Sabre tells clients of American Airlines drop, booking war is scorching

Sabre and American AirlinesOkay, we all saw this coming. The battle that was expected between airlines and online travel agencies as a result of improving market conditions has reached a high level of intensity, centered on American Airlines (with Delta playing a supporting role).

The situation is running deep, as both American and Delta have stepped back from online travel agencies (though for slightly different reasons). American Airlines is eager to push its Direct Connect system, which is what led it to pull out of Orbitz. Expedia, seeing the early stages of a trend, dropped American Airlines, likely as a defensive move to prevent a surprise later. Delta pulled out of three smaller online travel agencies – CheapOair, OneTravel and BookIt – to consolidate its distribution channel and focus on a core group of partners.

This has led to incredible amounts of uncertainty and angst in the airline and travel sectors, as the escalation has been swift and unconstrained. We’re past the early stages of the conflict between the two sectors. A month ago, Douglas Quinby, Sr. Director, Research at PhoCusWright, told me that things were just starting to percolate. Now, he explains, “[W]e saw the tip of the iceberg back in November, when American said it intended to pull its fares and schedules from Orbitz. We are now starting to see more and more of the iceberg,and it is a big one.”

Specifically, global distribution system Sabre has announced that it is terminating its relationship with American Airlines. This is ironic, of course, as the idea for Sabre was hatched on an American Airlines flight in 1953 by American’s president, C.R. Smith and IBM senior sales representative R. Blair Smith. Six years later, they made it a reality (Sabre spun off from American Airlines parent company AMR completely in 2000 following a 1996 IPO).

Quinby continues, “[W]ith Sabre’s escalation, the pressure clearly has to be building on American. What’s next is a near-term compromise that will result in an uneasy truce (with the potential for further escalation before we get there).”
But, that might take a while to reach, as you can see from Sabre’s recent message to its clients, revealed to Gadling yesterday. The company says:

Sabre has taken a set of actions to protect what you have told us is important to you – full air fare transparency and the ability to efficiently operate your business. As part of these actions, we have changed some of our availability and shopping displays to support airlines who value the transparency and efficiency of the proven system our customers use to serve travelers.

Sabre adds:

We have also initiated termination of our global distribution agreement with AA. We have provided AA notice that accelerates the termination date of our current agreement to the extent possible, culminating in early August. We are seeking a new agreement with AA that provides our customers long-term assurances of efficient comparison shopping.

AA’s stated plans regarding its “Direct Connect strategy,” backed up by its recent actions, are an attempt to impose a costly, unproven and unnecessary system that would make it harder and more costly for you to operate your business and for your customers to comparison shop based on full and transparent fare information. Based on AA’s actions, in addition to the steps noted above, we have also given notice that we are eliminating the substantial price discounts AA has enjoyed consistent with its prior long-term commitments to provide full content and support efficient comparison shopping for our agency and corporate customers.

It’s clear that the escalation is continuing, and Sabre isn’t the only player using heated language. In a statement on its website, American Airlines countered that Sabre has “taken a set of punitive actions against the airline and its customers, despite the fact that American has met all its obligations and continues to work in good faith with Sabre.” And, it has lobbed at Sabre the same “anti-competitive” accusation that the online travel agencies leveled at American. For good measure, American adds:

Sabre’s actions are discriminatory and patently inconsistent with both its contractual obligations and its professed goal of ensuring full transparency for the benefit of consumers and travel agents. In contrast, the actions only serve to protect Sabre’s market position and attempt to force airlines and travel agencies to rely exclusively on its legacy systems that only lead to higher fares and fewer choices for consumers.

In a message to members of its frequent flier program, AAdavantage, American said:

While there is much misinformation circulating on these matters, rest assured that tickets for travel on American Airlines and American Eagle – including all international and domestic classes of service – are widely available through a number of outlets, including American’s own website, AA.com, which features our Lowest Fare Guarantee. Tickets, fares and schedules are also available through American’s reservations agents, thousands of travel agencies in locations worldwide, other online travel agencies such as Priceline.com, and travel search engines such as Kayak.com. For more information, please visit AA.com.

