American Airlines and Sabre settle dispute after wild disclosures in court

After less than a week of airing their battles out in the open in a Texas state court, Sabre American Airlines said today that they settled their court and contract disputes and renewed their global distribution services agreements for multiple years.

Under the agreement, Sabre makes a monetary payment to American, the airline continues to pursue its direct-connect initiative (which some argue would bypass Sabre and other GDSs), and the two parties agreed that “American has also agreed to negotiate with Sabre for additional technology services in the future.”

Terms of the settlement and distribution agreements are subject to approval of the bankruptcy court handing the AMR Corp. restructuring proceedings.

The settement could end multiple court proceedings involving Sabre and American, and could also impact litigation involving American, Travelport and Orbitz.

American and Sabre had faced off in court beginning October 24 in a long-anticipated trial in Texas state court involving allegations that Sabre violated Texas antitrust statutes when it biased the airline’s flights in its GDS, and Sabre alleged that the airline violated their agreements by marketing a direct-connect solution.

Over the last few days, as reported by Law360 [subscription], there was testimony from American that a “high-level, top-secret team of Sabre Inc. executives … plotted to disrupt American’s business model and prevent it from competing for the most valuable customers.”

The efforts began as early as 2006, according to testimony. The Sabre effort, dubbed Project 99, was headed by Nadja Killisly, who now heads EMEA marketing for Sabre.

Killisly testified “one of her goals for the team was to ‘war-game’ American’s business plan and come up with a counter-strategy that would keep Sabre competitive in the market,” Law360 reported.

Sabre and Travelport have been fighting vehemently against American Airlines’ direct-connect initiative, which reduce their fees and role in the distribution chain. With direct-connect, in theory, at least, American Airlines would gain further control of its own customers and be able to offer them personalized services based on their profiles.

Today, American Airlines does this sort of thing with frequent flyers who are booking with the airline through its own channels, but the airline is hampered in doing so when the bookings are handled by GDS-using travel agents.

It’s unknown exactly how the settlement came to be behind the scenes, but these kinds of public revelations may have persuaded Sabre that bringing the dispute to a halt was in its best interests.

Further terms of the settlement are expected to be announced at a later date.

What’s clear for now is that travel agencies will continue to get access to American Airlines’ flights in an unbiased manner for the next several years without disruption — barring further flareups.

The settlement means that Sabre is dropped as a party to a federal antitrust lawsuit involving American, Travelport and Orbitz.

US Airways also is suing Sabre on antitrust grounds.