American Airlines may be cutting ties with Orbitz to cut prices
Update: American Airlines pulls fares from Orbitz on 12-22-10.
In a ruling issued on Tuesday, a judge blocked Orbitz’s restraining order against American Airlines. American wants to block Orbitz from selling tickets on its airline. American claims this move will help them cut costs; consumer advocates question the results of this action.
American Airlines wants to cut out Orbitz
American Airlines first announced that they would take their listings off Orbitz on Dec. 1. An injunction to prevent American Airlines from taking that action was filed. Travelport Ltd., which is a privately-held company that owns 48 percent of Orbitz, brought this action. Though a Chicago judge turned down the motion, American Airlines has not yet pulled their listings. American claims that by cutting ties with Orbitz, they will help reduce the cost of their tickets by cutting out brokerage and commission fees.
The structure of online travel purchasing
The steps American Airlines has taken to take itself off Orbitz is an effort to cut costs. Online travel sites, such as Orbitz, Travelocity, Kayak, Expedia, and Priceline, get their booking information from “global distribution systems.” When an airline ticket is booked through an online site, the airline pays a part of that ticket price to the global distribution system as a fee, and a part of that ticket price as a commission to the travel site. This three-tiered system allows for comparison shopping, but also increases costs to the airline. Some discount airlines, such as Southwest and JetBlue, do not participate in online comparison shopping to help reduce their costs.
Consumer advocates concerned about Orbitz move
Though American Airlines has threatened to take their listings off Orbitz, they have not made the same move to other global distribution system websites. Airline industry consultants applaud American’s move to get their listings off Orbitz as a cost-cutting move. Consumer advocates, however, are worried that by taking their tickets off comparison-shopping sites, American Airlines would be able to charge higher prices for their tickets without as much competition.