- February 2012
- January 2012
- December 2011
- November 2011
- October 2011
- September 2011
- August 2011
- July 2011
- June 2011
- May 2011
- April 2011
- March 2011
- February 2011
- January 2011
- December 2010
- November 2010
- October 2010
- September 2010
- August 2010
- July 2010
- June 2010
- May 2010
- April 2010
- March 2010
- February 2010
- January 2010
- December 2009
- November 2009
- October 2009
- September 2009
- August 2009
- July 2009
- June 2009
- May 2009
- April 2009
- March 2009
- February 2009
- January 2009
- December 2008
- November 2008
- October 2008
- September 2008
- August 2008
- July 2008
- June 2008
- May 2008
- April 2008
- March 2008
- February 2008
- January 2008
- December 2007
- November 2007
- October 2007
- September 2007
- August 2007
- July 2007
- June 2007
- May 2007
- April 2007
Comments (7)
Print
Save/ShareExpedia and Orbitz have stopped showing nearly all American Airlines flights. If you want to book tickets on American, you have to go directly to the airline's site, aa.com, or shop at other major online travel agencies and search engines.
Expedia and Orbitz are battling with American about who controls the search results you see. The backstory says a lot about how airlines want vacationers to pay even higher prices for fares.
Meanwhile, every time American posts a ticket on a site like Expedia, the airline has to pay about 10 percent in fees. Some of those fees go to the online travel agency, and some go to a middleman company that runs computer databases.
In contrast, every time a ticket is sold through American's own website, all of the traveler's money goes to the airline.
Even better for American, whenever a flier shops for a ticket directly on its aa.com site, the airline can up-sell the person on additional services, such as roomier seats.
American decided not to fully copy Southwest. It didn't want to stop listing its fares with all online travel sites—which provide about 17 percent of its revenue. So it came up with a half-way measure. The airline invented its own computer system, called Direct Connect, and asked Expedia and Orbitz to use it instead of the middleman's computer services.
This would give American the best of both worlds: The airline would continue to have its fares listed on major online travel sites, but it would no longer have to pay a fee of up to $4 per ticket to a middleman for its computer services to do so. Plus, its new computer system would let it upsell vacationers on profitable services.
But Expedia and Orbitz don't like Direct Connect. They don't like it for several reasons, but the most important one for budget travelers is that American's planned new system would ultimately make tickets more expensive—driving business down.
Tickets sold by online agencies like Expedia and Orbitz are 45 percent cheaper than ones sold by traditional travel agencies, says a survey by UBS quoted by the New York Times. American's new model would push up prices higher.
Expedia worried that the next shoe to drop would be for American to stop providing fares to it as well, not just Orbitz. So after American recently pulled its fares from Orbitz, Expedia stopped showing American's fares in solidarity with its competitor. It's an effort to team up and stop the airlines before they gain momentum and take actions that will push up prices.
Other airlines are watching the battle closely. On December 17, Delta, for one, stopped allowing three sites—CheapOAir.com, OneTravel.com, and BookIt.com—from listing its flights.
What do you think?
MORE FROM BUDGET TRAVEL
An airfare search with a sense of humor: Hipmunk
The best flight search tool you've never heard of: ITA Software
For the lowest airfare, study says book eight weeks in advance
User reviews and comments that include profanity or personal attacks or other inappropriate comments or material will be removed from the site. Additionally, entries that are unsigned or contain "signatures" by someone other than the actual author will be removed. Finally, we will take steps to block users who violate any of our posting standards, terms of use or privacy policies or any other policies governing this site. Please review the full rules governing commentaries and discussions.
Not happy with Expedia as I wanted to book 4 flights with them for United Airlines to San Diego and the priceof the tickets increased $47.50 per ticket.
I know it for a fact as I decided to book one more
airfare with United ... same time/date etc.
the price for this ticket was again $47.50 less
I asked what the deal was and the Expedia agent said when you book 4 tickets together the fare increased. What a sham. Expedia people are defrauding the public when they post a fare and
for some magical moment when you are speaking with
them the fare increases. By almost $200.00 per transaction
I refreshed my Expedia site and the lower fare was
still shown. How long have they been doing this to
the public.
Shame on you Expedia... I have been booking airfare
for over 20 years.
WE NEED TO BRING BACK THE CALL CENTERS TO THE USA.
I would indeed pay the extra $$$ to someone here
that speaks English.
