Is this all just posturing in negotiations between United and Expedia? It certainly could be but filing a lawsuit about it while a contract is in place takes things to a new level.
Expedia alleged United Airlines threatened as part of renegotiating its ticketing agreement to remove its access to customers’ flights on United for travel starting Oct. 1.
United could remove Expedia’s access to United’s flights for travel after September beginning on Monday, Feb. 11, according to an Expedia lawsuit.
Expedia filed a complaint against United under seal Monday in the Southern District of New York, and it alleged that United’s threat is a brazen attempt to force a renegotiation of the economic terms of the United-Expedia agreement.
Expedia distributed a redacted version of the complaint to the news media.
Expedia said its customers have already booked 2,000 seats on United flights slated to depart after Sept. 30, and that United’s action, if carried out, would harm Expedia’s ability to service its customers in the event of flight changes and cancellations, and would add lots of expense and hassle to consumers.
In a statement, United confirmed its fares soon may not be available on Expedia. It did not, however, explain the nature of the contract dispute.
“For months, Expedia has refused to engage in constructive discussions with United about a new contract and United currently expects that our fares will not be listed on Expedia sites in the U.S. and Canada effective Oct. 1, 2019,” United said.
“Out of concern for the growing number of customers at risk, we sent Expedia a letter last week, months in advance of the expiration date, formally notifying Expedia that United intends to prohibit Expedia from booking tickets for travel October 1 and beyond,” United added.
Expedia responded with a lawsuit in federal court. As one of the four largest airlines in the United States, United is trying to exert its power to force Expedia to renegotiate their agreement, Expedia alleged. Expedia said United has 15 percent market share of U.S. domestic air travel, and more than that in key markets such as Newark (more than a 50 percent market share), San Francisco (more than 41 percent), Houston (more than 37 percent), and Denver (more than 30 percent).
“While United may ultimately choose to enter into a new commercial agreement with Expedia when the term of the current Agreement ends, it has no right to breach the existing Agreement and to unilaterally inflict harm on Expedia and its customers as a negotiating tactic,” the Expedia complaint said.
Expedia’s airline contracts generally run two to three years. Expedia claims that United has not provided it with any written notice of any breach of their contract.
Expedia is asking the court to enjoin United from interfering with the online travel agency’s ability to service its customers buying United tickets for travel starting October 1, and it is asking for damages “in an amount to be proven at trial.”
In its statement, United said Expedia should be more focused on serving its customers and less on trying to make money off selling United’s fares.
“In their filing, Expedia doesn’t explain how they’ll protect customers from this potential service disruption, but the documents describe in great detail how Expedia views its contractual relationship with United as essential to their business model,” United said. “It reveals that Expedia’s lawsuit is more about their ability to make money off their customers than it is to serve them.”
Generally speaking, United said it has no issues with online travel agencies and meta search sites like Kayak. In its statement it said, “more than 70 million United tickets were purchased last year through meta search sites, OTAs and travel agencies.”
What’s the Conflict About?
It is difficult from the redacted complaint to decipher the precise cause of the underlying conflict between the two parties. But it appears to hinge around Expedia’s access to publicly available fares after their agreement would expire.
“Over the course of United and Expedia’s more than seven-year relationship under the agreement — during which times the agreed-to end date twice approached and twice passed — United provided Expedia with tens of thousands of publicly available fares for flights dated after the Agreement’s then-current end date. And, Expedia’s customers have booked, at minimum, thousands of such flights.”
The Expedia complaint against United said that “in early 2017, United began to express dissatisfaction with the economic terms of the Agreement.” The reasons are redacted in the complaint. In August 2018, United again pushed Expedia to rework the economic terms of their contract and “raised the specter of United interfering with Expedia’s ability to” service its customers, the complaint said.
Expedia pushed instead for a comprehensive negotiation of their agreement, the company said.
The United-Expedia ticketing agreement went into effect seven years ago, and it was reaffirmed in negotiations in 2013 and 2016, Expedia said in the lawsuit.
Expedia alleges that United’s threatened disruption, which Expedia views as a contract breach, devalues the value of the Expedia loyalty program, which counts more than 60 million members, because customers wouldn’t be able to redeem United flights through the program.
What Does it All Mean?
Airlines and hotels have done battle with Expedia and other online travel agencies over contract negotiations. In some of the more renowned instances, InterContinental Hotels Group removed its hotels from Expedia for several years, returning in late 2007.
Similarly, American Airlines went dark on Orbitz Worldwide sites for around six months from December 2010 to June 2011. During this period, some estimates said Orbitz lost about 5 percent of its business.
Airline contracts are extremely important to sites such as Expedia and Priceline, for example. As Expedia pointed out in its complaint, travelers generally begin their trip-planning by selecting flights, and airlines frequently dominate certain markets, such as Newark, New Jersey, where United has more than 50 percent market share.
In that respect, airline negotiations may be even more important than hotel negotiations. Expedia, for example, is believed to be still negotiating its contract with Marriott. But while travelers might be able to choose from abundant hotel options on Expedia if Marriott dropped out, a consumer flying from Newark would have more limited options if United removed its flights from Expedia.
One view about the current United-Expedia tiff is that this is typical posturing that occurs during negotiations and that the parties will eventually come to terms. That would seem to be a reasonable perspective. On the other hand, American Airlines did indeed withdraw from Orbitz Worldwide for several years.
The next milestone will be Monday, and we’ll see if United indeed pulls the plug on Expedia.
This story was updated Tuesday afternoon with comment from United.
Senior Aviation Business Editor Brian Sumers contributed to this story.
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Photo credit: United and American Airlines jets are pictured at Los Angeles International Airport in this photo from 2017. United is threatening to remove some of its flights from Expedia. Tomás Del Coro / Flickr