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American Airlines Group went public with its inability to come to terms on a contract with Orbitz Worldwide, and removed its flights from the company’s consumer sites, including Orbitz, CheapTickets and ebookers.
American Airlines Group and Orbitz Worldwide have been working together without a formal contract for an extended period after American Airlines removed its flights from Orbitz Worldwide consumer sites for six months starting in late December 2010.
The difference this time around is that US Airways is now part of the merger-created American Airlines Group, and US Airways flights will join American’s flights and go missing on Orbitz Worldwide consumer sites starting September 1, the American Airlines Group stated.
Josh Freed, an American Airlines Group spokesperson, says the contract dispute with Orbitz Worldwide is purely over economic issues as the airlines need to be competitive with the full spectrum of legacy airlines and low cost carriers.
Unlike in the 2010-2011 dispute, the issue of American Airlines trying to prod Orbitz Worldwide into getting American’s flights and fares directly from the airlines is not an issue, Freed said.
The dispute is somewhat surprising, too, in that Travelport no longer controls Orbitz Worldwide, and the online travel company was thought to have won increased flexibility in its airline and other contract relationships.
“We have worked tirelessly with Orbitz to reach a deal with the economics that allow us to keep costs low and compete with low-cost carriers,” said Scott Kirby, American Airlines president. “While our fares are no longer on Orbitz, there are a multitude of other options available for our customers, including brick and mortar agencies, online travel agencies, and our own websites.”
The dispute does not impact the ability of Orbitz for Business’ corporate clients to access American or US Airways flights.
“American Airlines has notified Orbitz Worldwide that as of today, its flights will not be available on Orbitz sites,” Orbitz Worldwide stated. “Our sites offer hundreds of airlines which are eager to capture the revenue American is choosing to forego and we will continue to show our customers a broad range of flight options to thousands of destinations in the U.S. and worldwide. Orbitz for Business is not impacted.”
Henry Harteveldt of Atmosphere Research Group argues that American Airlines Group has taken this action against Orbitz Worldwide because it is a poor performer.
“As it has in the past, distribution boils down to economics,” Harteveldt says. “Revenue quality and volume must be suitably ahead of the costs associated with using a third-party.”
“Other airlines have, in the past 24 hours, also described Orbitz as among their poorer-performing OTAs,” Harteveldt adds. “With its decision to drop Orbitz from its distribution mix, American stamped ‘irrelevant’ on Orbitz’s home page.”
Harteveldt likens the American Airlines Group action to Delta’s moves over the past few years to trim distribution partners.
And, Harteveldt points out that two other U.S.-based online travel agencies, are selling American Airlines’ ancillary services in a manner that aligns with the airlines’ strategy.
“Priceline is using AA’s ‘direct connect’ technology for at least some of the reservations booked on that site,” Harteveldt says. “Plus, by dropping Orbitz, AA will only shift more users to Expedia and Priceline — making them more powerful.”
“AA also recently began to sell on Fareportal’s sites, which include CheapoAir.com. Fareportal uses Farelogix [to connect directly to American] and is retailing AA’s ancillaries, along with those from Air Canada, US Airways, and Spirit.”
Orbitz Worldwide took a substantial financial hit in 2011 when American Airlines removed its flights, and the impact could be even more substantial this time around if the contract impasse is protracted because US Airways flights are involved, as well.
By the early afternoon August 26, shares of Orbitz Worldwide were down 7.47% to $7.72 for the day.
Expedia Inc. chimed in about the dispute between American Airlines Group and Orbtiz Worldwide, noting: ““American Airlines and US Airways fares continue to be available on Expedia sites.”