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American Airlines two years ago transformed the travel industry by charging for checked bags. It may be on the verge of changing the way we fly again.
A fight between the airline and travel Web giants Orbitz and Expedia threatens to expand to the entire airline industry as American looks to fundamentally change its relationship with the sites that sell its tickets. Because of the feud, American flights are not listed on Orbitz and Expedia. Now the question is which side will give in.
Already, Delta Air Lines, which operates a hub in Salt Lake City, has notified several secondary travel websites it is pulling its fares, indicating other legacy airlines may follow American's move.
"Delta continues to evaluate its online distributors, and intends to be more selective in its use of online travel sites in the future," spokesman Trebor Banstetter wrote.
American has near-zero interest in preserving an open and transparent marketplace, according to Kevin Mitchell, chairman of the Business Travel Coalition (BTC).
"It is an outrageous act that will negatively impact consumers nationwide who are in the midst of comparison-shopping," he said.
Travel agents and travel sites use what are known as Global Distribution Systems (GDS) to search for fares. The GDS's — created decades ago by the airlines themselves but are now independent companies — receive a commission for each sale, as do the agents or sites that use them. American — ironically an original investor in Orbitz — argues it's providing free inventory for others to sell.
"In today's competitive marketplace, it is important for American to be free to customize its product offerings to improve the customer experience, as well as distribute its products in a way that does not result in unnecessary costs," said Derek DeCross, American's vice president of sales.
If consumers were forced to buy their tickets directly from American on its own site, the airline would save millions on commissions — it spent more than $500 million on them in 2009 — and potentially make even more money if customers then booked hotels and rental cars through it as well.
That model is one Southwest has been using for years. Southwest fares typically have not been available through travel sites.
"From a consumer point of view, this isn't good," said Charlie Leocha of the Consumer Travel Alliance based near Washington, D.C.
Toby Nash, owner of Salt Lake City's Cruise and Travel Masters, said a move to force consumers to exclusively use its website to book seats "could force us to pay a fee back to American to keep us in their system. And every fee charge on a GDS passed on to travel agencies is passed on to the customer. In the long run, the consumer pays for the information. ... If American charged $1 per segment of a four-segment flight to have access for information, our service fee instead of $15 would have to be whatever American is charging. Orbitz and Expedia are refusing to pay those fees to American so they are pulling their information out of the system."
What's more, Nash said airlines that normally absorb a 3.2 percent fee for a credit card transaction are now threatening to pass those charges onto consumers as an additional fee.
Leocha said another unanswered question is whether travelers who use an online travel agent to buy tickets as opposed to booking through an airline site will be able to transfer to another airline in the case of a flight cancellation.
American Airline fares have not been available on Orbitz since Dec. 21. Orbitz spokesman Brian Hoyt said revenue earned on American tickets and ancillary products including car, hotel and insurance accounted for 5 percent of the site's revenue for the nine months that ended Sept. 30.From the fourth quarter of 2009 through the third quarter of 2010, Orbitz Worldwide generated $800 million in sales for American.
Leocha said American's action is anti-consumer. Extra fees generated from such practices as charging for baggage, reserving a seat, using a blanket, booking through a human agent or changing a flight are making up most of the profits for airlines, he said.
Consumers such as Tony Hoagland of Salt Lake City may ultimately pay more for the privilege of flying.
"I need to find the fairest price for all the airlines," said Hoagland, who recently booked a bicycle trip to France and bought an airline ticket for his daughter to fly between Salt Lake City and San Francisco using online travel sites. "I just want a level playing field."