This week’s deal between and Expedia settled the distribution dispute between the carrier and online travel agency, but it leaves many unanswered questions about the broader distribution war between the airline and third-party sellers of its product.
American, for example, still is negotiating with the Sabre global distribution system (GDS) for an agreement to end their dispute and avoid a potentially lengthy and costly court battle, which has been put on hold until at least June 1 while they try to work out their differences. American is not even talking to online travel agency Orbitz, from which American pulled its flight and fare data in mid-December. And even its agreement with Expedia is not exactly clear about how the issue was settled.
The battles have centered on American’s desire to have travel agents bypass GDSs to connect directly with American’s internal reservations system.
American says its “Direct Connect” alternative would enable it to avoid costly GDS booking fees and customize fare-and-fee offerings for consumers based on their travel characteristics, preferences and purchasing history. But many travel agents, travel management companies, corporate travel managers and companies say they oppose the change because the GDSs provide a central repository for them to comparison shop, settle payments, manage back-office accounting and track spending.
Because of its insistence on Direct Connect, American could not reach a deal to renew its agreement with Expedia beyond Dec. 31, 2010. Expedia gets its fare and flight availability information from GDSs, primarily Sabre.
Under the memorandum of understanding announced by American and Expedia on April 4, American returned to Expedia and its Hotwire sites immediately—via GDSs. But the airline and agency also said that Expedia eventually “plans to access American’s fares, schedules and customized travel products and services via American’s Direct Connect link by using aggregation technology provided by a GDS.”
Expedia and American are not explaining exactly what that means or providing a timetable for the transition, although it is believed to be about 12 months. Questions remain about whether the aggregation technology would be provided directly by the GDS, whether a third-party aggregator, such as Farelogix, could be used, or whether GDSs even are interested in such a solution.
Sabre responded by sticking to its anti-direct connection guns.
“Sabre has invested significantly to allow any airline, including AA, to broadly and rapidly deploy its ancillaries—at no incremental cost to the airline—through the proven system used by agencies and corporations to efficiently manage travel,” it says. “We already aggregate American’s content, along with hundreds of other airlines. As such, there is no need for a one-off Direct Connect.”
Orbitz, meanwhile, revealed April 5 that it has extended until Aug. 31 an agreement with Travelport under which Travelport, owner of the Worldspan and Galileo GDSs, increased the segment fees it pays to Orbitz for each American booking made through the online agency. Travelport also has a 48% stake in Orbitz Worldwide.
Under the original agreement, reached Feb. 1 and backdated to the time American pulled out of Orbitz, Travelport will pay the higher fees until American comes back, Orbitz reaches an agreement with American for a Direct Connect relationship or becomes “engaged in a discussion with American that is reasonably likely to result in a Direct Connect relationship.”