Orbitz Could Lose American Airlines Over Data Dispute
Nov 4th 2010 6:30PM
Updated Nov 5th 2010 3:49AM
The news on Thursday knocked down shares of Orbitz Worldwide Inc. by more than 17%.
Orbitz CEO Barney Harford said American was trying to force travel agencies to get information directly from the company instead of through middlemen called global distribution systems, or GDSs. He said American's strategy would limit consumers' ability to compare airline prices.
Orbitz is controlled by privately held Travelport Limited, which also owns the Worldspan and Galileo GDSs.
American spokeswoman Mary Sanderson said travel agencies could get more information tailored to individual consumers by connecting directly to American's reservations system, "and we won't have to pay as much for it." She said American must compete against low-cost airlines such as Southwest that largely skip the GDS operators and sell tickets cheaper on their own websites.
Despite that criticism, Sanderson said American still wants to negotiate a deal that helps both the airline and Orbitz.
Does Leaving Make Sense?
Airlines have been cutting costs to deal with high fuel prices and the recession, which caused business travelers and vacationers to cut back on flying. American has been very vocal about reducing its distribution costs as well.
Henry Harteveldt, a travel analyst for Forrester Research, said that if American carries out the threat to leave Orbitz, any savings it sees in lower distribution costs could be swamped by lost ticket sales. He said rivals such as Delta, United and US Airways were unlikely to leave Orbitz.
"This will make it more difficult for people to find American Airlines fares," he said. "By not appearing with the other airlines in travel agency searches, American could lose business."
Consumers can't find fares for Southwest Airlines Co. on Orbitz or rivals such as Travelocity and Expedia. But Harteveldt said Southwest can get away with that because it has a reputation for low prices. By contrast, he said, American "is a fairly generic airline."
American declined to say whether it would seek to pull its listings off Travelocity or Expedia (EXPE).
Orbitz shares fell $1.19, or 17.5%, to close at $5.63. Shares of American parent AMR Corp. lost 3 cents to close at $8.34.