses AirTran flight inventory through the airline’s Farelogix Direct Connect (Open AXIS API).  ezRez uses an SaaS platform.

The AirTran deal is part of a larger technology agreement between ezRez and the Expedia Affiliate Network, which the two will announce next week. Both parties say the technology agreement is not exclusive.

“The ezRez platform is powering the entire AirTranVacations.com website,” says Dario Ambrosini, an ezRez spokesman. “We are the spoke for all connectors, so the Expedia Affiliate Network does not directly connect to Farelogix. We have direct connects to both the Farelogix and Expedia Affiliate Network APIs, as well as APIs for car rental and activity providers.”

So, AirTran provides the flight inventory through Farelogix and ezRez accesses the Expedia Affiliate Network for hotels and vacation packages. The ezRez SaaS platform then controls business rules, optimization algorithms and the user interface for AirTran Vacations, Ambrosini says.

“Their [Farelogix] API is very robust and includes access to their SPRK platform for travel agents servicing AirTranVacations,” Ambrosini says.

Expedia.com has committed to American Airlines to begin using “GDS aggregation technology” to access AA Direct Connect for flight inventory, but hasn’t detailed precisely how it will do so.

The Expedia-American Airlines settlement had to irk Sabre and Amadeus, which provides GDS services to Expedia, because the pair, along with Travelport, have been fighting direct-connect and the prospect of GDS bypass.

Sabre says it will play no role in accessing AA Direct Connect, and Amadeus declined to comment on whether it may be the provider.

Note: The original version of this story stated that the Expedia Affiliate Network and ezRez will announce a reseller agreement next week. That information came from an ezRez spokesman, who later clarified the statement and said, EAN “resold us to AirTran as part of a larger partnership.” The reselling takes place on a case-by-case basis, the spokesman adds.  However, the Expedia Affiliate Network states, in a draft press release, that there is no reseller agreement, but the two companies have a “non-exclusive partnership under which EAN utlizes ezRez technology as a simple solution to offer Expedia’s hotel inventory on airline websites.” EAN adds: “AirTranVacations is first joint [EAN-ezRez] client to offer Expedia hotel inventory using ezRez technology.”

Tnooz reported in 2009 that Sabre, too, had terminated its developer’s agreement with Farelogix, but Travelport’s move against Farelogix hadn’t been widely known until American Airlines discussed it in its April antitrust complaint against Travelport. American Airlines provided further details about the global distribution moves against Farelogix, which handles direct-connects for the airline, when it added Sabre as a defendant in an amended complaint filed June 1.

American Airlines alleges that Travelport terminated a Farelogix developer’s agreement Dec. 28, 2010, a week after the airline severed its relationship with Travelport-controlled Orbitz because of Farelogix’s role in advancing American Airlines’ direct-connect initiative.

“Other software developers have been told that under their agreements with Travelport they are not permitted to work with Farelogix or AA Direct Connect,” the airline alleges.

What did the cut-off mean to Farelogix?

“It means that Farelogix can no longer provide any Travelport GDS connectivity through a Farelogix platform for travel agencies even when the agency wants us to and the agency already had a subscriber agreement with Travelport,” says Jim Davidson, Farelogix CEO.

Travelport declined to comment on the issue. “We do not, by policy, comment on the specifics of our commercial relationships or pending legal matters,” says Travelport spokeswoman Jill Brenner.

American Airlines also provided further detail in its amended complaint about Sabre’s termination of a Farelogix developer’s agreement in 2009, alleging the action was taken because Farelogix was helping airlines with their direct-connect plans.

The airline noted that without the development agreement with Sabre, which had been in place since 2005, “Farelogix does not have access to the APIs that are needed to allow its software to interoperate with Sabre subscribers’ front-, mid- and back-office systems.”

In 2009, Sabre spokeswoman Nancy St. Pierre commented about the termination of the Farelogix developer’s agreement:

However, as we said earlier this year, the termination of the developer agreement with Farelogix only affected a handful of Sabre subscribers and we have worked hard to ensure their needs have been taken care of. Our action was taken in light of the evolution of the Farelogix business model to one of content fragmentation, and what became clear was an attempt to free ride off of our database and systems.   The termination was fully compliant with the terms of the agreement and with any applicable law.   Sabre has not told any of its subscribers not to do business with Farelogix.

American alleges that Sabre also ordered Pass Consulting, a Farelogix partner which offers multi-GDS access, to restrict Farelogix’s access to Sabre through PASS or risk losing its own developer’s agreement with Sabre.

“Other software developers working with Farelogix and American on Direct Connect development have reported similar from Sabre that they are not to work with Farelogix or any other entity that facilitates direct connections,” American alleges.

Asked to comment on American’s allegations, St. Pierre said: “We are not going to litigate in the media. We will respond to allegations in court.”

