American’s announcement last night that it is pulling first and buisness class fares as well as all international fares from Expedia will impact Expedia’s ability to service the corporate travel market.
As background, the first airline to pull its inventory out of Expedia was Northwest back in Oct 2002. At that time Northwest was complaining about the financial cost of distributing through Expedia. Northwest put out full page ads encouraging consumers to shop directly at nwa.com. Northwest and Expedia mended fences within three weeks.
US Airways pulled its fares from Expedia in Dec 2003 over the same financial issues and also came back within three weeks.
AirTran pulled its fares from Expedia in Oct 2005 when it was unable to reach a financial agreement with both Worldspan and Expedia. AirTran stayed off of Expedia for more than a year and just reached a new strategic agreement in Nov 2006.
In the end, American’s decision is all about the financials. Expedia is the largest online travel agency and has typically used this market concentration to negotiate the best compensation possible from the carriers. In turn the carriers, not to mention the hoteliers, have been working hard to convince consumers to buy directly rather than purchase through an intermediary like Expedia.
What’s particularly interesting in this case is that American is targeting the “high” margin business and leaving the low margin tickets on Expedia.
Sorry, the comment form is closed at this time.