The parent of American Airlines said Wednesday that disputes with the two largest U.S. online travel agencies hadn't dented ticket sales over the past week, though critics said extra incentives may have softened the blow.
AMR Corp. (AMR) said passengers had shifted from booking through Expedia Inc. (EXP) and Orbitz Worldwide Inc. (OWW) to its own website and external sellers such as Priceline.com Inc. (PCLN) and Kayak. The third-largest U.S. airline is at the forefront of broader industry efforts to reduce the cost of ticket sales and distribution with a high-profile strategy that has brought it into confrontation with parts of the travel agent sector as well as the online sellers.
American said year-on-year sales growth since it pulled fares and schedules from the U.S. units of Orbitz on Dec. 21 following a contract dispute remained in line with the trend earlier in the month. Expedia Inc.(EXP), the U.S. market leader, subsequently made it more difficult to find American's flights on its site, a move it said was in response to the treatment of rival Orbitz.
American's statement Wednesday sought to dispel concern that the approach could backfire by leading to passengers booking with rivals. Orbitz has said it generated an annualized $800 million for AMR, which had passenger ticket sales of just over $15 billion last year. Experian has not disclosed how reliant it is on American, though analysts at Soleil Securities estimate the airline accounts for just 1% of its annual revenue, versus 5% at Orbitz.
American said the annualized rise in overall ticket sales since Orbitz was dropped and Expedia reacted was "roughly comparable to that seen earlier in December." The Business Travel Coalition, a lobby group for corporate travelers that has been critical of American, responded to the airline's statement by pointing out it boosted incentives to retain business. Passengers who had previously booked through Orbitz were emailed by American the day it stopped selling through the site and offered a 15% discount to book through the carrier's website. Expedia customers were also offered discounts.
American dropped Orbitz after failing to reach a new contract that would encourage the online sellers to link to the airline through a so-called "direct connect" system, rather than through the global distribution systems that still dominate the airline ticket market, especially for corporate travel. Expedia's existing pact with American is due to expire in the next few months, and while the airline has said it is in negotiations with online travel agents about their contracts, it hasn't commented on speculation it has already reached a deal for Priceline.com to join its direct connect system.
The situation is being closely watched by other U.S. airlines, who are also seeking to cut costs by pruning the fees paid to the global distribution systems such as Amadeus, Sabre and Worldspan.
-By Doug Cameron, Dow Jones Newswires; (312) 750-4135; doug.cameron@dowjones.com