The airline’s allegations are part of antitrust lawsuits against Sabre, Travelport and Orbitz Worldwide.

The U.S. Department of Justice previously delved into the Sabre-Farelogix matter and currently is investigating the GDS antitrust issue.

The Circuit Court of Cook County in Illinois said an injunction should have been granted against American Airlines in December to prevent it from terminating its contracts with the online travel agency.

The decision effectively puts the airline tickets back on Orbitz and Orbitz for Business almost immediately.

Barring further legal action by American Airlines, it is possible that American Airlines’ flights will be available on Orbitz for at least several months as Travelport attempts to negotiate a new participation agreement with Orbitz.

It is considered unlikely that Travelport, which controls its largest customer, Orbitz, would conclude a GDS agreement with American Airlines without protecting Orbitz.

The ruling may also lead to a few red faces at American Airlines, with the decision coming just a day after it touted a new video poking fun at Orbitz for not having the airline’s fares on the site. The video has already been removed from YouTube.

An Orbitz official characterised the ruling as “a win for transparency, for consumer choice, and for our millions of our mutual customer”.

“Orbitz continues to believe that it is in the best interests of both companies to work towards a long term agreement to continue distribution of American Airlines content to our millions of mutual customers.

Travelport chief commercial officer, Kurt Ekert, claims the decision is a “significant ruling”.

American Airlines, in a statement, says it “fundamentally disagrees” with the court’s decision.

“We want to underscore that this is the exact opposite conclusion than that of the judge who heard the evidence. We are evaluating our options, but in the meantime, we will, of course, comply with the judge’s order.”

The latest turn in the Travelport-AA courtroom marathon ends a heady day of legal shenanigans in the US, with Sabre filing an antitrust claim against American Airlines in the existing Travelport antitrust suit at a court in Fort Worth, Texas.

American Airlines hit back within the hour by then adding Sabre to the Travelport antitrust case.

In documents filed at the District Court for the Northern District of Texas in Fort Worth, Travelport slams the airline’s lawsuit as “not a genuine antitrust action brought by consumers suffering from excessive or artificial prices increases”.

The damage alone to Orbitz from “bullying” by AA has been substantial, Travelport claims, with the online travel agency losing more than half of its market capitalisation in the past six months.

AA’s behaviour is “opportunistic” and only brought about to enhance its “already substantial commercial bargaining leverage”, Travelport alleges.

The filing is the first official response (after the initial “significant inaccuracies” reaction) from Travelport to the antitrust lawsuit issued by AA on 13 April 2011.

The original lawsuit claims:

“Travelport effectively controls the distribution of airline tickets to a large number of business travelers. Travelport and Orbitz have entered into agreements with one another and with others to exclude competition and maintain Travelport’s monopoly power.”

Travelport says the lawsuit is an “unabashed” effort by AA to secure a better position ahead of contract negotiations between the pair for the renewal of their existing distribution agreement.

The airline’s power, Travelport claims, is already being felt following its decision to remove fares from Orbitz at the beginning of the row in November last year.

Travelport claims there is “nothing new or different in the marketplace” that warrants an antitrust lawsuit, adding that the airline has had to cite old cases and market definitions, pre-deregulation of the distribution model in the US.

Urging the court to dismiss the action for “failure to allege facts establishing a plausible market in which Travelport operates”, the filing adds:

“Stripped of its antitrust pretext, AA’s real complaint is that the marketplace has not embraced AA’s unproven and inefficient direct connect technology and that GDSs remain highly valued by many airlines and travel agencies.

“GDSs continue to offer proven, cost effective distribution services for AA and many other airlines, and compete intensely with each other on price, quality, and content to encourage both airlines and travel agents to continue using their services.

“GDSs also vigorously compete with other distribution channels that now account for a majority of air ticket distribution in the United States.  Contrived market definitions cannot mask these contemporary business realities.”

The other major area of concern for Travelport is around AA’s accusation that the GDS dominates the US marketplace for distribution of airfares.

A market share of “significantly” below 50% of US agencies rules out any argument that Travelport has a monopoly in the country, the filing says.

In a separate filing also made today to the same court, Travelport has asked that the case be heard in an Illinois District Court, where the other and existing legal battles between the pair are taking place.

The filing comes just a week after the Department of Justice announced it would be investigating GDSs on antitrust issues.

American Airlines, in reacting to the Travelport’s answer to the airline’s antitrust suit and Travelport’s motion to dismiss, says it indeed believes  that Travelport’s actions are anti-consumer. Says Ryan Mikolasik, a spokesman for American Airlines:

American firmly believes that Travelport’s conduct has harmed not only American [Airlines], but also U.S. consumers, and is in violation of the federal antitrust laws, specifically Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2, as well as provisions of Texas law.  We believe that the court will deny Travelport’s motion to dismiss.  Travelport’s rhetoric and claims that American – or any airline – has market power over Travelport is simply ludicrous and a smokescreen designed to draw attention away from its monopolistic and anti-consumer practices.

