AMR action leaves industry in limbo

With a major airline locked in a stalemate with travel companies over how tickets should be distributed, it was not immediately apparent whether it would help or hurt Norwalk-based Priceline.com Inc. and Kayak Software Corp.

Late last year, American Airlines parent AMR Corp. suspended ticket distribution on the Orbitz website, arguing the latter company was taking too large a bounty for tickets sold. Following AMR”™s action, Expedia Inc. stopped selling American Airlines tickets on its own website.

The immediate question becomes whether other airlines will join Fort Worth, Texas-based AMR ”“ in a conference call with investment analysts, AMR CEO Gerard Arpey said airlines are prevented from colluding on how they do business with global distribution systems (GDS) like Amadeus, Sabre and Travelport L.P.”™s Galileo and Worldspan systems; and online travel agencies (OTA) like Priceline.com, Expedia and Orbitz, the latter also controlled by Parsippany, N.J.-based Travelport.

“Despite the fact we have some disputes going on today, we have some very good partnerships with GDS and OTAs and of course travel agencies across the world,” Arpey said. “We want to work constructively with everyone with our ubiquitous approach to distributing our product so that I think in the end, we can have potentially a good result for everyone.”

Many of those companies do not see a good outcome, and banded together in January to form Open Allies for Airfare Transparency.

“When you can”™t see the full price of tickets or compare them among airlines, you lose the greatest benefit of our modern travel system and the benefits of price competition among the airlines,” said Andrew Weinstein, director of the Open Allies coalition, in a prepared statement. “Some airlines want to turn back the clock to the days of proprietary reservation systems, silos of closed data and one-off displays without price comparisons.  Consumers deserve the ability to compare prices across airlines, and Open Allies will work to ensure they continue to have it.”

American Airlines tickets remain available on Priceline.com and Kayak.com after the companies agreed to use the airline”™s “direct connects” system, potentially providing a boost for their traffic prospects as AMR tussles with the other companies ”“ but also potentially adding costs to their bottom line.

Between October and mid-February, Priceline shares were up more than a third to $455 a share at deadline; the company was slated to discuss its yearend results on Feb. 23 after deadline, presumably to include an update on any impact the dispute is having on its results.

“We have, we believe, very good relationships with the airlines and we certainly have the ability to do innovating things in our connections with the airlines,” said Priceline.com CEO Jeff Boyd, in a November conference call. “I think we provide to the airlines the lowest cost distribution that they have out there, and I don”™t believe that operating expenses required to continue to connect with them in ways that are acceptable to the airlines is going to have any significant impact on our (capital expenditures), or anything of that nature.”

Still, about nine in 10 travel industry managers expect an increase in travel costs if the airline industry moves to a “direct connect” model that bypasses the existing travel distribution system, according to a January survey published by the Global Business Travel Association, until recently known as the National Business Travel Association.

That in turn would have a negative impact on business travel, according to 72 percent of those polled by the association.

“Business travel buyers have spoken and they overwhelmingly indicate that the ”˜direct connect”™ approach for airfare distribution is a pricey strategy that will result in higher costs for companies and negatively impact the business travel industry as a whole,” said Mike McCormick, executive director of the Global Business Travel Association, in a prepared statement.