In the first public indication that American Airlines means to enforce its direct-connect strategy, the carrier told Orbitz it would end its participation in Orbitz’ websites, including Orbitz for Business, on Dec. 1. Orbitz chief executive Barney Harford characterized the move as “the first salvo” fired in the carrier’s “broad attack on the distribution landscape.”
American plans to connect directly with large travel distributors such as online travel agencies and major travel management companies. It would connect with smaller agencies and other distributors via third parties, such as Farelogix. Ultimately, American has said, it will sever its Edifact connections with GDSs. It would, however, offer its XML direct connection to GDSs.
American also has said it will distribute its growing collection of ancillary products only via its direct connection. Under current conditions, that is the only way that it can marry its proprietary customer data to its ancillary products in order to create highly customized offerings, it says.
The strategy has caused a stir in the travel distribution community. Travel management companies see it as further fragmentation of the marketplace that will create inefficiencies. They fear that if several airlines adopt similar strategies, their ability to truly manage corporate travel will be diminished. That scenario also would cut sharply into the productivity incentives that GDSs pay travel agencies. The incentives have become an important source of income since the airlines eliminated base commissions.
Harford called American’s strategy “an attempt to limit travelers’ choices at a time when they can least afford it. The current GDS model is pro-competitive,” he said. “It enhances competition between airlines and creates transparency. The actions of American are ultimately designed to restrict consumer choice,” he said. “They are fragmenting access to full content.”
Harford said Orbitz believes the GDSs “have an important role to play in the travel distribution landscape to ensure full and fair access for travel agency customers.”
Ironically, American was a founder of Orbitz and was the first to use its Supplier Link technology, a direct connection to airline reservations systems. Cory Garner, American’s director of distribution strategy, said Supplier Link was based on the same legacy technology as the GDSs, and it is time to “unleash the power” of modern Internet-based technologies.
Travelport, which has a significant stake in Orbitz, issued a statement saying it is “ready, willing and able to work with AA to deliver the customization AA is talking about.”
New products such as Travelport Universal Desktop and Travelport Universal API “demonstrate our commitment to invest in new technology that solves for individual customization and aggregation of new content not historically available within the GDS, while creating an efficient desktop for travel agents that also allows suppliers to customize and differentiate their content.”
Travelport said it would be happy to work with American on the delivery of such products, but “AA apparently intends to limit all GDS agencies’ access to full content such as low fares and ancillary services based solely upon AA’s own criteria,” it said. “Travelport will not support discrimination against its agency customers.”
In response, Garner said, “I do believe Travelport is capable of delivering the products. Technology is not the issue here.” Noting that Southwest Airlines, now the largest U.S. domestic carrier, is among the first carriers to announce plans to connect with distributors via Travelport’s Universal API, Garner said, “American is looking at an evolving world.”
Orbitz and American are still talking in an attempt to resolve their dispute. Meanwhile, Travelocity said it had not received a similar notice from American. Expedia did not respond to requests regarding its relationship with the carrier.
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