Tuesday, January 11, 2011

Cat Fight in the Air Travel Industry

A real cat fight has broken out in the air travel industry that may affect you in the future. The internet has been a boon for air travelers because it gives prospective passengers the ability to quickly comparison shop for fares and service between carriers. American Airlines wants to end all this nonsense.

American wants to drive consumers to its own website and not list on third-party sites like Expedia or Travelocity. Part of its motivation is cost control. It's tough to make a buck in the airline industry and they have to pay the third-party sites a commission for every booking. Part of it, though, I believe is a long term strategy to make it more difficult for consumers to easily shop flights and as a consequence get stuck with fares higher than they might have otherwise.

Using a theory of divide-and-conquer, American singled out Orbitz as its first victim and told the site it would no longer sell its tickets through Orbitz unless the company obtained its fare information directly from American and not from data providers that showed the fare and flight information for all carriers in a market. Orbitz refused and the fight was on. Expedia quickly realized what was at stake and went to Orbitz' aid by de-emphasizing American's flights on its site. Most recently, Sabre (ironically originally owned by American) has jumped into the fray and quit showing American flights on its listings.

American is free to run its business as it wishes, but the rest of us also have a right to respond when we see anti-competitive behavior that will lead to higher ticket prices if American is successful. Think about it and the next time you are booking a ticket, vote with your credit card.

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