Posted By BV on January 5, 2011, 7:03 PM
Sean, thanks for the background. Every story I've read so far mentions "Direct Connect" but doesn't bother to explain what it is... I appreciate the full background on "Direct Connect."
As a follow-up to this story I'd like someone/you to revisit the AA/Kayak.com dispute of the same vain and see if you can get any background on how costly/difficult it was for Kayak.com (or anyone else) to move to "Direct Connect." (I'm making an assumption here - that they did, since the Kayak.com/AA battle seems over.)
It also would be interesting to know how this relates to AA's backend inventory/revenue management systems and such. I understand (a very limited understanding at that) that most airlines pay an arm and a leg for inventory/revenue management systems - does this mean AA is replicating those types of systems also?
Posted By Iolaire McFadden on January 6, 2011, 1:37 PM
You mention that DirectConnect would make tickets more expensive, but don't explain how. I've found that often times when reporters tell us what to think instead of giving us the facts and lettingus decide that they have an agenda.
How would direct connect drive up costs?
Posted By Rob Dawes on January 6, 2011, 2:23 PM
@Iolaire
Thanks, as always, for your comments. I'm amazed that you remember the AA/Kayak spat. I never want to challenge you in a Travel Trivia Quiz.
American's battle with Kayak was not about Direct Connect, its computer-fare generating software that replaces the need for Global Distribution Systems, or GDSes. American hadn't invented Direct Connect yet. What *that* dispute was about was whether Kayak would show only fares bookable via AA.com. Some other online providers might offer American fares at a discount, but Kayak no longer shows those cheaper fares. It caved to Kayak, for all intents and purposes.
@Rob Dawes
Thanks for your comment. You should always be skeptical of journalists. In my case, I'm not trying to hide my biases when I write for Budget Travel's blog. I'm also trying to balance my geeky urge to explain every detail and the reality that most readers just want the upshot (in other words, most readers just want to know if the price of fares is going to go up or down and how they can find a cheaper fare). All that said...
American Airlines' computer system, Direct Connect, is like all things: It has positive and negative aspects, both for the company and for consumers.
It replaces, as I mention above, Global Distribution Systems (GDS), a handful of companies that act as middlemen between the airlines and travel agents (including online travel agencies like Expedia and Orbitz). Who says that we still need GDSes? I don't know. The answer to that question is above my pay grade.
American could argue that its system allows for cost savings that can be passed along to a consumer because the system cuts out the middleman (the GDSes). But how much of that savings will the airline truly pass along to the consumer?
I also wonder why American targeted Orbitz first. Online travel agencies like Orbitz sell most of their plane tickets to vacationers (Budget Travel's core audience, obviously). These agencies also happen to sell tickets that are, on average, much cheaper than those sold via traditional travel agents or via corporate travel agencies (like Amex and Carlson) to corporate accounts.
The company targeted for punishment Orbitz, a company catering primarily to vacationers and delivering some of the (relatively) cheapest airfares around. From the perspective of budget-conscious travelers, that's worrisome.
As I mention in my response to Iolaire (above), American has-- like most profit-seeking companies, understandably -- a long track record of boosting its revenue in any way possible. So from a gods-eye perspective, maybe this is a good thing.
A healthy aviation industry may be a plus for the country's economy as a whole, too, and Direct Connect-type technology might be a step toward a healthier industry.
Still, my view is that the short term effect seems likely to be higher prices for budget travelers.
That's my take, and I'm sticking to it. My "special interest" is budget travelers, and I think that they're hurt by this move in the short run.
But feel free to offer alternative views by posting a comment. It wouldn't be the first time I was wrong, obviously.
Posted By Sean O'Neill on January 6, 2011, 3:28 PM
Time to boycott AA and steer my business away from it.
Posted By A Cheng on January 10, 2011, 2:12 PM
Even if AA were on Expedia, Orbitz, etc., don't use them. The website http://www.itasoftware.com gives only airfares and does not sell tickets at all. But the search engine is so good, it will give routing and fares that the airlines themselves don't even know about.
So, I use itasoftware to find my routing and prices, then book directly with the airlines.
Posted By Steve From TravelingProfessor.com on January 10, 2011, 5:13 PM
DirectConnect is simply a way for AA to control the ticket pricing process and generate more revenue - a move similar to AA's development of Sabre, its own travel reservation system. For AA, DirectConnect is a smart business decision that will squeeze the most profits as possible from customers. Unfortunately, budget travelers will lose out, but then again, AA is not in business for budget travelers.
Posted By ArkLady on January 11, 2011, 8:19 AM