Judge blocks Sabre, gives American Airlines a break

American AirlinesI guess it would make sense for American Airlines to turn to litigation. After all, this approach worked well against Orbitz.

Here’s the situation: the battle between airlines and online travel agencies escalated from the beginning of November – with American’s announcement that it would pull out of Orbitz – through the new year. The latest move was by global distribution system Sabre, which has made it more difficult for American’s fares to be found. Along the way, Expedia dropped American in a defensive move, and Delta pulled out of three smaller booking sites: CheapOair, OneTravel and BookIt.

The decision by Sabre to “demote” American Airlines had obvious business implications for the carrier, which is likely why it sought relief in the courts. As a result of a hearing held yesterday, Sabre has been blocked from limiting the visibility of American Airline flights, but there’s clearly more to come.

In addition to making it more difficult for customers to find American’s flights, Sabre also increased the fees it charges American, which would lead to an annual cost of $157 million for the airline.

Sabre maintains that it was within its contractual rights, according to an Associated Press report, while American believes the move was anti-competitive.

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

Which BIG airline just pulled out of three booking sites?

american airlines orbitzAs you’ve read here on Gadling, the battle between airlines and online travel agencies is poised to heat up. For the past few years, a dismal economy has sent many bargain-hunters to online travel sites with the hopes of finding fantastic deals and minimizing the pain in their wallets. Yet, with the travel market and the broader economy showing signs of recovery, airlines‘ brand power will gain momentum, and customers with more cash at their disposal will favor convenience and recognition over saving a couple of dollars. A battle for your money and your loyalty is brewing.

And, it’s just intensified.

Last month, American Airlines and Orbitz tangled over fees and the booking process, with the airline threatening to yank its inventory from the travel site, a threat on which it made good. After a temporary restraining order was issued, a judge ruled yesterday that American could pull its inventory from the online travel agency and ordered Orbitz to stop selling American Airlines tickets and displaying its fares.

Now, Delta‘s getting in on the action.

The airline has yanked its inventory from a handful of smaller online travel agencies, Aviation Week reports, including CheapOair, OneTravel and Bookit as of last Friday. So, if you’re hunting for cheap tickets on these sites, you won’t run into Delta any more. Aviation Week observes that it appears to be “part of a partial shift in its distribution strategy,” and notes that it seems different from American’s move with Orbitz.For Delta, the decision looks like it’s part of an effort to consolidate around larger online travel agencies, while American is targeting agencies directly, rather than using an intermediary to reach another intermediary.

While the means may be different, the objective appears to be the same. With a shift in the economy, airlines have a bolstered position in the marketplace, and this is likely to give them a bit more weight in dealing with online travel agencies and in reaching consumers directly. For American, it seems like a play to reduce costs and increase efficiency – as it is for Delta (though through different means). Ultimately, however, Delta wants more direct action from consumers, which reduces its sales costs and increases profits, which is what differentiates its decision from that of American.

According to a statement by Delta in Aviation Week, “Delta is being more selective in our use of online travel sites in the future as we continually work to improve our online distribution strategy.” The company adds, “We continue to make significant investments in delta.com to make it an industry-leading travel site, and we believe that delta.com will become the preferred online site to book travel on Delta.”

A representative from CheapOair was not available for comment.

I asked Douglas Quinby, Sr. Director, Research, at travel industry research firm PhoCusWright, his thoughts on Delta’s decision, and his reply was pretty striaghtforward: “The only surprising thing about this move is that it has taken this long.” He explained, “U.S. airlines have impressively restrained their appetite for growth (i.e. capacity) on the back of a (more or less) recovering economy. With clear control of their inventory, airlines have already started rationalizing distribution, and the weakest links are first to get snipped. American may have jumped the gun a bit with Orbitz, but believe me – we ain’t see nothin’ yet!”

So, what’s the net effect of all this? Do the actions of Delta and American suggest that we’ll be paying higher fares in the future because of behavior that doesn’t benefit the consumer? My bet is that the average fare buyer won’t see a whole lot of difference, especially given the share of sales already owned by the airlines via their own websites. The infrequent leisure traveler, especially, is losing an alternative … though it’s one that won’t be as important in a recovering economy.

[photo by boeingdreamscape]

Hotels in the U.S. Virgin Islands offer 25 cent nightly rate

The U.S. Virgin Islands are going to be featured on a newly designed quarter and to celebrate, hotels around the islands are offering up rooms at 25 cents – yes, just 25 cents! – per night.

Of course, there is some fine print to the offer. Guests will still be responsible for taxes of 7%, resort fees, and government taxes of 8%, so the total ends up being a litte more than the 75 cents you might immediately assume when learning of the offer (packages I checked totaled around $100 in taxes and fees). Nine different hotels are participating in the promotion, including the Bolongo Bay Beach Resort and the Wyndham Sugar Bay Resort and Spa.

The offer is valid for travel now through December 15, though each resort may have its own blackout dates. There is a three night limit for the 25 cent rate and air-inclusive packages must be booked through the BookIt website. Guests who book the package do get a few perks – they’ll receive a $25 activities credit, $25 dining credit and a commemorative quarter.

The other caveat: you’ve got to act fast. There are a limited number of rooms available and you must book by November 2.

[via Budget Travel]

Sunny discounts on Caribbean travel

How’s this for perfect timing? It’s a great time of year to go to the Caribbean (mild weather and no hurricanes). And travel discounts there are popping up left and right–from vacation packages to cruises.

If you’re interested in a Sandals Resort vacation, you have a few ways to save. Either book directly through Sandals for their Three Free Nights promotion, plus up to 60% off (through March 31st). Or book through Orbitz and get 50% off your stay (through March 15th).

Save 50-70% off vacations at CheapCaribbean.com (through March 15th). The Today Show even mentioned one the other day: a vacation package at Punta Cana, Dominican Republic that’s $67 per person, per night (instead of $277).

Save on vacation packages through Bookit.com’s Half-Price Caribbean & Mexico Sale (through March 17th).

Or take a discounted cruise through CheapTickets’ Spring Cruise Clearance Event (through April 1st).