But which are the injured parties in the overall war? And, perhaps more of a conundrum, why is it like this?

For anyone who is a fares person, you can stop reading now – you know this stuff. However for many who have struggled with airline pricing we hope that you can use this article to explain to your stakeholders why it is so complicated.

To answer these questions we have to go back to basics and attempt to understand why prices vary.

Clearly airlines believe fares are their own and that only they should have the rights to determine who gets to display and manipulate the data; who gets to use the data; and where and how it gets used.

This appears fine in theory, but there is a strange quirk: airlines in the past have ceded the ability to determine the price for a ticket to the GDS or their own internal systems.

The very act of not having a formalized reference price for most airlines makes this whole process fraught with possible abuses. The impact? Multiple correct prices for the same product.

• Different prices from the airlines to the GDSs and subsequently to GDS customers online and offline
• Different prices for the same product sold in different jurisdictions

If we look at the possible sources of airline-based fares and pricing, the process for what actually determines a fare is almost beyond belief.

It has a guarantee that the pricing will be different and that the process of enforcement in today’s internet-based transparency seem a little arcane.

As pricing has become more complex – with different taxes, more volatility for surcharges and the imposition of fees for direct and indirect items, for example – then the ability of the pricing mechanisms to keep up are challenged.

Furthermore, the airlines themselves have never enforced a standardized unique pricing mechanism. There are therefore four major issues:

1. Pricing

Each pricing algorithm used by the GDSs are, by definition, different. In other words: the calculations are different, therefore the prices are different:

• the logic of the pricing is different,
• the order of the pricing elements are different

2. Display

Not every GDS correctly enforces all the rules of the pricing. If they did then some of the airlines fares would never price. There is perhaps a little “give” in the system to accommodate specific instances when the pricing might not work.

3. Publishers

• ATPCO, which publishes fares, rules, routings and footnotes, does not provide a reference point for the fare in the form or a test case service.
• SITA, which can and does both, provides a filing service for fares and at the same time has a fares and pricing engine can do this. But an airline’s own website might use a different mechanism for determining the fare from the price.

4. Location and currency

The use of multiple geographic points for determining pricing elements (taxes and unidirectional pricing elements such as fuel surcharges) means that the use of a currency exchange system must occur. However, the “home” currency of the GDS can vary. The location of this home can also have a different impact on the final price.

The GDSs are not to be blamed for this. The airlines liked this process as it contributed to the overall goal of obfuscating pricing. But the enforcement process is also somewhat difficult to comprehend and digest.

Enforcement is accomplished by checking prices issued post-fact and punishing with a harsh stick for any transgressions.

If a price is found to be incorrect or, more accurately, if the airline finds that the price on a ticket does not measure up to the airlines’s impressions of what the price should be, then the airline has the right to charge a deficit price up to the value of the (usually not widely used) full fare price of the ticket.

In theory, if the agency messes up the ticket and fails to completely book the reservation according to the rules then the full fare can be charged back to the agency by the airline.

However if the GDS autopriced the fare and the agency followed all the rules, then agency is protected in most cases by the GDS fare guarantee programs.

The onus to fix this rests with the agency as the airlines have very broad rights in these matters including taking money from a bank account.

Perhaps now you can see why this is not a trivial matter.

In many cases the actual amount of variation can be just a matter of a few pennies. However in some cases they translate into hundreds of currency units of difference.

Just have a look again at the differences in the fares from the Orbitz website. In a future article, I will try and answer the next big question: does full content hurt more than just GDS competition?

When asked in early-January this year about the controversial American Airlines strategy to install so-called direct-connect technology with agency customers (bypassing the GDSs), British Airways said officially that it has a “good working relationship” with the GDSs and the model is “working as we would expect”.

Willie Walsh, BA CEO at the time before moving upstairs to front the new International Airlines Group (uniting BA and Iberia), dropped a hint that the AA direct-connect idea was more than on the radar when he acknowledged IATA supremo Giovanni Bisignani’s comments over the profitability of the GDSs.

Walsh told The Transnational at the time:

“We will continue to distribute our products through the global distribution systems, but I am conscious that many airlines around the world look at the value chain and see profitability in other areas when they are suffering losses. One area highlighted recently by [IATA director general] Giovanni Bisignani was the profitability of the global distribution systems, but at BA, we have no issues with our GDS partners at the moment.”

Four months on (with a few more lawsuits flying around in the US) and the atmosphere has darkened ever so slightly at BA.

