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Tuesday, January 4, 2011

American Airlines Wins Favorable Ruling in Fight with Orbitz

Last week, Judge Martin Agran of the Cook County Circuit Court issued a ruling in Travelport, LP v. American Airlines, Inc. Case No. 10 CH 48028.  Unfortunately, I have been unable to find the opinion on the web, so I am relying on other reports that I have found on the web.  As reported in The Mercury here, American threatened to pull its flights from Orbitz's site on December 1st as a result of a dispute over American's attempts to provide information about its flights directly to Orbitz and thus to cut out middlemen known as global distribution systems which track the airlines and provide the information to travel sites such as Orbitz.  While Travelport, which owns 48% of Orbitz was initially granted an injunction forcing American to continue posting its flights on the travel site, Judge Agran now has ruled that no injunction is necessary, as American can simply pay damages if it is found to have breached its contract with Orbitz.

American Airlines Apparently, under the current system, airlines such as American have to pay a fee to Orbitz when its customers book a flight with the airlines and also to the global distribution systems, which make flight information available.  As anyone who has paid to check a bag, or to have legroom or to have a snack or a drink on an American Airlines flight known, American prefers to charge money rather than spend it.  So it is now proposing to provide its own flight information and have Orbitz pay for access to that information.  Travel industry experts claim that cutting out the middlemen will make it harder for consumers to comparison shop and will create confusion.  

I checked on December 30th, and Orbitz does not seem to be offering flights on American Airlines right now. The short-term effect of Judge Agran's decision will thus make matters a bit more difficult for consumers.  The website Travelpulse.com reports that the Business Travel Coalition is unhappy with the ruling for that reason.  eTurboNews provides a quotation from BTC Chairman Kevin Mitchell here:

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.  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.

The same article provides survey results indicating business travel managers' hostility to American's new strategy.  It appears that American is trying to learn from its more efficient rival, Southwest, which already has its own information distribution system.  

For reasons unexplored in the articles I found, American's flights are listed on Expedia.  In order to book with Southwest, you have to go to their website,  And that may be the future for American as well.

[JT]

Update: The New York Times, frustrated at having been scooped once again by this blog, has now published a full report with more information.  Among other things, the report notes that American has taken down its flights from Expedia.com as well now.  It looks as though Delta might follow American's lead.  The Times report is also the clearest I have thus far found about what is motivating this move, beyond the general observation that the big airlines are looking for ways to cut costs and increase revenues.

http://lawprofessors.typepad.com/contractsprof_blog/2010/12/american-airlines-wins-favorable-ruling-in-fight-with-orbitz-1.html

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