There are rumors circulating that Priceline has signed on for American’s Direct Connect program, but nothing has been confirmed – a smart move given how volatile the disputes are getting between American and the other online travel agencies.

Of course, the actions by Sabre have led many to wonder if Amadeus, another global distribution system, is going to jump into the fray. This seems likely, Quinby told me by email: “Amadeus has a pretty small presence in the U.S. so they may sit this one out (with a good bowl of popcorn!)”.

Here’s the Sabre message in full and unedited:

Dear Sabre Customer,
This is to notify you that Sabre has taken a set of actions to protect what you have told us is important to you – full air fare transparency and the ability to efficiently operate your business. As part of these actions, we have changed some of our availability and shopping displays to support airlines who value the transparency and efficiency of the proven system our customers use to serve travelers. Specifically, we have made changes in the Sabre . system that alter the order in which some of American Airlines’ flights appear in availability and shopping displays. The display changes do not apply for points of sale in the EU or Canada due to specific regulations in those markets.
We have also initiated termination of our global distribution agreement with AA. We have provided AA notice that accelerates the termination date of our current agreement to the extent possible, culminating in early August. We are seeking a new agreement with AA that provides our customers long-term assurances of efficient comparison shopping.
AA’s stated plans regarding its “Direct Connect strategy,” backed up by its recent actions, are an attempt to impose a costly, unproven and unnecessary system that would make it harder and more costly for you to operate your business and for your customers to comparison shop based on full and transparent fare information. Based on AA’s actions, in addition to the steps noted above, we have also given notice that we are eliminating the substantial price discounts AA has enjoyed consistent with its prior long-term commitments to provide full content and support efficient comparison shopping for our agency and corporate customers.
We understand that some customers may have concerns regarding the potential impact of these actions on their operations. I want to assure you we decided to take these actions only after very careful consideration of the negative impacts AA’s plans would have on your business and ours. We have a track record of acting in the best business interests of our customers and doing what is necessary to grow the value of the proven and successful system that enables travel agents, corporate travelers and consumers to efficiently and cost-effectively comparison shop.
Sabre is taking these actions as part of our efforts to obtain a new agreement with AA that provides long-term assurances to our customers who prefer to continue using a proven system that provides significant value to both suppliers and buyers of travel. We are committed to delivering this value to our customers for the long term, and we will take the necessary steps to accomplish that objective.
Sincerely,
Chris Kroeger
Senior Vice President, Marketing
Sabre Travel Network

And here’s the message to AAdvantage members, in full and unedited:

Dear Thomas Johansmeyer,

As a valued AAdvantage member, we want to clarify what you may be reading in the press. As a result of a commercial dispute, over the past several weeks there have been changes to how we sell our tickets. American Airlines last month removed its fares and schedules from Orbitz.com, and effective January 1 Expedia.com stopped offering American Airlines fares on its website. Additionally Sabre, a company that distributes airline fares and schedules, made it more difficult for travel agents to find and select American’s flights by moving our fares lower in the display order than they normally would be listed.

While there is much misinformation circulating on these matters, rest assured that tickets for travel on American Airlines and American Eagle – including all international and domestic classes of service – are widely available through a number of outlets, including American’s own website, AA.com, which features our Lowest Fare Guarantee. Tickets, fares and schedules are also available through American’s reservations agents, thousands of travel agencies in locations worldwide, other online travel agencies such as Priceline.com, and travel search engines such as Kayak.com. For more information, please visit AA.com.

We are committed to working with all distribution channels, including traditional travel agencies, online travel agencies and global distribution systems. We will keep you informed of important updates on these developments.

Thank you for giving us the opportunity to address this matter. We appreciate your business very much and look forward to welcoming you aboard soon.

Sincerely,

Maya Leibman
President
AAdvantage® Loyalty Program