Expedia Drops American Airlines Flights

Jan. 3, 2011— -- The battle between American Airlines and online travel agents such as Orbitz and Expedia has taken yet another twist, with Expedia dropping the airline from its site.

The move comes a little more than a week after Expedia made it extremely difficult to find American's tickets -- obscuring them in searches in favor of other airlines, regardless of the cheapest ticket price.

Expedia said it's move was prompted by American's earlier decision to pull all its flights off rival online booking site Orbitz. American is trying to reshape the way airline tickets are sold, directing more fliers to its own website, hoping to eliminate paying fees to Orbitz, Expedia and Travelocity.

"American Airlines is attempting to introduce a new direct connect model that will result in higher costs and reduced transparency for consumers, making it difficult to compare American Airlines' ticket prices and options with offerings by other airlines," Expedia said in a statement. "American Airlines' direct connect model is of questionable, if any, benefit to travelers, would be costly to build and maintain and would compromise travel agents' ability to provide travelers with the best selection."

Any American Airlines tickets previously sold on these sites are still valid, but this fight could signal the start of a new era for how travelers book their flights and, possibly, how much they pay.

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So far, no other major airline has followed American's lead in fighting with the big three booking sites. However, last month, Delta did pull its tickets off three smaller travel sites: CheapOair, BookIt.com and One Travel.

At issue are fees that each of the online travel agents get for each airline ticket sold. American is trying to steer more ticket sales to its own website and keep a larger share of the ticket prices for itself.

For its part, American says that ticket sales have not been hurt after the break with the travel companies.

Airfare experts say the ongoing battle will mean more work for passengers looking for the cheapest flights.

"The move does make things a bit more difficult for consumers in terms of comparison shopping, since they will have to remember to search American separately if using Orbitz," said Anne Banas, executive editor of the travel website SmarterTravel. "However, my advice would be to use a meta-search engine like Bing Travel or Kayak that searches multiple sites -- including Orbitz and American -- at the same time."

Cheap Airfare Websites

At the same time, Google is trying to buy the airfare search software company ITA for $700 million, an acquisition that is being reviewed by the Justice Department for possible anti-trust violations.

While ITA is not a household name, it has some of the most powerful airfare search technologies, often sold to third parties. Google dominates the overall search market and has transformed areas – think of Google shopping – that it has entered. Competitors say they fear that if Google buys ITA, it would control airfare searches and give preferential treatment to the highest-bidding advertiser.

"Google buying ITA would be a very bad deal for consumers," said George Hobica, president of airfarewatchdog.com, which refers ticket buyers to several sites including Orbitz and Expedia.

So why would American and Delta make their tickets harder to find? Money.

An airline has to pay a fee to any third-party site, such as Travelocity, Expedia or Orbitz, that sells a seat on one of its planes. Those fees can be as high as $4 per flight segment, according to Robert Mann, an airline consultant and president of R.W. Mann & Company.

For instance, consider a $160 Delta Air Lines ticket from Boston to Orlando, stopping in Atlanta each way. If that ticket were purchased on Orbitz, Delta would have to pay $16 -- or 10 percent of that ticket price -- to the booking site. If that same ticket was purchased on Delta.com, the airline would get to keep every cent of the $160 airfare.

"They are trying to flex their muscles and control their distribution costs," said Graeme Wallace, chief technology officer of FareCompare.com.

Southwest Airlines -- which like American is based in Dallas -- has long resisted allowing others to sell its inventory. Mann estimates that roughly 80 percent of Southwest's tickets are sold directly by the airline. It used to be higher, but the airline opened up some of its higher-cost tickets to corporate travel agents to woo business travelers.

Traditional network carriers, like American and Delta, only sell 20 to 30 percent of tickets directly through their websites.

"This frustrates them," Mann said.

Orbitz -- which had unsuccessfully gone to court to block American -- calls its departure "unfortunate" and said the airline accounted for about 5 percent of its overall sales.

While American's move isn't likely to have an immediate impact on ticket prices, other airlines are now likely to review their own deals with third-party booking sites.

"Southwest for a long time has not played with Orbitz or anyone and they are doing fabulously. If I were an airline, I might think: If I can do it, why can't I?" Hobica said.

"Airline websites sell a heck of a lot more than airfare. They sell hotel rooms, they sell rental cars," he added. "Maybe the airlines are thinking why share this ancillary revenue with Orbitz? There might be some profit in just selling your wares on your own website."

Cheap American Airlines Tickets? Not on Orbitz

In the past few years, airlines have cut labor costs and added fees. They have now returned to profitability and are looking for new ways to increase the bottom line.

"American, and the airlines in general, are trying to get more control and reduce costs for their distribution," said Ray Neidl, an airline specialist with the Maxim Group.

The removal of major airlines from such travel sites would not necessarily mean higher airfares, but makes those super-cheap tickets harder for passengers to find.

"It's going to mean extra work because you are going to have to look at AA.com and also your favorite online travel agency," Hobica said. If American and other airlines pull out of other travel sites, "it will kind of be back to the old days when you got on the phone and called American and called United.

"I don't see that happening," Hobica said.

Customers might also find it harder to save money with multi-carrier itineraries. For instance, a one-way ticket from Chicago to San Francisco on American paired with a one-way ticket back on United might be cheaper than a roundtrip ticket on either airline.

"The multi-carrier itineraries disappear in a puff of blue smoke," Wallace said. "Those multi-carrier initiatives are often the cheapest prices."