6:14 PM EDT, August 26, 2014
American Airlines said Tuesday it has withdrawn its fares and schedules from Orbitz-owned websites, including flagship Orbitz.com, because the airline could not come to an agreement with the Chicago-based online travel agency on a new contract.
The fares of its merger partner US Airways will disappear Sept. 1, American Airlines said.
The dispute sets up a standoff between the travel industry giants, and comes at a time when airlines’ upgraded websites are becoming more popular with consumers. By next year, about two-thirds of all non-corporate travel bookings will be conducted through airline websites, with the remaining one-third handled by online travel agencies, according to PhoCusWright, a market research firm.
Together, American and US Airways account for a quarter of the U.S. travel market. Orbitz, meanwhile, is the second-largest online travel agency for domestic air-travel bookings, behind Expedia.
“Airlines say publicly that they are happy to work with (online travel agencies), but of course they are constantly evaluating the costs and benefits of working with each of (them),” said Maggie Rauch, research analyst for PhoCusWright. “It has a huge effect on the completeness of Orbitz's content.’’
Shares in Orbitz Worldwide slipped on the news, falling 4.6 percent Tuesday to close at $8.04.
In a statement, American Airlines President Scott Kirby said the carrier sought a deal “with the economics that allow us to keep costs low and compete with low-cost carriers.’’ Some low-cost carriers - and notably Southwest Airlines - don't sell tickets through online travel agencies to keep costs down.
American has no immediate plans to resume negotiations, a spokesman said.
Tickets already purchased through Orbitz websites remain valid for travel, but changes to reservations must be made through each airline’s reservations department, the airline said. In the U.S., Orbitz operates retail travel agency sites Orbitz.com and CheapTickets.com.
Orbitz downplayed the significance of the news.
“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 said in a statement.
Orbitz also provides a travel service for corporate clients that is not available to the public. American fares will still be available on that service.
The dispute is likely about more than commissions American Airlines pays to Orbitz for bookings, said Henry Harteveldt, industry analyst with Hudson Crossing. It’s also about how much business Orbitz is delivering to American and the technology Orbitz can offer the airline to sell extras, such as extra-legroom seats, he said.
“So this isn’t just about compensation,” he said. “This is fairly serious stuff.”
While it’s an “enormous” development for Orbitz, he said, it does not necessarily portend more industry strife.
“This is not a harbinger of other disputes that are likely to occur,” Harteveldt said. “It’s a very singular issue, strictly between Orbitz and American.”
Customers can still buy tickets for flights on American and US Airways, which merged in December but haven’t combined operations yet, through the airlines’ websites and travel agencies besides Orbitz. American has agreements with other online travel agencies, including Orbitz competitors Expedia and Travelocity. American in June reached its first post-merger agreement with an online travel agency when it signed a deal with Fareportal, operator of CheapOair and OneTravel.
This is not the first time the companies have clashed over a contract. American pulled its fares from Orbitz in late 2010 over a dispute with the online travel agency and its corporate parent at the time, Travelport, which now is in the process of divesting its stake in Orbitz. Then in June 2011, an Illinois court ordered American Airlines to publish its fares and flight schedule on Orbitz. American spokesman Casey Norton said the that dispute is unrelated to the current one.
American Airlines was among the major airlines that launched Orbitz in 2001.
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