Over the past few months, tension between online travel agencies and their featured airlines has been steadily rising. Despite the large volume of business that online travel agencies have generated for airlines in the past few years, certain airlines have recently started disputes with the agencies due to the extra fees associated with their global distribution systems.
Global distribution systems (GDS) are worldwide computerized reservation networks used by online agencies to reserve a variety of travel means and amenities, such as airline seats, hotel rooms, or rental cars. These networks compile information from numerous information and then aggregate it on websites such as Expedia, Orbitz, and Priceline.
The end result is one of greater consumer convenience, as they are able to compare and contrast prices on a single webpage instead of having to pull prices from various different websites.
While the one-stop-shopping created by these global distribution systems provides a clear benefit for consumers, airlines recently have begun to express grievances with the extra fees required to use the distribution systems. The fees had always been an area of dispute, but no real conflict had ever arisen from them until American Airlines decided to remove its flight listings from all online travel agencies.
In December 2010, American Airlines, an industry leader, announced its intention to remove its flight listings from all online travel agencies by mid-year 2011. This announcement was American’s first bold step towards trying to steer more reservations to be booked through its direct connect reservation system.
American claims that its direct connect system will help provide passengers with a more personalized flying experience by offering benefits to travelers based on their history of preferences (e.g. more leg room or lower fees for checking baggage). However, there are clear financial motives for the switch to direct connect – namely the opportunity to avoid global distribution fees.
The announcement by American induced an ugly lawsuit between the airline and Travelport, a leading global distribution systems provider. As a result of the lawsuit, Travelport hopes to regain lost booking fee revenues, as well as other damages that American has allegedly inflicted on Travelport’s business operations.
Travelport is not the only company to lash out against American’s rebellious actions. After American pulled all of its flight listings from Orbitz.com in December, Expedia countered by adjusting its global distribution in such a way that made American Airlines flights extremely difficult to find on their website. After only about a week, Expedia dropped American’s listings from its databases altogether.
As the battle between airlines and online agencies continues, travel agents are steadily becoming more alarmed in regard to the future prospects of their business. Airlines had been expressing their discontent with paying third party fees for several years, but before 2010 no company had been bold enough to make a move like the one made by AA. Should more companies follow in American’s footsteps, the future of online travel agencies could be very bleak.
The most alarming aspect of the current American Airlines dispute is the future consequences that will be absorbed by consumers.
Though American claims that its direct connect system has been organized and implemented with the best interest of the consumer in mind, in reality it seems to just be a way of generating higher profits and reducing transparency for potential customers. Online travel agencies provide consumers with convenience, an essential aspect of their shopping experience.
The airlines’ separation from these agencies would just make it more difficult for consumers to compare prices and choose the best deal. If big airlines begin to mimic American’s course of action, consumers will certainly suffer along with online travel agencies.