The official line remains as many would expect – business-like and not particularly inflammatory:

“We’re working with AA and Iberia to optimise distribution, and given it’s a single economic entity this includes joint corporate and agency deals to bring increased choice and flexibility to our customers.

“But on the GDS side we have separate contracts with differing expiry dates. and BA’s full content deals run to March 2013. But we watch with interest to see what is developing in the industry.”

It would be sensible to presume the next 18 months will see a jockeying for position by BA and its GDS partners, Amadeus, Travelport and Sabre – indeed, it happens ahead of every round of GDS negotiations by major airlines.

The difference this time is the situation in the US with American Airlines – with BA previously trying to sit quietly on the sidelines but because of its relationship with the carrier, unable to do so.

Meanwhile, executives are rarely wrong-footed publicly with remarks over business-critical issues, so there is perhaps plenty to read into comments by one of BA’s senior figures at an event in Abu Dhabi last weekend.

Head of UK and Ireland sales Richard Tams told delegates at the annual conference of the Guild of Travel Management Companies that the GDS model is “broken” and labelled the companies running the systems as “gatekeepers”.

Tams also said the GDSs are “incredibly capable platforms”, but that the airline had two issues: the economics of the model and the ability of GDSs to change.

He is reported to have told delegates:

“GDSs make margins of up to 30%… They have priced themselves as distribution gatekeepers, using other people’s money to fund unsustainable market share battles. Many in the industry would privately admit the model is broken, but they are struggling to make the transition.”

When asked if BA’s position has changed with regards to its use of the GDS model for distribution, an official says “no change”. When asked to comment on the remarks by Tams to the GTMC, an official says: “He [Tams] made those comments and stands by them.”

There is, for the time being, a stay of execution over whether BA will follow its US cousin into the world of direct-connect, mostly because it is bound up in contracts ending, at the very latest, in March 2013.

But would BA seek to kickstart such discussions earlier, hinting at a new position and ramping up the rhetoric in the public domain?

It would certainly be a cheaper process than thrashing it out in the courts…

NB: Full report on the session from Travel Weekly.

The airline apparently is making a big push now to get travel agents to sign the direct-connect contracts because of a looming big day on the calendar, June 1.

On June 1, if Sabre and American Airlines have not reached an agreement on a full-content contract to replace the one expiring Aug. 31, then their temporary truce on the legal front will have expired.

By late January, after Sabre had biased American Airlines’ displays and hiked the airline’s GDS fees, and American had filed suit against Sabre and Travelport, Sabre and American agreed to put the legal battle on hold and to put the displays and fees back to normal while the two sides attempted to negotiate a new agreement.

Barring an extension in their ongoing talks, the landscape may change June 1 as the two sides have the option to go back to court.

Sabre is telling agencies that it will not remove American Airlines content starting June 1, but there has been no word on whether it might again begin biasing American Airlines’ flights or increase the airline’s GDS fees again.

Ryan Mikolasik, a spokesman for American Airlines, said May 11:

If Sabre dramatically increases our fees, as they attempted to in January, we will need to explore all legal and commercial options, including possibly holding agencies that choose to use Sabre responsible for the added costs imposed by Sabre.

If Sabre does not take any retaliatory actions, then American Airlines has “no plans to impose the Booking Source Premium after June 1,” Mikolasik says.

The most recent time American Airlines charged a Booking Source Premium, it was $5.50 per segment.

The approaching June 1 watershed day and the visits by American Airlines representatives have left some travel agents angry — or at least confused.

One travel agent said an American Airlines employee visited the office a few weeks ago and informed the agent that it would be best to sign a direct-connect licensing agreement before June 1 to avoid surcharges, which would come via invoice from American Airlines.

This travel agent, along with two others interviewed for this story, declined to be identified.

The American Airlines sales staffer indicated that the direct-connect link could be “installed in a few minutes and would be up and running,” said the travel agent, who has yet to sign the licensing contract but is considering doing so.

Another travel agent got a similar face-to-face meeting and was asked to sign the licensing agreement to use technology from Farelogix, which is American Airlines’ direct-connect subcontractor.

The American Airlines representative explained that agent should sign the licensing agreement in the event there is no agreement with Sabre by June 1 and Sabre removes American Airlines’ content, a scenario which Sabre is on record as saying it won’t do.

A third travel agent in a different state took a meeting with an American Airlines employee and discussed a direct-connect contract, but didn’t even read it and has refused to sign.

The American Airlines’ employee told the agent that the agent’s ability to book American in Sabre may be gone starting in June, although nothing is definite, the agent said.

The travel agent, who obviously is not a direct-connect afficionado, said he hopes no travel agents sign the agreement because if they do “it’s leverage for the airlines.”

All of the agents said they believe that American and Sabre will eventually reach an agreement.