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Judge sides with American Airlines in Orbitz pullout [BREAKING]
American announced last month that it would be withdrawing its inventory from Orbitz as early as December 1, 2010 in a bid to streamline its booking operations and trim some cost. This is a clear outcome of the change in economic conditions, as airlines have gained more negotiating power relative to online travel agencies as a result of the slow recovery. Customers with more disposable income don't have to hunt as hard for bargains, putting the booking sites at a disadvantage heading into 2011.
While the outcome unfavorably impacts Orbitz customers and Orbitz For Business corporate clients, by reducing fare searching, booking and servicing efficiencies, travel professionals the world over have recognized that this lawsuit represents merely the opening skirmish in the larger battle for the future of the open marketplace for travel.
Business Travel Coalition Chairman Kevin Mitchell explains, "The stakes in this conflict are clear: either an improved airline industry and distribution marketplace centered around the consumer, or one that subordinates consumer interests to the self-serving motivations of individual airlines endeavoring to impose their wills on consumers and the other participants in the travel industry." He adds "Single-supplier direct connect proposals, like the one advanced by American Airlines, can cause massive fragmentation of airfares and ancillary fees depriving consumers of the ability to compare the total cost of air travel options across all airlines."
Unsurprisingly, the business travel community isn't thrilled with American's move to pull out of Orbitz. In a recent survey, the Business Travel Coalition found that 94 percent of travel managers say that "access to all airfare and ancillary fee information is either indispensably important or very important for their corporate managed travel programs." And, 98 percent oppose the American Airlines strategy of disintermediation via the Direct Connect initiative.
The consumer side of the travel world is also less than thrilled with this legal development.
The Consumer Travel Alliance released a statement opposing American's decision, as well. Charlie Leocha, the organization's director, said, "At its core, this dispute has nothing to do with business agreements, legal arguments, or distribution technologies. This is simply a heavy-handed attempt by American Airlines to prevent consumers from easily searching and comparing its fares against those of other airlines. In short, the only 'direct connect' American really seems to want is a 'direct connect' to consumers' wallets."
Ratcheting up the intensity, he continued, "American appears to have no idea why we fly. We fly to get from point A to point B in the most convenient and cost-effective manner possible. We don't fly to be manipulated by proprietary airline reservation systems that limit our choices, prevent comparison shopping, and hide the real cost of travel."
Keep in mind that these reactions are to the American Airlines strategy and not to the legal decision.
So, what does this mean for you? Well, if you don't fly American or use Orbitz, your world doesn't change at all. If you do use Orbitz, it looks like you won't have access to flights on American Airlines. American Airlines loses access to the Orbitz customer base, which likely consists heavily of bargain-hunters and occasional leisure travelers ... not the stuff on which you build a business, frankly. With consumers becoming more comfortable spending again – not to mention the loosening of corporate travel budgets, which is arguably more impactful – airlines are back in the driver's seat. If you buy because of brand loyalty to American, your world won't change – likewise Orbitz.
UPDATE: Click here to see what Orbitz has to say about the ruling.
[photo by boeingdreamscape via Flickr]