December 23, 2010
BTC Statement Update
According to press reports, Expedia has removed or significantly downgraded American Airlines’ (AA) offerings in response to AA’s move this week to pull its fares from Orbitz. AA’s decision followed a Chicago court’s ruling in AA/Travelport litigation that lifted a temporary restraining order previously issued.
Now, substantially more revenue is at risk for AA than the $800 million in annualized sales Orbitz was delivering to AA. Indeed, sales from Orbitz and Expedia of AA’s airfares may not be a true proxy for the revenue at risk for AA.
According to a May 2010 PhoCusWright report, 87% of travelers start their shopping process on the Internet. What’s more, some 28% of shoppers at online travel agencies (e.g., Orbitz, Expedia) end up purchasing on suppliers’ websites.
The point: Consumers who start the shopping process on Orbitz, and now Expedia, before going to airline.com will miss AA offerings and end up on AA competitors’ websites. This could represent a much bigger number and bottom-line impact than AA was prepared for or is willing to acknowledge.
“American acts as if it's the country's biggest airline when it's really number four and falling. American is making a reckless rodeo bet that it can rope its best customers like calves and then push and pull and kick them toward aa.com and Direct Connect,” stated BTC Chairman Kevin Mitchell. “Online consumers may not even know American's flights are missing. The ones who will gain the most here are American's competitors United, Southwest and others. They should be thankful for this early Christmas present.”
“Expedia’s decision to support the consumer and its competitor Orbitz underscores the enormity of the economic damage American Airlines’ Direct Connect plans could have on consumers due to lessoned price transparency and impeded comparison shopping. Direct Connect takes the consumer problem of hidden airline fees to a much darker and dangerous place for consumers. We applaud Expedia for standing up for what is best for consumers!” added Mitchell.