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AA Wins in Court But Faces Angry Industry

December 22, 2010 By: George Dooley

Travelport expressed disappointment with a ruling by the an Illinois court that denied Travelport’s request for a preliminary injunction against American Airlines (AA) and its attempt to terminate Orbitz’s ticketing authority. The move effectively blocks Orbitz's sales of AA tickets.

”Although the motion for a preliminary injunction was denied, the case will continue on its merits until the request for a declaratory judgment is adjudicated. Travelport remains confident that it will ultimately prevail on the merits of the matter,” Travelport said in a release.

Travelport said it “strongly supports the consumers’ right to maximum transparency and the ability to shop, compare, and book travel services wherever they choose.” Travelport said it believed that AA’s plans to force a more restrictive distribution model will result in inefficiencies and added costs and will be detrimental to airline customers, travel agencies and consumers.

“The enhancement of distribution capabilities, whether optional ancillary sales, product differentiation, providing travel agency partners with access to new services or functionality, any of these things which AA is seeking to do, can all be achieved through Travelport’s GDS,” Travelport said.

Travelport’s position was supported by the Consumer Travel Alliance (CTA): “At its core, this dispute has nothing to do with business agreements, legal arguments, or distribution technologies. This is simply a heavy-handed attempt by American Airlines to prevent consumers from easily searching and comparing its fares against those of other airlines. In short, the only ‘direct connect’ American really seems to want is a ‘direct connect’ to consumers’ wallets,” said Charlie Leocha, CTA director.

“American appears to have no idea why we fly. We fly to get from point A to point B in the most convenient and cost-effective manner possible. We don’t fly to be manipulated by proprietary airline reservation systems that limit our choices, prevent comparison shopping, and hide the real cost of travel,” CTA said. “American should end its strong arm tactics and abandon this anti-consumer direct connect program. The Consumer Travel Alliance encourages American to launch a renewed effort to listen to its customers and partners about the services they actually want and need, instead of trying to force feed us a ‘direct connect’ to higher prices, less choice, and limited competition."

The CTA recently filed joint comments with the Business Travel Coalition (BTC) regarding proposed rules from the Department of Transportation (DOT) that would require an airline to make all of its ancillary fee information available through all of the distribution channels in which that airline participates.

The Business Travel Coalition (BTC) also commented on the implications of the ruling handed down by the Cook County Circuit Court.

“While the outcome unfavorably impacts Orbitz customers and Orbitz For Business corporate clients, by reducing fare searching, booking and servicing efficiencies, travel professionals the world over have recognized that this lawsuit represents merely the opening skirmish in the larger battle for the future of the open marketplace for travel,” BTC said in a statement.

“The stakes in this conflict are clear: either an improved airline industry and distribution marketplace centered around the consumer, or one that subordinates consumer interests to the self-serving motivations of individual airlines endeavoring to impose their wills on consumers and the other participants in the travel industry,” said BTC Chairman Kevin Mitchell. “Single-supplier direct connect proposals, like the one advanced by American Airlines, can cause massive fragmentation of airfares and ancillary fees depriving consumers of the ability to compare the total cost of air travel options across all airlines."

According to BTC, the industry and public policy debate over American Airlines Direct Connect plan has been raging for the past year, moving to the forefront of consumers' focus with American Airlines unprovoked assault on Orbitz. American Airlines repeatedly changed its rationale for the reasoning behind Direct Connect by arguing about cost containment, product customization and technological innovations at different times, BTC said.

“When an airline must constantly change its rationale for implementing a program, or in the case of Orbitz, resorts to threats to gain acceptance of a new business model, it vividly demonstrates that there is in fact no unmet market need requiring a solution. Whether in North America or Europe, what American Airlines is selling, nobody in the downstream distribution chain, to BTC’s knowledge, is saying they want,” Mitchell said.

Mitchell also said that interim results from a currently open BTC survey of corporate travel managers points to an overwhelming rejection of AA’s attempts to change the distribution system model to its advantage while driving corporate travel departments costs up and undermining their ability to service their travelers.

BTC reported that 94 percent of surveyed travel managers indicate access to all airfare and ancillary fee information is either indispensably important or very important for their corporate managed travel programs.

Nearly all (87 percent) of travel managers believe that in advocating its Direct Connect strategy, American Airlines is endeavoring to secure higher fares — paid by undermining the independent travel distribution system and corporate managed travel programs and by driving more consumers to, where comparison-shopping, expert advice and corporate travel policies are non-existent.

Eighty-eight percent of travel managers who oppose American Airlines Direct Connect believe that the program will result in fragmentation of airfares and fees and that without access to all air travel options travelers will pay higher prices. Ninety-eight percent do not support American Airlines Direct Connect strategy.

Travel industry professionals can participate in the survey at through the end of December. Survey results and analysis will be published in early January, BTC said.



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By George Dooley | December 22, 2010
Business and consumer groups critical of AA policy.